Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators, 9580-9633 [2018-03708]

Agencies

• DEPARTMENT OF ENERGY
• Federal Energy Regulatory Commission

[Federal Register Volume 83, Number 44 (Tuesday, March 6, 2018)]
[Rules and Regulations]
[Pages 9580-9633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03708]



[[Page 9579]]

Vol. 83

Tuesday,

No. 44

March 6, 2018

Part II





Department of Energy





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 Federal Energy Regulatory Commission





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18 CFR Part 35





Electric Storage Participation in Markets Operated by Regional 
Transmission Organizations and Independent System Operators; Final Rule

Federal Register / Vol. 83 , No. 44 / Tuesday, March 6, 2018 / Rules 
and Regulations

[[Page 9580]]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 35

[Docket Nos. RM16-23-000; AD16-20-000; Order No. 841]


Electric Storage Participation in Markets Operated by Regional 
Transmission Organizations and Independent System Operators

AGENCY: Federal Energy Regulatory Commission, Department of Energy.

ACTION: Final rule.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is 
amending its regulations under the Federal Power Act (FPA) to remove 
barriers to the participation of electric storage resources in the 
capacity, energy, and ancillary service markets operated by Regional 
Transmission Organizations (RTO) and Independent System Operators (ISO) 
(RTO/ISO markets).

DATES: This rule will become effective June 4, 2018.

FOR FURTHER INFORMATION CONTACT: 
Michael Herbert (Technical Information), Office of Energy Policy and 
Innovation, Federal Energy Regulatory Commission, 888 First Street NE, 
Washington, DC 20426, (202) 502-8929, [email protected].
Heidi Nielsen (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street NE, Washington, 
DC 20426, (202) 502-8435, [email protected].

SUPPLEMENTARY INFORMATION:  This rule requires each RTO and ISO to 
revise its tariff to establish a participation model consisting of 
market rules that, recognizing the physical and operational 
characteristics of electric storage resources, facilitates their 
participation in the RTO/ISO markets. The participation model must (1) 
ensure that a resource using the participation model is eligible to 
provide all capacity, energy, and ancillary services that the resource 
is technically capable of providing in the RTO/ISO markets; (2) ensure 
that a resource using the participation model can be dispatched and can 
set the wholesale market clearing price as both a wholesale seller and 
wholesale buyer consistent with existing market rules that govern when 
a resource can set the wholesale price; (3) account for the physical 
and operational characteristics of electric storage resources through 
bidding parameters or other means; and (4) establish a minimum size 
requirement for participation in the RTO/ISO markets that does not 
exceed 100 kW. Additionally, each RTO/ISO must specify that the sale of 
electric energy from the RTO/ISO markets to an electric storage 
resource that the resource then resells back to those markets must be 
at the wholesale locational marginal price. We are taking this action 
pursuant to our legal authority under section 206 of the FPA to ensure 
that RTO/ISO tariffs are just and reasonable.
    In the Notice of Proposed Rulemaking (NOPR), the Commission also 
proposed reforms related to distributed energy resource aggregations. 
While we continue to believe that removing barriers to distributed 
energy resource aggregations in the RTO/ISO markets is important, we 
have determined that more information is needed with respect to those 
proposals; therefore, we will not take final action on the proposed 
distributed energy resource aggregation reforms in this proceeding. 
Instead, the Commission will continue to explore the proposed 
distributed energy resource aggregation reforms under Docket No. RM18-
9-000. To that end, concurrent with this Final Rule, a Notice of 
Technical Conference is being issued in Docket No. RM18-9-000 with 
questions related to the participation of distributed energy resource 
aggregations in the RTO/ISO markets so that we can gather additional 
information to help us determine what action to take on the distributed 
energy resource aggregation reforms proposed in the NOPR. All comments 
filed in response to the NOPR in this proceeding will be incorporated 
by reference into Docket No. RM18-9-000, and any further comments 
regarding the proposed distributed energy resource aggregation reforms, 
including comments regarding the technical conference, should be filed 
henceforth in Docket No. RM18-9-000.

Order No. 841

Final Rule

Table of Contents

 
                                                         Paragraph Nos.
 
I. Introduction......................................                  1
II. Background.......................................                  7
III. Need for Reform.................................                 10
    1. Comments......................................                 13
    2. Commission Determination......................                 19
IV. Discussion.......................................                 22
    A. Definition of Electric Storage Resource.......                 22
        1. NOPR Proposal.............................                 22
        2. Comments..................................                 23
        3. Commission Determination..................                 29
    B. Creation of a Participation Model for Electric                 37
     Storage Resources...............................
        1. Participation Model for Electric Storage                   37
         Resources...................................
            a. NOPR Proposal.........................                 37
            b. Comments..............................                 38
            c. Commission Determination..............                 51
        2. Qualification Criteria for the                             57
         Participation Model for Electric Storage
         Resources...................................
            a. NOPR Proposal.........................                 57
            b. Comments..............................                 58
            c. Commission Determination..............                 61
        3. Relationship Between Electric Storage                      66
         Resource Participation Model and Existing
         Market Rules................................
            a. NOPR Proposal.........................                 66
            b. Comments..............................                 67
            c. Commission Determination..............                 68
    C. Eligibility of Electric Storage Resources To                   70
     Participate in the RTO/ISO Markets..............
        1. Eligibility To Provide All Capacity,                       70
         Energy, and Ancillary Services..............
            a. NOPR Proposal.........................                 70
            b. Comments..............................                 71

[[Page 9581]]

 
            c. Commission Determination..............                 76
        2. Ability To De-Rate Capacity To Meet                        82
         Minimum Run-Time Requirements...............
            a. NOPR Proposal.........................                 82
            b. Comments..............................                 83
            c. Commission Determination..............                 94
        3. Energy Schedule Requirement for Provision                 102
         of Ancillary Services.......................
            a. NOPR Request for Comments.............                102
            b. Comments..............................                104
            c. Commission Determination..............                119
        4. NERC Definitions..........................                121
            a. NOPR Request for Comment..............                121
            b. Comments..............................                122
            c. Commission Determination..............                126
    D. Participation in the RTO/ISO Markets as Supply                127
     and Demand......................................
        1. Eligibility To Participate as a Wholesale                 127
         Seller and Wholesale Buyer..................
            a. NOPR Proposal.........................                127
            b. Comments..............................                129
                i. Wholesale Seller/Wholesale Buyer..                129
                ii. Dispatchability..................                136
                iii. Limitations on Price Setting....                138
            c. Commission Determination..............                142
        2. Mechanisms To Prevent Conflicting Dispatch                151
         Instructions................................
            a. NOPR Request for Comments.............                151
            b. Comments..............................                152
            c. Commission Determination..............                162
        3. Make-Whole Payments.......................                166
            a. NOPR Request for Comments.............                166
            b. Comments..............................                167
            c. Commission Determination..............                174
    E. Physical and Operational Characteristics of                   180
     Electric Storage Resources......................
        1. Requirement To Incorporate Bidding                        180
         Parameters as Part of the Electric Storage
         Resource Participation Model................
            a. NOPR Proposal.........................                180
            b. Comments..............................                181
            c. Commission Determination..............                189
        2. State of Charge, Upper and Lower Charge                   195
         Limits, and Maximum Charge and Discharge
         Rates.......................................
            a. NOPR Proposal.........................                195
            b. Comments..............................                196
                i. State of Charge...................                197
                ii. Upper and Lower Charge Limit.....                208
                iii. Maximum Energy Charge and                       209
                 Discharge Rate......................
            c. Commission Determination..............                211
        3. Minimum Charge Time, Maximum Charge Time,                 217
         Minimum Run Time, and Maximum Run Time......
            a. NOPR Proposal.........................                217
            b. Comments..............................                218
            c. Commission Determination..............                220
        4. Additional Physical and Operational                       225
         Characteristics.............................
            a. Comments..............................                225
            b. Commission Determination..............                229
        5. Summary of Physical and Operational                       236
         Characteristics of Electric Storage
         Resources...................................
    F. State of Charge Management....................                237
        1. NOPR Proposal.............................                237
        2. Comments..................................                238
        3. Commission Determination..................                251
    G. Minimum Size Requirement......................                258
            1. NOPR Proposal.........................                258
            2. Comments..............................                259
            3. Commission Determination..............                270
    H. Energy Used To Charge Electric Storage                        277
     Resources.......................................
        1. Price for Charging Energy.................                277
            a. NOPR Proposal.........................                277
            b. Comments..............................                278
            c. Commission Determination..............                294
        2. Metering and Accounting Practices for                     303
         Charging Energy.............................
            a. NOPR Proposal.........................                303
            b. Comments..............................                304
            c. Commission Determination..............                322
    I. Issues Outside the Scope of This Final Rule...                329
        1. Comments..................................                329
        2. Commission Determination..................                331
V. Compliance Requirements...........................                332
    A. NOPR Proposal.................................                332
    B. Comments......................................                335
    C. Commission Determination......................                348
VI. Information Collection Statement.................                351

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VII. Environmental Analysis..........................                355
VIII. Regulatory Flexibility Act Certification.......                356
IX. Document Availability............................                361
X. Effective Date and Congressional Notification.....                364
Regulatory Text
Appendix A: Abbreviated Names of Commenters
 

Order No. 841

Final Rule

(Issued February 15, 2018)

I. Introduction

    1. In this Final Rule, the Federal Energy Regulatory Commission 
(Commission) is adopting reforms to remove barriers to the 
participation of electric storage resources \1\ in the Regional 
Transmission Organization and Independent System Operator 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 electric storage resources in 
the RTO/ISO markets, thereby reducing competition and failing to ensure 
just and reasonable rates. To help ensure that the RTO/ISO markets 
produce just and reasonable rates, pursuant to the Commission's legal 
authority under Federal Power Act (FPA) section 206,\3\ the Commission 
modifies section 35.28 of its regulations \4\ to require each RTO/ISO 
to revise its tariff to establish market rules that, recognizing the 
physical and operational characteristics of electric storage resources, 
facilitate their participation in the RTO/ISO markets, as discussed 
further below.
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    \1\ We define an electric storage resource as a resource capable 
of receiving electric energy from the grid and storing it for later 
injection of electric energy back to the grid. See infra PP 29-36.
    \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 and 
Independent System Operators, Notice of Proposed Rulemaking, FERC 
Stats. & Regs. ] 32,718 (2016). 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 (2012).
    \4\ 18 CFR 35.28 (2017).
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    2. As the Commission explained in the NOPR, barriers to the 
participation of new technologies, such as many types of electric 
storage resources, in the RTO/ISO markets can emerge when the rules 
governing participation in those markets are designed for traditional 
resources and in effect limit the services that emerging technologies 
can provide.\5\ For instance, electric storage resources in MISO that 
want to sell services other than frequency regulation would not have 
bidding parameters for electric storage resources available to them and 
it is unclear if or how they would be eligible to purchase energy from 
the MISO market.\6\ Where such conditions exist, resources that are 
technically capable of providing services are precluded from competing 
with resources that are already participating in the RTO/ISO markets. 
This restriction 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 electric storage resources in the RTO/ISO markets, our 
actions in this Final Rule will enhance competition and, in turn, help 
to ensure that the RTO/ISO markets produce just and reasonable rates. 
Furthermore, due to electric storage resources' unique physical and 
operational characteristics--including their ability to both inject 
energy into the grid and receive energy from it--our actions here will 
help support the resilience of the bulk power system.
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    \5\ See NOPR at P 2.
    \6\ See MISO Data Request Response, Docket No. AD16-20-000, at 
14, 17 (filed May 16, 2016) (MISO Data Request Response).
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    3. To address barriers to the participation of electric storage 
resources in the RTO/ISO markets, in this Final Rule, we require each 
RTO/ISO to revise its tariff to establish a participation model 
consisting of market rules that, recognizing the physical and 
operational characteristics of electric storage resources, facilitates 
their participation in the RTO/ISO markets. The RTOs/ISOs generally 
have a set of tariff provisions that apply to all market participants. 
In addition, 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.\7\ These distinct tariff provisions 
that are created for a particular type of resource are what we refer to 
in this Final Rule as a participation model. Accordingly, the 
participation model for electric storage resources that we require in 
this Final Rule is a set of tariff provisions that will help facilitate 
the participation of electric storage resources in the RTO/ISO markets.
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    \7\ As examples of RTO/ISO participation models, we point to 
Non-Generator Resources in CAISO, Alternative Technology Regulation 
Resources in ISO-NE, Generation Resources in MISO, Energy Limited 
Resources in NYISO, Economic Load Response resources in PJM, and 
Variable Energy Resources in SPP. See CAISO Data Request Response, 
Docket No. AD16-20-000, at 2 (filed May 16, 2016) (CAISO Data 
Request Response); ISO-NE Data Request Response, Docket No. AD16-20-
000, at 3 (filed May 16, 2016) (ISO-NE Data Request Response); MISO 
Data Request Response at 4; NYISO Data Request Response, Docket No. 
AD16-20-000, at 2-3 (filed May 16, 2016) (NYISO Data Request 
Response); PJM Data Request Response, Docket No. AD16-20-000, at 5 
(PJM Data Request Response); SPP Data Request Response, Docket No. 
AD16-20-000, at 3 (filed May 16, 2016) (SPP Data Request Response).
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    4. For each RTO/ISO, the tariff provisions for the participation 
model for electric storage resources must (1) ensure that a resource 
using the participation model for electric storage resources is 
eligible to provide all capacity, energy, and ancillary services that 
it is technically capable of providing in the RTO/ISO markets; (2) 
ensure that a resource using the participation model for electric 
storage resources can be dispatched and can set the wholesale market 
clearing price as both a wholesale seller and wholesale buyer 
consistent with existing market rules that govern when a resource can 
set the wholesale price; (3) account for the physical and operational 
characteristics of electric storage resources through bidding 
parameters or other means; and (4) establish a minimum size requirement 
for participation in the RTO/ISO markets that does not exceed 100 kW. 
Additionally, each RTO/ISO must specify that the sale of electric 
energy from the RTO/ISO markets to an electric storage resource that 
the resource then resells back to those markets must be at the 
wholesale locational marginal price (LMP).
    5. In the NOPR, the Commission also proposed reforms related to 
distributed energy resource aggregations.\8\ While we continue to 
believe removing barriers to

[[Page 9583]]

distributed energy resource aggregations in the RTO/ISO markets is 
important, we have determined that more information is needed with 
respect to those proposals; therefore, we will not take final action on 
the proposed distributed energy resource aggregation reforms in this 
proceeding.\9\ Instead, the Commission will continue to explore the 
proposed distributed energy resource aggregation reforms under Docket 
No. RM18-9-000. To that end, concurrent with this Final Rule, a Notice 
of Technical Conference is being issued in Docket No. RM18-9-000 with 
questions related to the participation of distributed energy resource 
aggregations in the RTO/ISO markets so that we can gather additional 
information to help us determine what action to take on the distributed 
energy resource aggregation reforms proposed in the NOPR.\10\ All 
comments filed in response to the NOPR in this proceeding will be 
incorporated by reference into Docket No. RM18-9-000, and any further 
comments regarding the proposed distributed energy resource aggregation 
reforms, including comments regarding the technical conference, should 
be filed henceforth in Docket No. RM18-9-000.\11\
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    \8\ See NOPR at PP 1-16, 103-158.
    \9\ We clarify that the reforms adopted here regarding electric 
storage resources represent final agency action subject to rehearing 
and appeal.
    \10\ Notice of Technical Conference, Docket No. RM18-9-000 (Feb. 
15, 2018).
    \11\ Further comments regarding the proposed distributed energy 
resource aggregation reforms should no longer be filed in Docket No. 
RM16-23-000.
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    6. As discussed further below, 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. We will allow each RTO/ISO a further 365 days from that date 
to implement the tariff provisions.

II. Background

    7. Electric storage resources have unique physical and operational 
characteristics, namely their ability to both inject energy to the grid 
and receive energy from it. Certain electric storage resources, such as 
pumped-hydro resources,\12\ have been participating in the RTO/ISO 
markets for many years, and, as the RTOs/ISOs have gained experience 
with these resources, the RTOs/ISOs have found new ways to facilitate 
the participation of pumped-hydro resources.\13\ More recently, other 
types of electric storage resources, such as batteries and flywheels, 
are participating in the RTO/ISO markets.\14\
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    \12\ Pumped-hydro storage projects move water between two 
reservoirs located at different elevations (i.e., an upper and lower 
reservoir) to store energy and generate electricity. See https://www.ferc.gov/industries/hydropower/gen-info/licensing/pump-storage.asp.
    \13\ See, e.g., ISO New England Inc., Docket Nos. ER16-954-000 
and ER16-954-001 (2016) (delegated letter order).
    \14\ Midwest Indep. Trans. Sys. Operator, Inc., 129 FERC ] 
61,303 (2009); NYISO Services Tariff, section 2.12 (defining 
``Limited Energy Storage Resource'' as ``[a] Generator authorized to 
offer Regulation Service only and characterized by limited Energy 
storage, that is, the inability to sustain continuous operation at 
maximum Energy withdrawal or maximum Energy injection for a minimum 
period of one hour''); PJM Operating Agreement, Schedule 1, section 
1.3 (defining an ``Energy Storage Resource'' as ``[a] flywheel or 
battery storage facility solely used for short term storage and 
injection of energy at a later time to participate in the PJM energy 
and/or ancillary services markets as a Market Seller.'')
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    8. As the capabilities of electric storage resources improve and 
their costs decline to the point that they may be competitive with 
existing resources,\15\ the Commission has become concerned that these 
resources face barriers that limit their participation in the RTO/ISO 
markets. To further examine this issue, the Commission hosted 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.\16\ 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.
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    \15\ See, e.g., Lazard's Levelized Cost of Storage Analysis--
Version 3.0 (Nov. 2017), available at https://www.lazard.com/media/450338/lazard-levelized-cost-of-storage-version-30.pdf.
    \16\ Specifically, Commission staff requested information 
related to (1) the eligibility of electric storage resources to 
participate in the capacity, energy, and ancillary service markets 
in the RTOs/ISOs; (2) the technical qualification and performance 
requirements for market participants; (3) the bidding parameters for 
different types of resources; (4) opportunities for distribution-
level and aggregated electric storage resources to participate in 
the RTO/ISO markets; (5) the treatment of electric storage resources 
when they are receiving electricity for later injection to the grid; 
and (6) any forthcoming rule changes or other stakeholder 
initiatives that may affect the participation of electric storage 
resources in the RTO/ISO markets.
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    9. On November 17, 2016, the Commission issued the NOPR in this 
proceeding, proposing to amend its regulations under the FPA to remove 
barriers to the participation of electric storage resources in the RTO/
ISO markets. The Commission received 109 comments on the NOPR proposals 
from a diverse set of stakeholders.\17\
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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.
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III. Need for Reform

    10. In the NOPR, the Commission stated that its proposal in this 
proceeding 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.\18\ 
Specifically, the Commission noted that it has observed that market 
rules designed for traditional resources can create barriers to entry 
for emerging technologies. The Commission explained that it was 
proposing to require the RTOs/ISOs to address barriers to the 
participation of electric storage resources in the RTO/ISO markets.\19\
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    \18\ See NOPR at P 9 (citing Integration of Variable Energy 
Resources, Order No. 764, FERC Stats. & Regs. ] 31,331, order on 
reh'g, Order No. 764-A, 141 FERC ] 61,232 (2012), order on reh'g, 
Order No. 764-B, 144 FERC ] 61,222 (2013); Wholesale Competition in 
Regions with Organized Electric Markets, Order No. 719, FERC Stats. 
& Regs. ] 31,281 (2008), order on reh'g, Order No. 719-A, FERC 
Stats. & Regs. ] 31,292 (2009), order on reh'g, Order No. 719-B, 129 
FERC ] 61,252 (2009)).
    \19\ See id. P 10.
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    11. The Commission acknowledged in the NOPR that electric storage 
resources are already providing energy and ancillary services in some 
RTO/ISO markets.\20\ However, the Commission explained that these 
resources must often use existing participation models designed for 
traditional generation or load resources that do not recognize electric 
storage resources' unique physical and operational characteristics and 
their capability to provide capacity, energy, and ancillary services in 
the RTO/ISO markets.\21\ Even where the RTOs/ISOs have established 
distinct participation models for electric storage resources, the 
Commission stated that those models limit the services that electric 
storage resources may provide \22\

[[Page 9584]]

or are designed for electric storage resources with very specific 
characteristics (such as pumped-hydro facilities or resources with a 
maximum run-time that is less than one hour). The Commission also noted 
that existing RTO/ISO tariffs generally limit smaller electric storage 
resources to participating in the RTO/ISO markets as demand response 
resources, which can restrict these electric storage resources' ability 
to employ their full operational range, prohibit them from injecting 
power onto the grid, and preclude them from providing certain services 
that they are technically capable of providing (such as operating 
reserves).
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    \20\ See id. P 11.
    \21\ See id. PP 11-12.
    \22\ See id. P 11 (citing Midwest Indep. Trans. Sys. Operator, 
Inc., 129 FERC ] 61,303 at PP 40, 64; MISO FERC Electric Tariff, 
section 1.S (Stored Energy Resources); NYISO Services Tariff, 
section 2.12 (defining Limited Energy Storage Resource as a 
``Generator authorized to offer Regulation Service only and 
characterized by limited Energy storage, that is, the inability to 
sustain continuous operation at maximum Energy withdrawal or maximum 
Energy injection for a minimum period of one hour.'')). The 
Commission noted that NYISO limits Limited Energy Storage Resources 
to providing regulation service only and Demand Side Resources and 
Generators that can sustain operation for longer than one hour are 
not eligible to be Limited Energy Storage Resources. Id. (citing 
NYISO Data Request Response at 3-4).
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    12. Thus, the Commission preliminarily found that current tariffs 
that do not recognize the operational characteristics of electric 
storage resources limit the participation of electric storage resources 
in the RTO/ISO markets and result in inefficient use of these 
resources.\23\ As a result, the Commission stated that the RTOs/ISOs 
may not efficiently dispatch resources, including electric storage 
resources, thereby reducing competition in the RTO/ISO markets. The 
Commission stated that limiting the services an electric storage 
resource is eligible to provide and limiting the efficiency with which 
it is dispatched to provide services could also inhibit developers' 
incentives to design their electric storage resources to provide all 
capacity, energy, and ancillary services that these resources could 
otherwise provide, further reducing competition in the RTO/ISO markets. 
The Commission stated that effective integration of electric storage 
resources into the RTO/ISO markets would enhance competition and, in 
turn, help to ensure that these markets produce just and reasonable 
rates.
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    \23\ See id. P 12.
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1. Comments

    13. In response to the NOPR, commenters elaborate on the degree to 
which, and how, existing RTO/ISO market rules pose barriers to the 
participation of electric storage resources in the RTO/ISO markets and 
the impact of those barriers.\24\ For example, Advanced Energy Economy 
and GridWise state that RTO/ISO tariffs often lack participation models 
that allow for participation by advanced energy technologies, apply 
unnecessary and burdensome technical requirements originally developed 
for traditional generation technologies, or impose performance 
requirements that arbitrarily exclude advanced technologies.
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    \24\ See Advanced Energy Economy Comments at 14-15; GridWise 
Comments at 3.
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    14. Alevo, Eagle Crest, Massachusetts State Entities, and NYISO 
Indicated Transmission Owners claim that RTO/ISO market rules hinder 
the full participation of electric storage resources by failing to 
recognize these resources' unique operating characteristics and 
requiring them to use market rules designed for other types of 
resources, such as generation.\25\ For example, Massachusetts State 
Entities explain that, in ISO-NE, electric storage resources have to 
use participation models for pumped-hydro resources, which do not take 
advantage of the flexibility of newer electric storage technologies.
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    \25\ See Alevo Comments at 4-6; Eagle Crest Comments at 5; 
Massachusetts State Entities Comments at 13-14; NYISO Indicated 
Transmission Owners Comments at 3.
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    15. A few commenters emphasize that making market rules technology 
neutral will remove barriers to entry for electric storage resources. 
For example, several commenters argue that market design should be 
technology neutral to ensure equal access to markets \26\ and to reduce 
long-term investment risk associated with developing electric storage 
resources.\27\ Microgrid Resources Coalition shares the Commission's 
concerns that the varying participation models among RTOs/ISOs limit 
market opportunities for new technologies.\28\
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    \26\ See AES Companies Comments at 14; Alevo Comments at 7-8; 
EEI Comments at 6-7; Efficient Holdings Comments at 2, 5; ELCON 
Comments at 2-4; GridWise Comments at 3; Tesla/SolarCity Comments at 
10-11.
    \27\ See Massachusetts State Entities Comments at 9.
    \28\ See Microgrid Resources Coalition Comments at 2.
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    16. While commenters addressed concerns with specific aspects of 
the NOPR proposals, most commenters, including the RTOs/ISOs, generally 
agree that the Commission should act to remove barriers to the 
participation of electric storage resources in the RTO/ISO markets.\29\ 
Further, commenters state that allowing electric storage resources to 
fully participate in the RTO/ISO markets could create more reliable and 
resilient electric markets and could provide energy security, fuel 
diversity, and valuable fast-responding capability to the RTO/ISO 
markets.\30\ CAISO explains that there is no reason to exclude an 
electric storage resource from providing an existing wholesale electric 
service if that resource has the technical capabilities required to do 
so.\31\
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    \29\ See, e.g., Advanced Energy Economy Comments at 1, 3-6, 8-
17; American Petroleum Institute Comments at 2; APPA/NRECA Comments 
at 1-2; EEI Comments at 2-4; EPRI Comments at 2; EPSA/PJM Power 
Providers Comments at 3, 6-9, 11-12; Energy Storage Association 
Comments at 3-5; IRC Comments at 2; NARUC Comments at 3; National 
Hydropower Association Comments at 2-4; TAPS Comments at 1.
    \30\ See, e.g., IRC Comments at 2; ISO-NE Comments at 1, 4; 
NYISO Comments at 2; SPP Comments at 1-2.
    \31\ See CAISO Comments at 3.
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    17. Some commenters note that implementation of the reforms 
proposed in the NOPR could improve competition and/or efficiency in the 
RTO/ISO markets and provide other system benefits.\32\ More 
specifically, Energy Storage Association contends that the benefits 
from participation of electric storage resources in the RTO/ISO markets 
include avoided capacity payments, lower peak prices, reduced need for 
traditional generators to cycle, facilitating effective ramp 
management, avoiding generator start-up and shut-down costs, and 
absorbing over-generation. Dominion argues that recognizing the 
characteristics of electric storage resources can lead to more 
efficient dispatch and utilization of resources. In addition, City of 
New York, Energy Storage Association, NYISO, Sunrun, and Tesla/
SolarCity suggest that the NOPR reforms will lead to lower costs for 
consumers,\33\ while Silicon Valley Leadership Group and Starwood 
Energy state that use of electric storage resources will reduce 
greenhouse gas emissions.\34\ Institute for Policy Integrity explains 
that new storage technologies can reduce dependence on expensive 
transmission infrastructure.\35\ Commenters also argue that electric 
storage resources can improve grid ``resiliency'' in the event of a 
significant weather emergency.\36\
---------------------------------------------------------------------------

    \32\ See, e.g., Dominion Comments at 4-5; Energy Storage 
Association Comments at 4 (citing Massachusetts Department of Energy 
Resources, State-of-Charge: Massachusetts Energy Storage Initiative 
Study (Sept. 2016), available at https://www.mass.gov/eea/docs/doer/state-of-charge-report.pdf); Imperial Irrigation District Comments 
at 6; IRC Comments at 2; ISO-NE Comments at 1; Starwood Energy 
Comments at 3; TechNet Comments at 1; Telsa/SolarCity Comments at 1.
    \33\ See City of New York Comments at 4; Energy Storage 
Association Comments at 4; NYISO Comments at 2; Sunrun Comments at 
1; Tesla/SolarCity Comments at 2, 5.
    \34\ See Silicon Valley Leadership Group Comments at 1; Starwood 
Energy Comments at 3.
    \35\ See Institute for Policy Integrity Comments at 3.
    \36\ See Advanced Energy Economy Comments at 3; Institute for 
Policy Integrity Comments at 3; IRC Comments at 2; Massachusetts 
State Entities Comments at 17; SPP Comments at 2.
---------------------------------------------------------------------------

    18. EPSA/PJM Power Providers argue that, because there are many

[[Page 9585]]

unanswered questions (such as the cost of software changes), the 
Commission should not develop generic requirements for the RTOs/ISOs in 
a final rule without a clear record that such specification will not 
constrain any particular region.\37\
---------------------------------------------------------------------------

    \37\ EPSA/PJM Power Providers Comments at 12-13.
---------------------------------------------------------------------------

2. Commission Determination

    19. 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 electric storage resources in the RTO/
ISO markets, thereby reducing competition and failing to ensure just 
and reasonable rates. Specifically, RTO/ISO market rules that limit the 
services that electric storage resources are technically capable of 
providing may create barriers to the participation of electric storage 
resources in the RTO/ISO markets. Barriers also exist in the RTOs/ISOs 
that have already adopted market rules that provide for the 
participation of electric storage resources because these participation 
models were often designed for electric storage resources with very 
specific characteristics (such as pumped-hydro resources or other 
electric storage resources with a maximum run-time that is less than 
one hour), thus limiting electric storage resources from providing the 
full range of services they are technically capable of providing.
    20. These barriers adversely affect competition in the RTO/ISO 
markets by limiting the participation of resources that are technically 
capable of providing services in those markets. Moreover, these 
barriers reduce competition and market efficiency by inhibiting 
developers' incentives to design their electric storage resources to 
provide all capacity, energy, and ancillary services that these 
resources could otherwise provide. We find that better integration of 
electric storage resources into the RTO/ISO markets is necessary to 
enhance competition and, in turn, help to ensure that these markets 
produce just and reasonable rates. Accordingly, as discussed further 
below, we require each RTO/ISO to revise its tariffs to remove barriers 
to the participation of electric storage resources in the RTO/ISO 
markets.
    21. While we agree with EPSA/PJM Power Providers that it is 
necessary to provide each RTO/ISO with flexibility in the manner it 
incorporates certain aspects of these reforms into its tariff as 
explained below, we find that the record in this proceeding provides 
sufficient basis for requiring the generic requirements discussed 
herein.

IV. Discussion

A. Definition of Electric Storage Resource

1. NOPR Proposal
    22. For the purpose of defining the set of resources for which an 
RTO/ISO must create a participation model, in the NOPR, the Commission 
proposed to define an electric storage resource as ``a resource capable 
of receiving electric energy from the grid and storing it for later 
injection of electricity back to the grid regardless of where the 
resource is located on the electrical system.'' \38\ The Commission 
stated that these resources include all types of electric storage 
technologies, regardless of their size, storage medium (e.g., 
batteries, flywheels, compressed air, pumped-hydro, etc.), or whether 
the resource is located on the interstate grid or on a distribution 
system.
---------------------------------------------------------------------------

    \38\ See NOPR at P 10.
---------------------------------------------------------------------------

2. Comments
    23. The comments received on the proposed definition of electric 
storage resources generally ask the Commission to modify or clarify the 
definition but disagree on how the Commission should do so. Some 
commenters ask the Commission to modify or clarify the definition of 
electric storage resource to broaden its application. For example, they 
raise concerns with how the Commission's proposed definition treats 
behind-the-meter resources. First, Energy Storage Association argues 
that the NOPR definition only applies to resources connected directly 
to the transmission or distribution system and, therefore, asks the 
Commission to extend these reforms to behind-the-meter electric storage 
resources that net inject energy to the grid.\39\ Second, some 
commenters ask that the Commission extend the NOPR reforms to behind-
the-meter resources that do not inject power back to the grid.\40\ 
Advanced Microgrid Solutions and Stem note that the definition of an 
electric storage resource in the NOPR implies that all such resources 
will inject electricity back to the grid. However, Advanced Microgrid 
Solutions and Stem argue that behind-the-meter electric storage 
resources can provide value to the grid even when they do not inject 
electricity to the grid. Advanced Microgrid Solutions and Stem thus ask 
the Commission to clarify that behind-the-meter electric storage 
resources that do not inject electricity back to the grid can use the 
participation model for electric storage resources to participate in 
the RTO/ISO markets.
---------------------------------------------------------------------------

    \39\ See Energy Storage Association Comments at 7, 21-22.
    \40\ See Advanced Energy Economy Comments at 18-20; Advanced 
Microgrid Solutions Comments at 10; Stem Comments at 6.
---------------------------------------------------------------------------

    24. Advanced Energy Economy expresses a related concern, arguing 
that the Commission's proposed definition of an electric storage 
resource does not capture all energy storage technologies, such as 
thermal and kinetic storage; storage co-located with generation 
resources (including variable resources) on the transmission grid; and 
other types of technologies that can perform an energy storage function 
but may not physically export electricity to the wholesale grid. 
Advanced Energy Economy suggests that the Commission remedy this 
concern by revising the definition of an electric storage resource to 
include all storage technologies that are capable of converting 
electric energy into stored energy and later supplying electric energy 
(either back to the grid or to a host customer or site).
    25. In contrast, other commenters recommend that the Commission 
narrow its proposed definition of an electric storage resource.\41\ 
Robert Borlick urges the Commission to limit the application of its 
proposed reforms to those electric storage resources that directly 
connect to transmission systems controlled by RTOs/ISOs, citing 
potential adverse impacts of distribution-interconnected resources on 
power systems. Xcel Energy Services also suggests that the proposed 
reforms should apply only to electric storage resources connected to 
the transmission system. While TAPS strongly supports facilitating the 
participation of transmission-interconnected storage and believes that 
distribution-interconnected storage could yield benefits to the RTO/ISO 
markets, it cautions that distribution-interconnected storage should 
comply with distribution utility tariffs and rates for delivery of 
energy between the transmission system and the resource's point of 
interconnection to the distribution system (including provisions 
related to losses and other terms and conditions of service), both for 
the resource's sales to the RTO/ISO markets and the resource's 
purchases of energy from the RTO/ISO markets.\42\
---------------------------------------------------------------------------

    \41\ See Robert Borlick Comments at 2; Xcel Energy Services 
Comments at 3-4.
    \42\ See TAPS Comments at 28-29.
---------------------------------------------------------------------------

    26. Several commenters address the implications of the proposed 
definition for state and federal jurisdiction. Connecticut State 
Entities state that they welcome the Commission's efforts to

[[Page 9586]]

fully provide resources access to wholesale electric markets without 
changing existing state and federal jurisdiction.\43\ Some commenters 
express concerns regarding the jurisdictional implications of including 
electric storage resources connected at the distribution level in the 
definition of an electric storage resource.\44\ NARUC asserts that 
state authority must remain intact under any final rule. Organization 
of MISO States supports the NOPR on the condition that state and other 
regulatory jurisdiction is maintained. APPA/NRECA, Maryland and New 
Jersey Commissions, MISO Transmission Owners, and NYISO Indicated 
Transmission Owners state that RTO/ISO market rules and Commission 
policy must maintain the ability of state and local authorities to 
regulate existing and future electric storage resources that 
interconnect at the distribution level or behind a customer meter and 
provide retail- or distribution-level services without the Commission 
considering such action as a barrier to participation in wholesale 
markets. This request includes Commission confirmation of state 
jurisdiction over matters such as distribution system design, 
interconnection to the distribution system, distribution system 
operations, distribution power quality, the ability of electric storage 
resources to participate in programs at the distribution level, and 
distribution system costs. APPA/NRECA believe that the NOPR confines 
the proposed reforms to the RTO/ISO markets and urge the Commission to 
reject requests to expand the scope of this final rule beyond that 
limited scope.
---------------------------------------------------------------------------

    \43\ See Connecticut State Entities Comments at 7.
    \44\ See APPA/NRECA Comments at 3-4; Maryland and New Jersey 
Commissions Comments at 3; Massachusetts State Entities Comments at 
9; MISO Transmission Owners Comments at 6; NARUC Comments at 4; 
NYISO Indicated Transmission Owners Comments at 4; Organization of 
MISO States Comments at 1-2.
---------------------------------------------------------------------------

    27. DTE Electric/Consumers Energy and MISO Transmission Owners 
assert that the Commission should allow states to decide whether 
electric storage resources in their state that are located on the 
distribution system or behind a retail meter are permitted to 
participate in the RTO/ISO markets through the electric storage 
resource participation model proposed in the NOPR.\45\ Massachusetts 
Municipal Electric asks the Commission to clarify that its proposed 
reforms will enable, but not compel, electric storage resources located 
behind the meter to participate in the RTO/ISO markets.\46\
---------------------------------------------------------------------------

    \45\ See DTE Electric/Consumers Energy Comments at 7; MISO 
Transmission Owners Comments at 4, 7.
    \46\ See Massachusetts Municipal Electric Comments at 2.
---------------------------------------------------------------------------

    28. In contrast, Genbright argues that the Commission must not only 
assert primary jurisdiction over electric storage resources' sales of 
services in the RTO/ISO markets but also ensure that RTOs/ISOs do not 
rely on ad hoc interpretations of retail rules and regulations to erect 
barriers to the participation of electric storage resources in those 
markets.\47\
---------------------------------------------------------------------------

    \47\ See Genbright Comments at 3-4.
---------------------------------------------------------------------------

3. Commission Determination
    29. Consistent with the NOPR proposal, in this Final Rule, we 
revise section 35.38(b) of the Commission's regulations to define an 
electric storage resource as ``a resource capable of receiving electric 
energy from the grid and storing it for later injection of electric 
energy back to the grid.'' We find that removing the phrase 
``regardless of where the resource is located on the electrical 
system'' from the NOPR proposal and instead clarifying where an 
electric storage resources may be located does not change the 
applicability of the definition and will also provide a more adaptable 
definition for other Commission actions.\48\ We clarify that this 
definition is intended to cover electric storage resources capable of 
receiving electric energy from the grid and storing it for later 
injection of electric energy back to the grid, regardless of their 
storage medium (e.g., batteries, flywheels, compressed air, and pumped-
hydro). Additionally, consistent with the NOPR proposal, we clarify 
that electric storage resources located on the interstate transmission 
system, on a distribution system, or behind the meter fall under this 
definition, subject to the additional clarifications provided below. By 
including all electric storage technologies, and by allowing resources 
that are interconnected to the transmission system, distribution 
system, or behind the meter to use the participation model for electric 
storage resources, we are ensuring that the market rules will not be 
designed for any particular electric storage technology.
---------------------------------------------------------------------------

    \48\ See, e.g., Essential Reliability Services and the Evolving 
Bulk-Power System--Primary Frequency Response, Order No. 842, 162 
FERC ] 61,128 (2018), Notice of Proposed Rulemaking, FERC Stats. & 
Regs. ] 32,718 (2016); Notice of Inquiry, FERC Stats. & Regs. ] 
35,576.
---------------------------------------------------------------------------

    30. We observe 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.\49\ As a result, such an electric storage resource 
must fulfill certain responsibilities set forth in the FPA and the 
Commission's rules and regulations.\50\
---------------------------------------------------------------------------

    \49\ We note that injections of electric energy back 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).
    \50\ Examples of such responsibilities include filing rates 
under FPA section 205 (potentially including obtaining market-based 
rate authority); 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).
---------------------------------------------------------------------------

    31. We disagree with commenters who assert that the definition of 
an electric storage resource should be limited to those electric 
storage resources that are interconnected to the transmission system. 
Electric storage resources interconnected to the distribution system 
are already participating in the RTO/ISO markets,\51\ and they should 
continue to be able to do so. Such a limitation also would be 
inconsistent with the participation of other types of resources because 
various types of traditional generation and demand-side resources that 
are not connected directly to the transmission system currently 
participate in the RTO/ISO markets.
---------------------------------------------------------------------------

    \51\ See, e.g., PJM Interconnection LLC, 149 FERC ] 61,185 
(2014), order on reh'g, 151 FERC ] 61,231 (2015).
---------------------------------------------------------------------------

    32. Some commenters argue that the Commission should broaden its 
definition of an electric storage resource to apply to behind-the-meter 
resources that do not inject electricity onto the grid. We decline to 
do so. Through this Final Rule, we seek to ensure that RTO/ISO market 
rules account for the unique physical and operational characteristic of 
electric storage resources, namely their bidirectional capability to 
both inject energy to the grid and receive energy from it. Expanding 
the definition of an electric storage resource to include behind-the-
meter resources that do not inject electric energy onto the grid would 
not advance this purpose because they would not be injecting electric 
energy back to the grid. In addition, we have previously found that 
behind-the-meter resources that do not inject electric energy onto the 
grid are considered demand response.\52\ There

[[Page 9587]]

are existing participation models for demand response that already have 
well-established rules that are in some cases unique to demand response 
and we do not want the requirements of this Final Rule to disrupt or 
otherwise conflict with those rules.\53\
---------------------------------------------------------------------------

    \52\ See ISO New England Inc., 138 FERC ] 61,042, at PP 76-86, 
reh'g denied, 139 FERC ] 61,116, at PP 10-12, 26-31 (2012).
    \53\ Participation by demand response resources in an RTO/ISO 
market does not involve a sale of electric energy at wholesale in 
interstate commerce. See EnergyConnect, Inc., 130 FERC ] 61,031, at 
P 30 (2010); see also FERC v. Elec. Power Supply Ass'n, 136 S.Ct. 
760 (2016) (RTO/ISO rules governing participation of demand response 
resources in the RTO/ISO markets are practices that directly affect 
rates in those markets.).
---------------------------------------------------------------------------

    33. We also clarify that, by ``capable of . . . later injection of 
electric energy back to the grid,'' we mean that the electric storage 
resource is both physically designed and configured to inject electric 
energy back onto the grid and, as relevant, is contractually permitted 
to do so (e.g., per the interconnection agreement between an electric 
storage resource that is interconnected on a distribution system or 
behind-the-meter with the distribution utility to which it is 
interconnected). Consequently, the definition of an electric storage 
resource excludes a resource that is either (1) physically incapable of 
injecting electric energy back onto the grid due to its design or 
configuration or (2) contractually barred from injecting electric 
energy back onto the grid.
    34. While we decline in this Final Rule to expand the definition of 
an electric storage resource to include behind-the-meter resources that 
do not inject electric energy onto the grid, we note that the 
definition in this Final Rule establishes the minimum set of resources 
that each RTO/ISO must consider when developing an electric storage 
resource participation model to comply with this Final Rule. It does 
not preclude any RTO/ISO from proposing a broader definition for 
electric storage resources through a separate FPA section 205 
filing.\54\
---------------------------------------------------------------------------

    \54\ See 16 U.S.C. 824d. We acknowledge that the definition of 
an electric storage resource that we adopt in this Final Rule may 
differ from existing, Commission-accepted practices. For example, in 
CAISO, a stand-alone electric storage resource or an aggregation of 
behind-the-meter electric storage resources that cannot or does not 
inject electric energy back to the grid is able to use CAISO's 
participation model for electric storage resources (the Non-
Generator Resource model). See California Indep. Sys. Operator 
Corp., 132 FERC ] 61,211 (2010). This Final Rule does not require 
each RTO/ISO to limit the applicability of its existing 
participation models to electric storage resources as they are 
defined in this Final Rule or prevent them from arguing on 
compliance why its Commission-accepted tariff complies with the 
requirements of this Final Rule.
---------------------------------------------------------------------------

    35. Further, this Final Rule requires each RTO/ISO to implement 
market rules applicable to electric storage resources, as defined 
herein, that voluntarily seek to participate in the RTO/ISO markets; 
this Final Rule does not require electric storage resources to 
participate in those markets. 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.\55\ We 
also understand that numerous resources connected to the distribution 
system participate in the RTO/ISO markets today.\56\ Under these 
circumstances, we are not persuaded to grant the MISO Transmission 
Owners' and DTE Electric/Consumers Energy's request that the Commission 
allow states to decide whether electric storage resources in their 
state that are located behind a retail meter or on the distribution 
system are permitted to participate in the RTO/ISO markets through the 
electric storage resource participation model.
---------------------------------------------------------------------------

    \55\ See FERC v. Elec. Power Supply Ass'n, 136 S.Ct. 760 (2016); 
see also Advanced Energy Economy, 161 FERC ] 61,245, at P 59-60 
(2017).
    \56\ See, e.g., Southern California Edison Co., Docket No. ER10-
1356-000 (2010) (accepting Southern California Edison's Wholesale 
Distribution Access Tariff); PJM Interconnection, L.L.C., Docket No. 
ER11-3148-000 (2011) (delegated letter order) (accepting Wholesale 
Market Participation Agreement among PJM, CleanLight Power, L.L.C. 
and Public Service Electric and Gas Company); PJM Manual 14C, Sec.  
1.3 (discussing requirements of Wholesale Market Participation 
Agreements).
---------------------------------------------------------------------------

    36. That said, we emphasize the ongoing, vital role of the states 
with respect to the development and operation of electric storage 
resources. Such state responsibilities include, among other things, 
retail services and matters related to the distribution system, 
including design, operations, power quality, reliability, and system 
costs. We add that nothing in this Final Rule is intended to affect or 
implicate the responsibilities of distribution utilities to maintain 
the safety and the reliability of the distribution system or their use 
of electric storage resources on their systems.

B. Creation of a Participation Model for Electric Storage Resources

1. Participation Model for Electric Storage Resources
a. NOPR Proposal
    37. In the NOPR, the Commission proposed to require each RTO/ISO to 
revise its tariff to include a participation model consisting of market 
rules that, recognizing the physical and operational characteristics of 
electric storage resources, facilitates their participation in RTO/ISO 
markets.\57\ The Commission further proposed that the electric storage 
resource participation model satisfy certain requirements to 
accommodate the physical and operational characteristics of electric 
storage resources.\58\
---------------------------------------------------------------------------

    \57\ See NOPR at P 26.
    \58\ See id. P 28.
---------------------------------------------------------------------------

b. Comments
    38. Many commenters support the Commission's proposal to require 
each RTO/ISO to create a participation model for electric storage 
resources.\59\ These commenters agree that there is a need to recognize 
the physical, technical and operational characteristics of electric 
storage resources,\60\ remove artificial barriers to electric storage 
resource participation in the RTO/ISO markets,\61\ and allow electric 
storage resources to be adequately and fairly compensated for the 
services they provide.\62\ Commenters argue that these reforms will 
provide system and consumer benefits \63\ (including increased 
competition and lower costs to consumers,\64\ efficiency,\65\ and 
system reliability benefits \66\) and will improve air quality.\67\
---------------------------------------------------------------------------

    \59\ See, e.g., Advanced Microgrid Solutions Comments at 3; AES 
Companies Comments at 5, 14; Brookfield Renewable Comments at 2; 
CAISO Comments at 3-4; EEI Comments at 3-4; Energy Storage 
Association Comments at 1, 4-5; EPSA/PJM Power Providers Comments at 
4, 11; Massachusetts State Entities Comments at 13-14; NYISO 
Comments at 5.
    \60\ See, e.g., Advanced Energy Economy Comments at 22-24; AES 
Companies Comments at 3; APPA/NRECA Comments at 11; CAISO Comments 
at 3; City of New York Comments at 3; Research Scientists Comments 
at 2.
    \61\ See, e.g., City of New York Comments at 3; Energy Storage 
Association Comments at 5; Exelon Comments at 4; NYISO Indicated 
Transmission Owners Comments at 2-3.
    \62\ See, e.g., Dominion Comments at 4-5; Massachusetts 
Municipal Electric Comments at 2; NYISO Indicated Transmission 
Owners Comments at 2-3.
    \63\ See, e.g., Alevo Comments at 4-6; NESCOE Comments at 3; 
Ohio Commission Comments at 4.
    \64\ See, e.g., Beacon Power Comments at 2, 6; City of New York 
Comments at 3-4; EPRI Comments at 2; NESCOE Comments at 3; Union of 
Concerned Scientists Comments at 7.
    \65\ See EPRI Comments at 8-9; NESCOE Comments at 5.
    \66\ See, e.g., EPRI Comments at 2; Institute for Policy 
Integrity Comments at 4; NESCOE Comments at 5.
    \67\ See City of New York Comments at 3-4.
---------------------------------------------------------------------------

    39. Some commenters, however, condition their support for the 
Commission's proposed electric storage resource participation 
model.\68\ For example, EEI expresses support contingent on the 
proposed

[[Page 9588]]

participation model ensuring adequate reliability, not causing undue 
discrimination to other market participants, and addressing cost 
allocation and double recovery. Similarly, Exelon emphasizes that the 
Commission should avoid approving tariff changes that may have a 
detrimental effect on reliability, safety, or markets. Xcel Energy 
Services supports the participation model if it is feasible and cost-
effective. According to EPSA/PJM Power Providers, any initiatives or 
rules to facilitate participation of electric storage resources in the 
RTO/ISO markets must be compatible with, and support, the extensive 
system of conventional resources that make up the backbone of the bulk 
power system and implementation of a participation model for electric 
storage resources must preserve efficient operational and investment 
signals for all resources.
---------------------------------------------------------------------------

    \68\ See, e.g., EEI Comments at 4-6; EPSA/PJM Power Providers 
Comments at 3-4; Exelon Comments at 5-6, 12; Xcel Energy Services 
Comments at 14-15.
---------------------------------------------------------------------------

    40. Whether or not they support the Commission's proposal to 
require each RTO/ISO to establish a participation model for electric 
storage resources, many commenters caution against granting undue 
preference in the markets to electric storage resources.\69\ For 
example, Independent Energy Producers Association argues that the 
electric storage resource participation model should impose comparable 
performance obligations (such as penalties for non-performance, 
schedule deviations, and replacement obligations) to those required of 
other resources participating in the RTO/ISO markets. Similarly, 
several commenters contend that the Commission should focus on the 
technical requirements of the electric system and remain neutral about 
how or from which technology services are provided.\70\ For example, 
Massachusetts State Entities urge the Commission to ensure that 
participation is not limited based on type, vintage, ownership, 
business model, or other criteria unrelated to how well a particular 
resource satisfies the physical and operational parameters of a defined 
electric market or service.
---------------------------------------------------------------------------

    \69\ See, e.g., Avangrid Comments at 5; EEI Comments at 5; ELCON 
Comments at 3; EPSA/PJM Power Providers Comments at 4, 7-8; Exelon 
Comments at 2, 12; Independent Energy Producers Association Comments 
at 4; New York Utility Intervention Unit Comments at 3.
    \70\ See, e.g., American Petroleum Institute Comments at 2-4; 
EEI Comments at 6-7; EPSA/PJM Power Providers Comments at 7-8; 
Massachusetts State Entities Comments at 8-9; MISO Transmission 
Owners Comments at 7; PJM Market Monitor Comments at 2-3, 4-5.
---------------------------------------------------------------------------

    41. Commenters also address whether the Commission should provide 
regional flexibility for each RTO/ISO to comply with the rule by 
proposing requirements that accommodate electric storage resources that 
comport to their unique circumstances. Several commenters contend that 
regional flexibility is appropriate, with EEI, EPSA/PJM Power 
Providers, and Exelon noting that the proposed electric storage 
resource participation model provides such flexibility.\71\ Connecticut 
State Entities suggest that the Commission should create threshold 
standards for all RTOs/ISOs but allow regional variations for cost 
allocation and rate design.\72\
---------------------------------------------------------------------------

    \71\ See, e.g., APPA/NRECA Comments at 11; EEI Comments at 4; 
EPSA/PJM Power Providers Comments at 11-12; Exelon Comments at 2; 
NESCOE Comments at 2-3, 9.
    \72\ See Connecticut State Entities Comments at 6.
---------------------------------------------------------------------------

    42. Other commenters argue that the Commission should defer to the 
RTOs/ISOs to develop the detailed participation rules that take into 
account the unique needs of each market.\73\
---------------------------------------------------------------------------

    \73\ See, e.g., Duke Energy Comments at 3; ISO-NE Comments at 
10-14; MISO Comments at 2; National Hydropower Association Comments 
at 4.
---------------------------------------------------------------------------

    43. For example, ISO-NE urges the Commission to avoid a one-size-
fits-all approach. Specifically, ISO-NE is concerned that (1) the focus 
on participation models and market participant types rather than on 
services is inconsistent with its core market design objective of 
technology neutrality and (2) the rulemaking could require ISO-NE to 
fundamentally change this technology-neutral approach to the detriment 
of its markets. ISO-NE argues that adopting participation models could 
allow resource owners to engage in participation model ``shopping,'' a 
form of tariff rule arbitrage.
    44. Given these concerns, ISO-NE asks the Commission to provide 
only general guidance to RTOs/ISOs, requiring them to (1) examine the 
requirements associated with providing each wholesale service in their 
markets and (2) assess whether and how to revise those requirements to 
better accommodate the participation of electric storage resources. 
ISO-NE also asks the Commission to clarify that RTOs/ISOs are not 
required to adopt a specific participation model construct but instead 
may propose to incorporate the participation of electric storage 
resources in their markets in a manner consistent with the RTO's/ISO's 
existing market constructs.
    45. Similarly, while NESCOE supports the intent of the NOPR, it 
observes that further information is required on whether each RTO/ISO 
could modify its existing participation model(s) to address any barrier 
to the participation of electric storage resources in the RTO/ISO 
markets, rather than being required to create a new participation 
model.\74\ TeMix also questions the need for a new participation model 
for electric storage resources, arguing that such a participation model 
will only add to the complexity of the RTO/ISO markets.\75\ TeMix 
instead proposes that the Commission encourage reform of retail energy 
and distribution tariffs and require the RTOs/ISOs to frequently post 
wholesale bids and offers at the retail/wholesale interface to better 
allow retail customers to respond to the wholesale price of 
electricity.
---------------------------------------------------------------------------

    \74\ See NESCOE Comments at 2, 5.
    \75\ See TeMix Comments at 2-3, 4-5.
---------------------------------------------------------------------------

    46. Some commenters request that the Commission establish detailed 
requirements for a participation model for electric storage 
resources.\76\ For example, Energy Storage Association argues that 
prescriptive requirements for the proposed electric storage resource 
participation model are necessary to ensure that the participation 
model is adequately defined. Starwood Energy requests that the 
Commission require uniform participation models across all of the RTOs/
ISOs to ensure that all electric storage resources have the same 
opportunity to fully participate in the RTO/ISO markets, including the 
capacity markets, regardless of the region in which they are located. 
EPRI suggests that the definition of a participation model include, in 
addition to a set of tariff provisions, the set of software provisions 
required to represent the physical and operational characteristics of 
the particular resource.\77\
---------------------------------------------------------------------------

    \76\ See Energy Storage Association Comments at 8; Starwood 
Energy Comments at 7.
    \77\ See EPRI Comments at 2-3.
---------------------------------------------------------------------------

    47. Several commenters suggest that the participation model for 
electric storage resources should account for the physical and 
operational differences among electric storage technologies because 
different electric storage resources (such as pumped-hydro) have 
different operating characteristics, provide different services, and 
are not intended to serve the same roles within the electric grid.\78\ 
EPRI suggests that, given the current form of the day-ahead and real-
time energy markets, there may need to be two participation models for 
electric storage resources.\79\ EPRI explains that one participation 
model would be for resources whose transition

[[Page 9589]]

time from charge to discharge, or vice versa, exceeds the market 
interval (e.g., pumped-hydro and compressed-air) with the operational 
mode of these resources determined by the RTO's/ISO's security 
constrained unit commitment model. EPRI further explains that the 
second participation model would be for resources that transition from 
charge to discharge, or vice versa, within the market interval (e.g., 
batteries and flywheels). EPRI states that it is likely these resources 
can be online and responsive at zero power output, and therefore do not 
need to be committed to a particular mode of operation, and can be 
dispatched as an injector or withdrawer of power.
---------------------------------------------------------------------------

    \78\ See, e.g., Brookfield Renewable Comments at 3; Dominion 
Comments at 4-5; DTE Electric/Consumers Energy Comments at 4-5; 
National Hydropower Association Comments at 4; NYPA Comments at 5; 
San Diego Water Comments at 12-13, 15.
    \79\ See EPRI Comments at 7-8.
---------------------------------------------------------------------------

    48. Other commenters discuss the need to distinguish between 
electric storage resources based on their point of interconnection with 
the grid.\80\ Organization of MISO States recommends that electric 
storage resource participation models differentiate between 
transmission-interconnected electric storage resources and 
distribution-interconnected electric storage resources due to the 
interplay and potential overlap between wholesale and retail rates for 
energy use of retail customers. Stem suggests that, in developing their 
electric storage resource participation models, RTOs/ISOs should 
distinguish between behind-the-meter and front-of-the-meter electric 
storage resources, as well as single site and aggregated resources, to 
ensure that each resource is being used to its full technical 
capabilities and behind-the-meter resources are not precluded from the 
most efficient use cases.
---------------------------------------------------------------------------

    \80\ See Organization of MISO States Comments at 3; Stem 
Comments at 2-3; TeMix Comments at 3.
---------------------------------------------------------------------------

    49. Two RTOs/ISOs request clarifications with respect to the 
Commission's proposal to require them to establish a participation 
model for electric storage resources.\81\ ISO-NE and PJM want to ensure 
that the requirement that they establish a participation model for 
electric storage resources does not preclude electric storage resources 
participating in their markets from using other participation models 
(such as demand response or Alternative Technology Regulation 
Resource). PJM also argues that its current rules for electric storage 
resources should be carried forward because it allows electric storage 
resources to provide all services that they are capable of providing in 
a manner comparable to generation resources of similar size and with 
similar operational characteristics.
---------------------------------------------------------------------------

    \81\ See ISO-NE Comments at 29-30; PJM Comments at 6, 9, 11.
---------------------------------------------------------------------------

    50. Finally, several commenters share information on existing RTO/
ISO initiatives to remove barriers to the participation of electric 
storage resources in their markets.\82\ California Commission notes 
that, in CAISO, most of the NOPR proposals are either already in place 
or under development.\83\ Stem suggests that CAISO's current models, 
while incomplete, are the best place to start when designing a 
participation model for electric storage resources.\84\
---------------------------------------------------------------------------

    \82\ See, e.g., NYISO Comments at 4; MISO Comments at 3.
    \83\ See California Commission Comments at 3.
    \84\ See Stem Comments at 2-3.
---------------------------------------------------------------------------

c. Commission Determination
    51. In this Final Rule, we adopt the NOPR proposal and add section 
35.28(g)(9)(i) to the Commission's regulations to require each RTO/ISO 
to revise its tariff to include a participation model consisting of 
market rules that, recognizing the physical and operational 
characteristics of electric storage resources, facilitates their 
participation in the RTO/ISO markets. We find that requiring each RTO/
ISO to create a participation model that recognizes the unique 
characteristics of electric storage resources will help eliminate 
barriers to their participation in the RTO/ISO markets, which will 
enhance competition and, in turn, help to ensure that these markets 
produce just and reasonable rates.
    52. In response to concerns that the creation of a participation 
model for electric storage resources may undermine market designs that 
are based on services provided rather than resource type, we find that 
this Final Rule does not preclude an RTO/ISO from structuring its 
markets based on the technical requirements that a resource must meet 
to provide needed services. It simply requires that each RTO/ISO 
establish a participation model that ensures eligibility to participate 
in the RTO/ISO markets in a way that recognizes the physical and 
operational characteristics of electric storage resources. As such, 
this Final Rule does not grant undue preference to electric storage 
resources as a group or to specific electric storage technologies; 
rather, it removes barriers to their participation, enhancing 
competition among all resources that are technically capable of 
providing wholesale services. As noted above, resources that use the 
participation model required by this Final Rule must fulfill certain 
responsibilities set forth in the FPA and the Commission's rules and 
regulations.\85\ Additionally, resources that use this participation 
model will be compensated for the wholesale services they provide in 
the same manner as other resources that provide these services.
---------------------------------------------------------------------------

    \85\ See supra P 30.
---------------------------------------------------------------------------

    53. With respect to commenters' arguments concerning regional 
flexibility in implementation, we find that this Final Rule strikes the 
appropriate balance between allowing each RTO/ISO to adopt market rules 
that complement its unique market design and providing sufficiently 
detailed requirements to ensure that each RTO/ISO eliminates barriers 
to electric storage resource participation in its markets. 
Specifically, this Final Rule does not adopt prescriptive, uniform 
market rules to which each RTO/ISO must adhere. Instead, the 
regulations establish minimum requirements (for, among other things, 
bidding parameters and resource size) that each RTO/ISO must meet when 
proposing market rules to comply with this Final Rule, permitting each 
RTO/ISO to propose market rules that comply with these minimum 
requirements in the way that best suits its individual market 
design.\86\ We therefore decline to adopt additional or more 
prescriptive requirements for the participation model at this time.
---------------------------------------------------------------------------

    \86\ For example, we acknowledge that it may be necessary in 
some markets to create market rules that differentiate between 
electric storage resources interconnected to the grid at different 
points (i.e., at the transmission system, the distribution system, 
or behind-the-meter). Such differences could include different 
metering and accounting practices for certain electric storage 
resources, as discussed in the Metering and Accounting Practices for 
Charging Energy section. See infra P 322.
---------------------------------------------------------------------------

    54. We are not convinced that separate participation models are 
necessary for different types of electric storage resources (e.g., 
slower, faster, or aggregated) because we believe that the physical 
differences between electric storage resources can be represented by 
complying with the requirements for bidding parameters that are 
discussed below and that a single participation model can be designed 
to be flexible enough to accommodate any type of electric storage 
resource. However, to the extent an RTO/ISO seeks to include in its 
tariff additional market rules that accommodate electric storage 
resources with specific physical and operational characteristics, the 
RTO/ISO may propose such revisions to its tariff through a separate FPA 
section 205 filing.\87\
---------------------------------------------------------------------------

    \87\ See 16 U.S.C. 824d.
---------------------------------------------------------------------------

    55. We agree with CAISO that electric storage resources currently 
participate in the RTO/ISO markets in a variety of

[[Page 9590]]

ways and may use a variety of existing participation models. We clarify 
that, where an RTO/ISO already has a separate participation model that 
electric storage resources may use (such as participation models for 
pumped-hydro resources or demand response), we are not requiring the 
RTO/ISO to consolidate that participation model with the participation 
model for electric storage resources required by this Final Rule. 
However, to the extent an RTO/ISO modifies existing participation 
models to comply with this Final Rule, it must ensure that those 
resulting participation models are available for all types of electric 
storage resources and comply with all of the other requirements set 
forth in this Final Rule.
    56. While the participation model for electric storage resources 
should be designed to facilitate the participation of all types of 
electric storage technologies, we do not require all electric storage 
resources to use that participation model. To that end, we clarify that 
this Final Rule does not preclude electric storage resources from 
continuing to participate in demand response programs, as Alternative 
Technology Regulation Resources in ISO-NE, or under other participation 
models in any RTO/ISO in which they are eligible to participate. 
However, we clarify that, under section 35.28(g)(9) of the Commission's 
regulations, section 35.28(g)(9)(i) applies to resources using the 
participation model for electric storage resources and section 
35.28(g)(9)(ii) applies to all electric storage resources that fall 
under the definition established in this Final Rule. Therefore, 
electric storage resources that may elect not to use the participation 
model for electric storage resources would still be able to pay the 
wholesale LMP for the electric energy they purchase from the RTO/ISO 
markets and then resell back to those markets.
2. Qualification Criteria for the Participation Model for Electric 
Storage Resources
a. NOPR Proposal
    57. To ensure that the proposed participation model for electric 
storage resources will facilitate the participation of both existing 
and future electric storage resource technologies in the RTO/ISO 
markets, the Commission proposed that each RTO/ISO define the criteria 
in its tariff that a resource must meet to qualify to use the 
participation model for electric storage resources (i.e., qualification 
criteria).\88\ The Commission stated that these qualification criteria 
must be based on the physical and operational attributes of electric 
storage resources, must not limit participation to any particular type 
of electric storage resource or other technology, and must ensure that 
the RTO/ISO is able to dispatch a resource in a way that recognizes its 
physical constraints and optimizes its benefits to the RTO/ISO. The 
Commission invited comment on whether it should establish qualification 
criteria that each RTO/ISO must adopt and, if so, what specific 
criteria the Commission should require. The Commission explained that 
it was not proposing to limit the use of the electric storage resource 
participation model to electric storage resources as defined in the 
NOPR, acknowledging that there may be other types of resources whose 
physical and operational characteristics could qualify under the 
proposed participation model.\89\
---------------------------------------------------------------------------

    \88\ See NOPR at P 29.
    \89\ See id. P 30.
---------------------------------------------------------------------------

b. Comments
    58. While several commenters support providing each RTO/ISO with 
flexibility to propose appropriate qualification criteria on compliance 
with this Final Rule,\90\ a few commenters suggest that the Commission 
require each RTO/ISO to propose qualification criteria that meet 
certain standards.\91\ For example, Exelon, Imperial Irrigation 
District, and Magnum assert that qualification criteria should not 
limit participation to certain types of electric storage resources. 
Imperial Irrigation District argues that the qualification criteria for 
a resource to use the electric storage resource participation model 
should not be more specific than the physical and operational 
attributes cited in the NOPR (i.e., the ability to both charge and 
discharge energy). EPRI states that, if an RTO/ISO adopts two different 
participation models for electric storage resources, one for slower 
responding resources and one for faster responding resources, then that 
RTO/ISO may need to establish different qualification criteria for each 
electric storage resource participation model.
---------------------------------------------------------------------------

    \90\ See, e.g., AES Companies Comments at 15-16; Bonneville 
Comments at 4; CAISO Comments at 4-5; MISO Comments at 9-10; NESCOE 
Comments at 9; PG&E Comments at 7; SoCal Edison Comments at 15-16.
    \91\ See, e.g., EPRI Comments at 7-8; Exelon Comments at 4; 
Imperial Irrigation District Comments at 6-7; Magnum Comments at 8.
---------------------------------------------------------------------------

    59. Both MISO and SPP point to existing qualification criteria for 
providing certain services in their markets that they argue should 
apply to resources that use the electric storage resource participation 
model to provide those services.\92\ MISO notes that, for certain 
services, a resource must be able to sustain provision of the service 
for the minimum amount of time (e.g., contingency reserves have a 90-
minute replenishment time and capacity resources must be capable of 
providing four hours of continuous energy). SPP makes similar 
arguments, noting that some products like regulation may have shorter 
output sustainability requirements than other products like energy.
---------------------------------------------------------------------------

    \92\ See MISO Comments at 9-10; SPP Comments at 4.
---------------------------------------------------------------------------

    60. In addition to qualification criteria, Fluidic argues that 
RTOs/ISOs should modify their protocols and procedures to include a 
uniform accrediting process for determining the capacity of an electric 
storage resource for participation in their markets.\93\
---------------------------------------------------------------------------

    \93\ See Fluidic Comments at 4.
---------------------------------------------------------------------------

c. Commission Determination
    61. To implement the new requirement in section 35.28(g)(9)(i) of 
the Commission's regulations for a participation model for electric 
storage resources, in this Final Rule, we adopt the NOPR proposal to 
require each RTO/ISO to define in its tariff the criteria that a 
resource must meet to use the participation model for electric storage 
resources (i.e., qualification criteria). As proposed in the NOPR, 
these criteria must be based on the physical and operational 
characteristics of electric storage resources, such as their ability to 
both receive and inject electric energy, must not limit participation 
under the electric storage resource participation model to any 
particular type of electric storage resource or other technology and 
must ensure that the RTO/ISO is able to dispatch a resource in a way 
that recognizes its physical and operational characteristics and 
optimizes its benefits to the RTO/ISO. We find that such criteria are 
necessary to ensure that the electric storage resource participation 
model will accommodate both existing and future technologies.
    62. Because the qualification criteria must not limit participation 
to any particular technology and instead will be based on the physical 
and operational characteristics of electric storage resources, these 
criteria will allow new electric storage resource technologies to 
participate in the RTO/ISO markets without the need for additional 
tariff revisions to explicitly permit their participation. This focus 
on the physical and operational characteristics of electric storage 
resources rather than the specific

[[Page 9591]]

technology in use will remove barriers to entry for existing and future 
technologies, which will enhance competition in the RTO/ISO markets 
and, in turn, help to ensure that these markets produce just and 
reasonable rates. In addition, requiring each RTO/ISO to define in its 
tariff qualification criteria will provide greater certainty about 
which resources will be eligible to use the electric storage resource 
participation model in each RTO/ISO.
    63. Also, as proposed in the NOPR, we provide each RTO/ISO with 
flexibility to propose qualification criteria that best suit its 
proposed participation model for electric storage resources. We decline 
to adopt Imperial Irrigation District's suggestion to specify that the 
qualification criteria for a resource to use the electric storage 
resource participation model should be limited to the physical and 
operational characteristics cited in the definition proposed in the 
NOPR (i.e., the ability to both charge and discharge energy). We agree 
that the qualification criteria should not present barriers to the 
participation of any electric storage resource in the RTO/ISO markets. 
As long as any qualification criteria that the RTOs/ISOs propose do not 
create such barriers and are inclusive of, at a minimum, those 
resources set forth under the definition of electric storage resources 
in this NOPR, then we do not find that it is necessary to place 
additional limitations on any qualification criteria that the RTOs/ISOs 
may propose in response to this Final Rule.
    64. In response to Fluidic, we clarify that the qualification 
criteria should not include a uniform accrediting process to determine 
the capacity of an electric storage resource. As discussed in the 
Eligibility to Provide All Capacity, Energy, and Ancillary Services 
section,\94\ we understand that, like all other market participants, 
resources using the participation model for electric storage resources 
will be subject to testing procedures to determine their technical 
ability to provide a particular service and that this testing will be 
done based on the capacity that the resource wants to offer into the 
RTO/ISO markets.
---------------------------------------------------------------------------

    \94\ See infra P 81.
---------------------------------------------------------------------------

    65. With respect to MISO's and SPP's comments, we note that, based 
on our understanding, the requirements that MISO and SPP characterize 
as qualification criteria are technical requirements to provide a 
particular wholesale service. Such technical requirements should not be 
used as qualification criteria to determine whether a resource may use 
the participation model for electric storage resources. Rather, MISO 
and SPP would continue to use these requirements to determine whether 
individual resources using the participation model for electric storage 
resources are eligible to provide specific services.
3. Relationship Between Electric Storage Resource Participation Model 
and Existing Market Rules
a. NOPR Proposal
    66. In the NOPR, the Commission proposed that each RTO/ISO propose 
any necessary additions or modifications to its existing tariff 
provisions to specify: (1) Whether resources that qualify to use the 
participation model for electric storage resources will participate in 
the RTO/ISO markets through existing or new market participation 
agreements; and (2) whether particular existing market rules apply to 
resources participating under the electric storage resource 
participation model.\95\
---------------------------------------------------------------------------

    \95\ See NOPR at P 31.
---------------------------------------------------------------------------

b. Comments
    67. CAISO supports the NOPR proposal.\96\ In contrast, ISO-NE 
requests that the Commission omit any specific directive about market 
participation agreements from a final rule.\97\ ISO-NE notes that, in 
New England, all market participants use the same Market Participation 
Service Agreement regardless of resource type, and it does not 
interpret the NOPR to preclude its continued use of a single agreement. 
SPP remains silent as to whether it supports the NOPR proposal but 
states that it will modify both its tariff and market protocols to 
accommodate the participation of electric storage resources, noting 
that it will structure any new rules consistent with SPP balancing 
authority needs and requirements, while providing as much flexibility 
and opportunity for the participation of electric storage resources as 
possible.\98\
---------------------------------------------------------------------------

    \96\ See CAISO Comments at 5.
    \97\ See ISO-NE Comments at 56.
    \98\ See SPP Comments at 5.
---------------------------------------------------------------------------

c. Commission Determination
    68. To implement the new requirement in section 35.28(g)(9)(i) of 
the Commission's regulations for a participation model for electric 
storage resources, in this Final Rule, we adopt the NOPR proposal to 
require each RTO/ISO to propose any necessary additions or 
modifications to its existing tariff provisions to specify: (1) Whether 
resources that qualify to use the participation model for electric 
storage resources will participate in the RTO/ISO markets through 
existing or new market participation agreements and (2) whether 
particular existing market rules apply to resources participating under 
the electric storage resource participation model. We find that these 
requirements are necessary to provide certainty to resources using the 
electric storage resource participation model about the market rules 
that will govern their participation in each RTO/ISO market, thus 
removing barriers to their participation.
    69. With respect to ISO-NE's concern that the RTOs/ISOs should not 
be precluded from using a single market participation agreement for all 
market participants, we clarify that this Final Rule allows the use of 
one or more existing agreements so long as the agreement(s) complies 
with the terms of this Final Rule.

C. Eligibility of Electric Storage Resources To Participate in the RTO/
ISO Markets

1. Eligibility To Provide All Capacity, Energy, and Ancillary Services
a. NOPR Proposal
    70. In the NOPR, the Commission proposed to require each RTO/ISO to 
modify its tariff to establish a participation model consisting of 
market rules for electric storage resources under which a participating 
resource is eligible to provide any capacity, energy, and ancillary 
service that it is technically capable of providing in the RTO/ISO 
markets.\99\ The Commission also proposed that electric storage 
resources should be eligible, as part of the participation model, to 
provide services that the RTOs/ISOs do not procure through a market 
mechanism, such as blackstart service, primary frequency response 
service, and reactive power service, if they are technically capable. 
The Commission specified that, where compensation for these services 
exists, electric storage resources should also receive such 
compensation commensurate with the service provided.
---------------------------------------------------------------------------

    \99\ See NOPR at P 48.
---------------------------------------------------------------------------

b. Comments
    71. Many commenters generally support the NOPR proposal.\100\ In 
particular, several commenters support the NOPR proposal that electric 
storage resources, if technically capable, must

[[Page 9592]]

be eligible to provide services that the RTOs/ISOs do not procure 
through a market mechanism, such as blackstart service, primary 
frequency response service, and reactive power service.\101\ However, 
APPA/NRECA suggest that the Commission give each RTO/ISO flexibility to 
demonstrate on compliance the extent to which an electric storage 
resource may not be technically capable of providing a given service 
reliably, efficiently, and cost-effectively.\102\
---------------------------------------------------------------------------

    \100\ See, e.g., Advanced Energy Economy Comments at 23-25; 
American Petroleum Institute Comments at 3; EEI Comments at 6; 
Mensah Comments at 2; MISO Comments at 4; National Hydropower 
Association Comments at 7.
    \101\ See, e.g., Advanced Energy Economy Comments at 29; APPA/
NRECA Comments at 12-13; Exelon Comments at 6; National Hydropower 
Association Comments at 7; Xcel Energy Services Comments at 21.
    \102\ See APPA/NRECA Comments at 13.
---------------------------------------------------------------------------

    72. Several of the RTOs/ISOs explain their ongoing efforts to 
improve the opportunities for electric storage resources to participate 
in their markets.\103\ MISO states that the NOPR proposal aligns with 
its tariff, which classifies resources based on their technical 
capabilities, including any technical limitations that they have. 
Moreover, MISO states that it is exploring the potential to enhance the 
opportunities for electric storage resources to participate in its 
markets, noting, however, that implementing such enhancements may 
require significant changes to its settlement systems and software. 
NYISO explains that, to ensure that its market rules are fully 
accessible to new electric storage technologies, it is working with 
stakeholders on a comprehensive review and reform of the rules related 
to electric storage resource participation in its markets.
---------------------------------------------------------------------------

    \103\ See CAISO Comments at 5-6; MISO Comments at 4-6; NYISO 
Comments at 5-6; SPP Comments at 7.
---------------------------------------------------------------------------

    73. CAISO points out that electric storage resources participating 
in CAISO's market have the opportunity to provide energy and ancillary 
services, including those that CAISO may procure outside of its market 
processes, if they meet the technical criteria to do so. Likewise, SPP 
notes that electric storage resources may provide non-market based 
services such as blackstart service and reactive power service if they 
meet the relevant technical requirements.
    74. While ISO-NE states that it will revise its market rules in 
compliance with a final rule in this proceeding to eliminate barriers 
to the participation of electric storage resources in their markets, 
and SPP states that, prior to the issuance of the NOPR, it was planning 
to do so,\104\ they each request clarification of the NOPR proposal 
that a resource using the electric storage resource participation model 
must be eligible to provide any capacity, energy, and ancillary service 
that it is technically capable of providing. According to ISO-NE, 
electric storage resources should not receive different treatment than 
other technology types. ISO-NE and SPP thus ask the Commission to 
clarify that an electric storage resource must be eligible to provide a 
service only if it meets the same requisite performance requirements to 
provide that service that apply to all other resources.
---------------------------------------------------------------------------

    \104\ See ISO-NE Comments at 14-15; SPP Comments at 3-4, 6-7.
---------------------------------------------------------------------------

    75. Energy Storage Association contends that it is imperative that 
RTOs/ISOs establish a process for resources to demonstrate that they 
are technically capable of providing a specific service.\105\ Energy 
Storage Association asserts that such a process must be transparent and 
documented to create more certainty for new resources and to ensure 
that all resources that are technically capable of providing a 
particular service can do so.
---------------------------------------------------------------------------

    \105\ See Energy Storage Association Comments at 10-11.
---------------------------------------------------------------------------

c. Commission Determination
    76. In this Final Rule, we adopt the NOPR proposal and add section 
35.28(g)(9)(i)(A) to the Commission's regulations to require each RTO/
ISO to establish market rules so that a resource using the 
participation model for electric storage resources is eligible to 
provide all capacity, energy, and ancillary services that it is 
technically capable of providing, including services that the RTOs/ISOs 
do not procure through an organized market. To provide clarity, we add 
the phrase ``technically capable of providing'' to the regulatory text 
we proposed in the NOPR. To be eligible to provide capacity, energy, 
and ancillary services, a resource using the participation model for 
electric storage resources will still need to meet the technical 
requirements for any of the services that it wants to provide. We 
recognize that the RTOs/ISOs have ongoing efforts to enhance 
opportunities for electric storage resources to participate in their 
markets and encourage each RTO/ISO to build upon these efforts when 
developing tariff revisions to comply with this Final Rule.
    77. In response to ISO-NE, we clarify that each RTO/ISO is required 
to revise its tariff to allow a resource using the electric storage 
resource participation model to be eligible to provide a service only 
if that resource is technically capable of doing so. To the extent that 
an RTO/ISO has developed a standard set of technical requirements that 
all resources must meet to provide a given service, those requirements 
would also apply to a resource using the electric storage resource 
participation model if it wants to provide that service.
    78. In response to ISO-NE and SPP, we clarify that ``technically 
capable'' of providing a service means that a resource can meet all of 
the technical, operational, and/or performance requirements that are 
necessary to reliably provide that service. For example, these 
requirements may include a minimum run-time to provide energy or the 
ability to respond to automatic generation control to provide frequency 
regulation. While we are clarifying the definition of ``technically 
capable'' here, we note that we are not considering in this proceeding 
the requirements that determine whether resources are technically 
capable of providing individual wholesale services.\106\
---------------------------------------------------------------------------

    \106\ To the extent that an RTO/ISO seeks to revise its tariff 
provisions setting forth the technical requirements for providing 
any specific wholesale service, the RTO/ISO may propose such 
revisions to its tariff through a separate FPA section 205 filing. 
See 16 U.S.C. 824d.
---------------------------------------------------------------------------

    79. We decline to adopt APPA/NRECA's suggestion that the Commission 
give each RTO/ISO flexibility to demonstrate on compliance the extent 
to which an electric storage resource may not be technically capable of 
providing a given service reliably, efficiently, and cost-effectively. 
Each individual electric storage resource must still meet the technical 
requirements of providing any specific service, which would be 
determined by the RTO/ISO on a case-by-case basis.
    80. As part of the requirement that each RTO/ISO develop a 
participation model for electric storage resources that allows electric 
storage resources to be eligible to provide services in all of its 
capacity, energy, and ancillary service markets, we also require that 
such participation model allow electric storage resources to be 
eligible to provide services that the RTOs/ISOs do not procure through 
an organized market mechanism (such as blackstart service, primary 
frequency response service, and reactive power service) if they are 
technically capable of providing those services. As noted above, we are 
not requiring each RTO/ISO to revise or revisit the technical 
requirements or compensation provisions of those markets.
    81. We will not require the RTOs/ISOs to establish new processes 
through which a resource using the participation model for electric 
storage resources can demonstrate that it is technically

[[Page 9593]]

capable of providing a specific service in their markets. The RTOs/ISOs 
already have technical requirements and testing procedures in place to 
ensure that market participants can provide the particular services 
that they seek to provide. We expect that these requirements and 
procedures will apply to resources using the electric storage resource 
participation model, just as they do to all other resources. However, 
as part of developing a participation model for electric storage 
resources, we encourage each RTO/ISO to consider whether any 
modifications or additions to the existing technical requirements, 
testing protocols, or other qualification procedures are necessary to 
facilitate the participation of electric storage resources in its 
markets.
2. Ability To De-Rate Capacity To Meet Minimum Run-Time Requirements
a. NOPR Proposal
    82. In the NOPR, the Commission proposed to require each RTO/ISO to 
revise its tariff to clarify that an electric storage resource may de-
rate its capacity to meet minimum run-time requirements to provide 
capacity or other services.\107\ In RTOs/ISOs with capacity markets, 
the Commission proposed that the de-rated capacity value for electric 
storage resources be consistent with the quantity of energy that must 
be offered into the day-ahead energy market for resources with capacity 
obligations.
---------------------------------------------------------------------------

    \107\ See NOPR at P 49.
---------------------------------------------------------------------------

b. Comments
    83. Many commenters generally support the proposal to require each 
RTO/ISO to revise its tariff to clarify that an electric storage 
resource may de-rate its capacity to meet minimum run-time requirements 
to provide capacity or other services.\108\ Additionally, while many 
commenters either support or do not oppose the NOPR proposal, multiple 
entities request that the Commission clarify the proposal or raise 
specific issues about the proposal and its interaction with the RTO/ISO 
markets.
---------------------------------------------------------------------------

    \108\ See, e.g., AES Companies Comments at 16; Avangrid Comments 
at 5; City of New York Comments at 6-7; Energy Storage Association 
Comments at 8; Minnesota Energy Storage Alliance Comments at 3; MISO 
Comments at 12; NESCOE Comments at 10-11; NRG Comments at 14-15; R 
Street Institute Comments at 5; Xcel Energy Services Comments at 21.
---------------------------------------------------------------------------

    84. Multiple commenters raised issues surrounding performance 
requirements for electric storage resources in the RTO/ISO 
markets.\109\ NRG agrees that the final rule should allow flexibility 
to de-rate in capacity markets but argues that the Commission should 
clarify that electric storage resources participating in capacity 
markets must meet the same performance metrics and criteria as other 
resources. American Petroleum Institute similarly supports allowing 
electric storage resources to de-rate to meet their capacity 
requirements but asserts that this should not affect the ability of 
these resources to participate in energy and ancillary services markets 
up to their nominal capacity. American Petroleum Institute also 
contends that electric storage resources should be subject to the same 
penalties for non-performance as generators and demand response.
---------------------------------------------------------------------------

    \109\ See, e.g., AES Companies Comments at 17; American 
Petroleum Institute Comments at 7-8; NRG Comments at 15.
---------------------------------------------------------------------------

    85. Some entities raise issues about the interaction of the 
Commission's de-rating proposal with resource obligations.\110\ Both 
Avangrid and EEI seek clarification that the proposal is intended to 
ensure that the resource's de-rate is consistent with obligations that 
the resource has in organized wholesale markets. AES Companies note 
that, because some electric storage resources may only provide 
wholesale services when there is excess available after serving retail 
load, their nameplate capacity may not be the same as the capacity 
available for wholesale services and would need to be reduced by the 
capacity reserved for providing retail services. Xcel Energy Services 
agrees that resources must reserve sufficient capacity to meet any 
applicable capacity obligations, but it also notes that there are 
regional differences in how capacity obligations are treated (e.g., 
CAISO does not ``count'' storage capacity, while other RTOs/ISOs have a 
four-hour run-time requirement).
---------------------------------------------------------------------------

    \110\ See, e.g., Avangrid Comments at 5; EEI Comments at 7; Xcel 
Energy Services Comments at 21-22.
---------------------------------------------------------------------------

    86. Energy Storage Association raises concerns regarding the 
Commission's proposal that the de-rated capacity value for an electric 
storage resource should be consistent with the quantity of energy that 
must be offered into the day-ahead energy market for resources with 
capacity obligations.\111\ Energy Storage Association asserts that, 
because some RTOs/ISOs explicitly exempt electric storage resources 
from a day-ahead energy market must-offer obligation, there would not 
be a basis for determining a storage resource's capacity value. 
Instead, Energy Storage Association recommends that RTOs/ISOs assign 
electric storage resources a capacity value based on the quantity of 
energy that they can discharge continuously over the minimum run-time 
set by the RTO/ISO. SPP also supports the ability to de-rate the 
maximum capacity of an electric storage resource in order to qualify 
for provision of other products but requests that the Commission find 
that a storage resource de-rating its capacity to meet minimum run-time 
requirements is not physical withholding.\112\
---------------------------------------------------------------------------

    \111\ See Energy Storage Association Comments at 8-9.
    \112\ See SPP Comments at 7.
---------------------------------------------------------------------------

    87. Several other commenters consider the interaction between the 
Commission's de-rating proposal and market power issues.\113\ For 
example, EEI asserts that the RTO/ISO or market monitor would need to 
verify minimum run-times and parameters to ensure that there is a 
reasonable basis for the de-rate. Exelon agrees that electric storage 
resources should be treated the same as generators providing capacity, 
which can de-rate, and states that the market monitor can investigate a 
market participant if there is a concern about an exercise of market 
power. NYISO also raises general concerns about market power issues, 
asking the Commission to consider the potential market power 
implications of allowing a resource to hold back energy through its 
offer, even if its intent is to discharge the energy at a later time.
---------------------------------------------------------------------------

    \113\ See, e.g., EEI Comments at 7; Exelon Comments at 7; NYISO 
Comments at 7.
---------------------------------------------------------------------------

    88. Other commenters consider whether electric storage resources 
need to de-rate in all circumstances.\114\ For example, California 
Energy Storage Alliance asks the Commission to confirm that shorter-
duration electric storage resources should be eligible to participate 
in the markets and provide services, when reasonable, without de-
rating. California Energy Storage Alliance argues that each RTO/ISO 
should make determinations regarding de-rating capacity based on market 
needs. CAISO contends that the Commission should not require any 
specific outage rules for electric storage resources and that the 
general outage management rules that apply to all other resources in 
individual RTO/ISO markets should also apply to electric storage 
resources.
---------------------------------------------------------------------------

    \114\ See, e.g., CAISO Comments at 6; California Energy Storage 
Alliance Comments at 10-11.
---------------------------------------------------------------------------

    89. EPRI raises concerns about the effectiveness of the 
Commission's proposal. EPRI asserts that the Commission's de-rating 
proposal is potentially an improved approximation of an electric 
storage resource's capacity value.\115\ However, EPRI states that the 
proposal may not be entirely accurate because it assumes that an 
electric

[[Page 9594]]

storage resource would contribute less than its maximum capacity to 
provide energy across the entire four-hour minimum duration required 
for providing capacity in many RTOs/ISOs. EPRI asserts that, during 
periods where the RTO/ISO requires maximum capacity, an electric 
storage resource with a two-hour duration at maximum discharge may 
exhaust all energy production during the first two hours. EPRI argues 
that the Commission's proposal also does not guarantee that an electric 
storage resource will have full energy levels when the maximum capacity 
period begins. EPRI contends that, where the load typically peaks 
during just one hour of the highest load days, an electric storage 
resource with less than the minimum duration requirement of the 
capacity market may actually be providing greater capacity value than 
the proposed de-rated value. EPRI asserts that, depending on the 
ability of an electric storage resource to provide capacity when its 
duration of energy storage is less than the minimum duration 
requirement of the capacity market, must-offer rules for the day-ahead 
energy market must be fairly determined. EPRI adds that the hours which 
an electric storage resource must bid as an injector of energy per day 
and how much capacity it must bid for those days must be determined. 
EPRI adds that those rules should be consistent with other principles 
of must-offer rules for capacity providers and ensure that they lead to 
the electric storage resource's ability to perform during critical peak 
conditions.
---------------------------------------------------------------------------

    \115\ See EPRI Comments at 12-13.
---------------------------------------------------------------------------

    90. Several commenters consider whether reforms beyond the 
Commission's proposal are needed. For example, some commenters argue 
for either exempting electric storage resources from minimum run-time 
requirements in some circumstances or developing new capacity products 
with shorter minimum run-time requirements.\116\ Alevo argues that the 
Commission should require each RTO/ISO to have additional capacity 
market products that better reflect the capabilities of electric 
storage resources because minimum run-time requirements present a 
barrier to electric storage resource participation in capacity markets. 
R Street Institute states that capacity products and performance 
requirements may not be well-suited to extracting the full economic 
value of electric storage resources for resource adequacy purposes. R 
Street Institute states that these rules can create barriers to 
capacity market participation for electric storage resources but, at 
the same time, relaxing them too aggressively may raise reliability 
concerns. R Street Institute further explains that it may be useful for 
capacity constructs to distinguish between short- and long-duration 
resource needs. R Street Institute encourages the Commission to seek 
additional detailed comments on methodologies for electric storage 
resources to participate in capacity markets, stating that reforms may 
be best left to individual RTO/ISO compliance filings or individual 
RTO/ISO proceedings.
---------------------------------------------------------------------------

    \116\ See, e.g., Alevo Comments at 8; R Street Institute 
Comments at 5.
---------------------------------------------------------------------------

    91. NextEra asserts that, in most RTOs/ISOs, reserve product 
commitment requirements systematically discriminate against electric 
storage resources by restricting their ability to offer their full 
capacity into the market and that de-rating capacity to meet existing 
requirements diminishes the value of electric storage resources and 
arbitrarily restricts competition.\117\ In contrast, EPRI contends that 
each RTO/ISO should perform additional analysis to provide guidance on 
the amount of capacity that can be relied upon from limited-duration 
electric storage resources for particular services in each market.\118\
---------------------------------------------------------------------------

    \117\ See NextEra Comments at 7.
    \118\ See EPRI Comments at 12-13.
---------------------------------------------------------------------------

    92. A few commenters address the must-offer requirements that are 
often associated with a resource's capacity supply obligation.\119\ 
Energy Storage Association argues that electric storage resources 
should be exempt from, or otherwise allowed to manage, must-offer 
obligations. Advanced Energy Economy argues that must-offer 
requirements fail to account for the physical and operational 
characteristics of electric storage resources and arbitrarily exclude 
them from providing wholesale services that they are technically 
capable of providing. Advanced Energy Economy asserts that must-offer 
requirements were developed to prevent the exercise of market power and 
electric storage resources have no incentive or ability to exercise 
market power.
---------------------------------------------------------------------------

    \119\ See, e.g., Advanced Energy Economy Comments at 25-26, 28-
29; AES Companies Comments at 16-17; Energy Storage Association 
Comments at 6, 12.
---------------------------------------------------------------------------

    93. AES Companies claim that it may be necessary to modify RTO/ISO 
must-offer requirements to allow electric storage resources to 
participate in capacity markets while also providing non-dispatched 
services (such as primary frequency response and voltage control). AES 
Companies add that most must-offer requirements apply to a capacity 
resource during all dispatch intervals, even though specific services 
may only be needed for a set number of hours in a day.
c. Commission Determination
    94. To implement section 35.28(g)(9)(i)(A) of the Commission's 
regulations, in this Final Rule, we adopt the NOPR proposal, as 
modified and clarified below, to require each RTO/ISO to revise its 
tariff to allow electric storage resources to de-rate their capacity to 
meet minimum run-time requirements. We find that allowing resources 
using the participation model for electric storage resources to de-rate 
their capacity to meet minimum run-time requirements to provide 
capacity or other services will help to ensure that electric storage 
resources are eligible to provide all services that they are 
technically capable of providing by taking into account their physical 
and operational characteristics, while still maintaining the quality 
and reliability of services they seek to provide. For example, this 
requirement would allow a 10MW/20MWh electric storage resource to offer 
5MW of capacity into a capacity market with a 4-hour minimum run-time 
because that is the maximum output that the resource can sustain for 
the duration of the minimum run-time. Absent the opportunity to de-rate 
its capacity, the 10MW/20MWh electric storage resource would not be 
able to participate in that capacity market, despite its ability to 
reliably provide 5MW of capacity for the duration of the minimum run-
time.
    95. We also clarify several aspects of the NOPR proposal in 
response to commenters. In response to NRG, we clarify that this Final 
Rule does not exempt electric storage resources that participate in 
RTO/ISO capacity markets from meeting the performance metrics and 
criteria that apply to all other resources that participate in those 
markets. In fact, along with other requirements in this Final Rule that 
require an RTO's/ISO's participation model for electric storage 
resources to account for the physical and operational characteristics 
of electric storage resources,\120\ allowing electric storage resources 
to de-rate their capacity to meet minimum run-time requirements should 
make it possible for energy-limited electric storage resources to 
satisfy relevant performance metrics in the RTO/ISO markets. In 
response to American Petroleum Institute, we

[[Page 9595]]

clarify that this Final Rule does not exempt an electric storage 
resource that is participating in RTO/ISO capacity markets from any 
applicable penalties for non-performance.
---------------------------------------------------------------------------

    \120\ See, e.g., Physical and Operational Characteristics of 
Electric Storage Resources and State of Charge Management sections, 
infra PP 189-194, 251-257.
---------------------------------------------------------------------------

    96. In response to SPP, we clarify that an electric storage 
resource de-rating its capacity to provide capacity or other services 
is not engaging in physical withholding if it is de-rating to meet 
minimum run-time requirements. In the case of an electric storage 
resource that de-rates its capacity to meet minimum run-time 
requirements, this resource would be de-rating its capacity for true 
and verifiable technical reasons pertaining to the market rules for 
providing various services. However, as the Commission has previously 
explained, physical withholding may include a market participant 
declaring that an electric facility has been de-rated, forced out of 
service, or otherwise been made unavailable for technical reasons that 
are unrelated to physical or legitimate commercial issues or that 
cannot be verified.\121\ Thus, we find that each RTO/ISO may request 
that its market monitor verify whether an electric storage resource de-
rated its capacity to meet a minimum run-time requirement to ensure 
that these resources are not engaging in physical withholding, as 
defined by the Commission.
---------------------------------------------------------------------------

    \121\ See Sw. Power Pool, Inc., 141 FERC ] 61,048, at P 451 
(2012), order on reh'g, 142 FERC ] 61,205 (2013). Other examples of 
physical withholding that the Commission has identified, which we do 
not believe apply to de-rating to meet minimum run-time 
requirements, include: (1) Refusing to provide offers or schedules 
for an electric facility when it is required to offer into the 
market when it would otherwise have been in the economic interest to 
do so without market power; (2) operating a generation resource in 
real time to produce an output level that is less than dispatch 
targets; (3) de-rating a transmission facility or interface for 
technical reasons that are not true or verifiable; (4) operating a 
transmission facility in a manner that is not economic and that 
causes a binding transmission constraint or binding reserve zone 
constraint or local reliability issue; and (5) declaring that the 
capability of resources to provide energy or operating reserves is 
reduced for reasons that are not true or verifiable. Id.
---------------------------------------------------------------------------

    97. Additionally, while commenters do not specifically describe any 
market power concerns outside the context of physical withholding, to 
the extent that market power concerns arise as a result of electric 
storage resources de-rating capacity to provide capacity or other 
services, each RTO/ISO may consider whether it is appropriate to update 
and/or apply existing market power mitigation processes to electric 
storage resources to alleviate market power concerns.
    98. In response to California Energy Storage Alliance, we agree 
that electric storage resources may provide services in the RTO/ISO 
markets without de-rating so long as they meet the requirements to 
provide the particular service that they seek to provide. We also 
clarify that this Final Rule does not require any specific outage rules 
for electric storage resources.
    99. Further, upon consideration of the comments, we clarify the 
part of the NOPR proposal stating that the de-rated capacity value for 
electric storage resources should be consistent with the quantity of 
energy that must be offered into the day-ahead energy market for 
resources with capacity obligations. Several commenters suggest that 
there may be reasons why the de-rated capacity value for electric 
storage resources might not be consistent with the quantity of energy 
that must be offered into the day-ahead energy market. For example, an 
electric storage resource may choose to de-rate to reflect its capacity 
interconnection rights; to reserve capacity for providing retail 
services; or because system operators may need the full capacity of 
electric storage resources based on real-time system conditions.\122\ 
We find these points compelling. We also agree with Xcel Energy 
Services that the rules governing must-offer quantities vary between 
RTOs/ISOs and with Energy Storage Association that where electric 
storage resources do not have a must-offer obligation the de-rated 
quantity cannot be tied to such an obligation. We therefore provide 
each RTO/ISO flexibility either to use its existing rules for must-
offer quantities or to modify its existing rules as necessary to 
reflect the physical and operational characteristics of electric 
storage resources. However, in response to Avangrid and EEI, we clarify 
that, if an electric storage resource elects to de-rate its capacity, 
it must not de-rate its capacity below any capacity obligations it has 
assumed, such as any applicable must-offer requirement. We also agree 
with Energy Storage Association that the de-rated quantity should be 
based on the quantity of energy that an electric storage resource can 
discharge continuously over the minimum run-time set by the RTO/ISO.
---------------------------------------------------------------------------

    \122\ See, e.g., AES Companies Comments at 16-17; Avangrid 
Comments at 5; Energy Storage Association Comments at 8-9; EPRI 
Comments at 12-13.
---------------------------------------------------------------------------

    100. In response to those commenters suggesting that the RTO/ISO 
resource adequacy constructs provide accommodations for electric 
storage resources, we will not require the RTOs/ISOs to make specific 
changes to minimum run-time or must-offer requirements associated with 
providing capacity. While we agree with commenters that some of the 
requirements to participate in the resource adequacy constructs of the 
RTOs/ISOs may limit the ability of electric storage resources to 
participate, there is significant variation in how each RTO/ISO 
approaches resource adequacy. Thus, we do not believe it is appropriate 
to establish one standard approach to this issue in the RTO/ISO 
markets. However, we do find that it is important for electric storage 
resources that can provide value in those resource adequacy constructs 
to be eligible to participate. Therefore, in the interest of preserving 
flexibility for the RTOs/ISOs to address this issue given their unique 
resource adequacy constructs, we require each RTO/ISO to demonstrate on 
compliance with this Final Rule that its existing market rules provide 
a means for electric storage resources to provide capacity. If an RTO/
ISO does not have existing tariff provisions that enable electric 
storage resources to provide capacity, such as the RTO/ISO tariff 
provisions described below, we require the RTO/ISO to propose such 
rules on compliance with this Final Rule.
    101. To provide guidance for this requirement, we note that several 
of the RTOs/ISOs already have developed rules that allow energy-limited 
resources to provide capacity. Some of these market rules explicitly 
facilitate the participation of electric storage resources. For 
example, NYISO has an Energy Limited Resource model that facilitates 
the participation of electric storage resources in the capacity market 
by limiting their commitments to one four-hour interval per day, while 
CAISO requires that flexible resource adequacy resources be available 
only during peak hours. Other RTOs/ISOs rely on opportunity costs in 
incremental energy offer reference levels, allowing for a resource to 
reflect its energy-limited nature through high offers in the energy 
market that make it unlikely to be dispatched. For example, ISO-NE's 
tariff allows opportunity costs included in an incremental energy 
reference level based on costs associated with complying with emissions 
limits, water storage limits, and other operating permits that limit 
production of energy.\123\ While some of these market rules may apply 
to resources using the participation model for electric storage 
resources, we require each RTO/ISO to demonstrate how such rules are 
applicable to resources using the participation model for electric 
storage

[[Page 9596]]

resources on compliance with this Final Rule.
---------------------------------------------------------------------------

    \123\ ISO-NE Tariff, Market Rule 1, Appendix A, Sec.  
III.A.7.5.1.
---------------------------------------------------------------------------

3. Energy Schedule Requirement for Provision of Ancillary Services
a. NOPR Request for Comments
    102. In the NOPR, the Commission stated that electric storage 
resources tend to be capable of faster start-up times and higher ramp 
rates than traditional synchronous generators and are therefore able to 
provide ramping, spinning, and regulating reserve services without 
already being online and running.\124\ However, the Commission 
acknowledged that the RTOs/ISOs that co-optimize energy and ancillary 
services dispatch and pricing may condition eligibility to provide 
ancillary services on having an energy schedule.\125\ The Commission 
therefore sought comment on whether the requirement to have an energy 
schedule to provide ancillary services could be adjusted so that 
electric storage resources and other technically-capable resources 
could participate in the ancillary service markets independent of 
offering energy to the RTO/ISO.
---------------------------------------------------------------------------

    \124\ See NOPR at P 50.
    \125\ See id. P 51.
---------------------------------------------------------------------------

    103. Specifically, the Commission sought comment on whether 
dispatch and pricing of energy and ancillary services would be 
internally consistent if a resource were not required to offer to 
provide energy in order to offer to provide ancillary services. 
Further, the Commission sought comment on whether the capability of 
resources to provide an ancillary service absent an energy schedule can 
be determined in the regular performance tests that the RTO/ISO 
conducts and whether a resource's start-up time and ramp capability are 
generally represented in bidding parameters and would adequately 
guarantee the resource's ability to provide other services absent 
energy market participation. Finally, the Commission sought comment on 
the extent of software changes necessary to factor the elimination of 
such an energy schedule requirement into the RTO/ISO co-optimization 
models.
b. Comments
    104. A number of commenters agree that the RTOs/ISOs should base a 
market participant's eligibility to provide a particular ancillary 
service on its ability to provide services when called upon, rather 
than whether it is online and synchronized to the grid.\126\ They argue 
that the requirement to have an energy schedule to provide ancillary 
services is no longer technically necessary. For example, Advanced 
Energy Economy and Efficient Holdings state that electric storage 
resources are able to provide services such as primary frequency 
response, even while they are charging and unable to supply energy. 
Altametric and Energy Storage Association explain that an electric 
storage resource's start-up time and ramp capability are generally 
represented in bidding parameters, adequately guaranteeing the 
resource's ability to provide other services absent energy market 
participation. Altametric adds that an RTO/ISO can validate a 
resource's ability to provide ancillary services through its regular 
performance, while Energy Storage Association, NRG, and Pacific Gas & 
Electric contend that periodic performance testing is sufficient. 
Beacon Power notes that regulation resources are already required to 
undergo performance testing in PJM, with no requirement that they 
participate in the energy market.
---------------------------------------------------------------------------

    \126\ See, e.g., Advanced Energy Economy Comments at 26-27; 
Altametric Comments at 6; Beacon Power Comments at 3-4; Efficient 
Holdings Comments at 13-14; Energy Storage Association Comments at 
10, 12-13; NRG Comments at 15-16; Pacific Gas & Electric Comments at 
8.
---------------------------------------------------------------------------

    105. A few commenters address the benefits of removing any 
requirement to have an energy schedule to provide ancillary 
services.\127\ Specifically, Efficient Holdings, Energy Storage 
Association, and Magnum argue that removing any such requirement would 
eliminate a barrier to some electric storage resources' ability to 
provide ancillary services because they are energy-limited, increasing 
competition. Similarly, Starwood Energy states that electric storage 
resources should be allowed to participate in the ancillary service 
markets regardless of whether they offer energy to the RTO/ISO.
---------------------------------------------------------------------------

    \127\ See., e.g., Efficient Holdings Comments at 13-14; Energy 
Storage Association Comments at 12; Magnum Comments at 10; Starwood 
Energy Comments at 6.
---------------------------------------------------------------------------

    106. Energy Storage Association and Research Scientists opine that 
it is feasible for RTOs/ISOs to remove any requirement to have an 
energy schedule to provide ancillary services.\128\ Energy Storage 
Association and Research Scientists argue that, even if an electric 
storage resource is allowed to provide ancillary services without an 
energy schedule, dispatch and pricing of energy and ancillary services 
can be co-optimized and will be internally consistent. However, 
Research Scientists also note that whether an electric storage resource 
offers to provide energy may influence market outcomes, as an energy 
offer represents a resource's opportunity cost of providing ancillary 
services under the market clearing optimization algorithm. Energy 
Storage Association adds that, just as some resources currently provide 
only energy, RTOs/ISOs can manage resources that provide only ancillary 
services because they will receive enough information about electric 
storage resources' capability to provide ancillary services through 
their bidding parameters and through regular performance tests.
---------------------------------------------------------------------------

    \128\ See Energy Storage Association Comments at 12-13; Research 
Scientists Comments at 5-6.
---------------------------------------------------------------------------

    107. In contrast, EPSA/PJM Power Providers and NRG contend that, if 
the Commission requires each RTO/ISO to remove any requirement that a 
resource have an energy schedule to provide ancillary services, the 
Commission should require each resource that seeks to provide ancillary 
services to provide economic offers into the energy market.\129\ They 
argue that such offers are necessary to allow for the co-optimization 
of energy and ancillary services markets and to price the provision of 
ancillary services.
---------------------------------------------------------------------------

    \129\ See EPSA/PJM Power Providers Comments at 17; NRG Comments 
at 15-16.
---------------------------------------------------------------------------

    108. While not opining on whether the Commission should require 
each RTO/ISO to remove any requirement to have an energy schedule to 
provide ancillary services from its tariff, MISO Transmission Owners 
comment on the ability of resources to provide ancillary services 
without an energy schedule.\130\ MISO Transmission Owners claim that 
whether a resource can provide ancillary services without an energy 
schedule depends on the particular electric storage technology, the 
service being offered, and the ability of the resource to respond 
within the timeframe established for that service. Similarly, EPRI and 
Research Scientists assert that electric storage resources that 
transition from charge to discharge slowly (e.g., pumped-hydro 
resources) are unlikely to be able to provide certain ancillary 
services without an energy schedule, while electric storage resources 
that transition from charge to discharge and change operating levels 
quickly can.\131\
---------------------------------------------------------------------------

    \130\ See MISO Transmission Owners Comments at 9.
    \131\ See EPRI Comments at 14-15; Research Scientists Comments 
at 5.
---------------------------------------------------------------------------

    109. While Xcel Energy Services agrees that resources do not 
necessarily need to be synchronized to the grid to provide ancillary 
services, it argues that RTOs/ISOs must establish response time 
requirements to ensure that all resources provide those services within 
an adequate timeframe.\132\ Xcel Energy

[[Page 9597]]

Services further notes that to provide some services, such as voltage 
support, resources do not need to submit an energy offer. Xcel Energy 
Services concludes that the larger issue is the capability of co-
optimization software to evaluate the option between dispatching an 
electric storage resource to charge or discharge.
---------------------------------------------------------------------------

    \132\ See Xcel Energy Services Comments at 22.
---------------------------------------------------------------------------

    110. MISO, PJM, and SPP do not opine on whether the Commission 
should require each RTO/ISO to remove any requirement that a resource 
have an energy schedule to provide ancillary services, although MISO 
and SPP present considerations for the Commission to evaluate should it 
move forward on this issue, each discuss the feasibility of removing 
any such requirement for some services.\133\ For example, PJM notes 
that it already allows market participants to offer to provide 
ancillary services without a corresponding energy offer and that no 
further software changes are needed to effectuate this outcome.\134\ 
Likewise, MISO notes that, under its Stored Energy Resource model, the 
Stored Energy Resource submits regulation offers but not energy offers, 
illustrating the potential for resources to provide ancillary services 
without an energy schedule. SPP states that it allows a resource that 
is not online or synchronized to provide supplemental reserves. SPP 
also explains that a resource that is not qualified to provide energy 
can participate in the regulation market; however, that resource would 
not be eligible to set the price in the energy market, and its output 
could not be substituted for contingency reserves.
---------------------------------------------------------------------------

    \133\ See MISO Comments at 12-14; PJM Comments at 17; SPP 
Comments at 8-9.
    \134\ But see NextEra Comments at 7, n.8 (asserting that this 
option is only available in PJM for regulation service).
---------------------------------------------------------------------------

    111. While MISO agrees that electric storage resources that can 
start rapidly should not be required to be online and synchronized to 
provide ancillary services, it contends that an RTO must review and 
address its system limitations to ensure that it can handle such 
resources' fast start and ramp capabilities before removing any such 
requirement. According to MISO, reflecting an electric storage 
resource's start-up time and ramp capabilities in the clearing engine 
is feasible but would require extensive system and software changes. 
For an electric storage resource that is managing its own state of 
charge, MISO states that it would need the resource's energy schedule 
and dispatch range to ensure that it dispatches the resource to provide 
ancillary services within that resource's physical limits. MISO further 
contends, however, that if it were managing an electric storage 
resource's state of charge, it would need to receive offers for all 
ancillary services that the resource seeks to provide and that, absent 
an energy offer, the optimization model would need to assume that the 
resource is a price taker in the energy market if that maximizes its 
profit from providing ancillary services.
    112. SPP asserts that any change to an energy schedule requirement 
for providing spinning reserve needs to involve the North American 
Electric Reliability Corporation (NERC) because NERC defines spinning 
reserves as a resource that is synchronized and spinning.
    113. AES Companies argue that, rather than adopting any 
prescriptive requirement in a final rule, the Commission should allow 
each RTO/ISO to determine whether it can remove or modify any tariff 
provision or business practice that requires a resource to have an 
energy offer or schedule to provide a specific ancillary service, given 
their differing operational characteristics and needs.\135\ That said, 
AES Companies note that some RTOs/ISOs permit demand response resources 
to provide certain ancillary services without providing energy and that 
it is important to remove barriers to the provision of essential 
reliability services. AES Companies also mention that periodic testing 
of resources is sufficient to determine their ability to provide 
ancillary services but that testing and measurement procedures may vary 
by technology.
---------------------------------------------------------------------------

    \135\ See AES Companies Comments at 17-19.
---------------------------------------------------------------------------

    114. R Street Institute asserts that, unless they have a must-offer 
energy obligation, electric storage resources should not have to submit 
an energy schedule to participate in ancillary service markets.\136\ 
However, R Street Institute contends that, before requiring each RTO/
ISO to remove any requirement that a resource must have an energy 
schedule to provide ancillary services, the Commission should weigh the 
costs of any software changes necessary to implement such a requirement 
against its projected benefits.
---------------------------------------------------------------------------

    \136\ See R Street Institute Comments at 4.
---------------------------------------------------------------------------

    115. CAISO, ISO-NE, and NYISO state that the Commission should not 
require each RTO/ISO to remove any requirement that a resource have an 
energy offer or schedule to provide ancillary services.\137\ They state 
that their markets cannot accommodate resources that seek to provide 
ancillary services without offering energy as well. Specifically, they 
contend that all other resource types must submit an energy offer or 
schedule to provide ancillary services because it is necessary to allow 
them to co-optimize their energy and ancillary services markets. They 
argue that, without such a requirement, an RTO/ISO may dispatch a 
resource to provide ancillary services when it would have been more 
economically efficient to dispatch the resource to provide energy or 
may not be able to determine which resource(s) that have cleared as 
reserves it would be most economically efficient to dispatch for energy 
when contingencies arise. They contend that removing this requirement 
would therefore decrease overall market efficiency, increasing costs to 
consumers and uplift costs.
---------------------------------------------------------------------------

    \137\ See CAISO Comments at 7-8; ISO-NE Comments at 15-17; NYISO 
Comments at 7-9.
---------------------------------------------------------------------------

    116. In terms of the technical difficulties of removing the 
requirement that a resource have an energy schedule to provide 
ancillary services, EPRI notes that some RTOs/ISOs require zero-cost 
offers for certain ancillary services in the real-time market.\138\ 
EPRI states that prices for these ancillary services are based on the 
opportunity costs that the marginal ancillary service provider incurs 
to provide ancillary services instead of energy. Energy Storage 
Association and EPRI contend that, without providing an energy offer, 
an electric storage resource will not have a lost opportunity 
cost.\139\ EPRI notes that therefore the electric storage resource will 
not be able to set the price at a non-zero value when it is the 
marginal resource providing ancillary services.
---------------------------------------------------------------------------

    \138\ See EPRI Comments at 15.
    \139\ See Energy Storage Association Comments at 12; EPRI 
Comments at 15;
---------------------------------------------------------------------------

    117. Guannan He argues that there is no need for the Commission to 
require each RTO/ISO to remove any requirement that a resource have an 
energy schedule to provide ancillary services if electric storage 
resources specify through their energy schedules when they are online 
or offline.\140\
---------------------------------------------------------------------------

    \140\ See Guannan He Comments at 1-2.
---------------------------------------------------------------------------

    118. While Advanced Energy Economy and Electric Vehicle R&D Group 
argue that the Commission should require each RTO/ISO to remove any 
requirement that an electric storage resource have an energy schedule 
to provide ancillary services, they state that, if the Commission 
decides to retain the requirement, the Commission should make certain 
clarifications in the final rule or require each RTO/ISO to revise its 
existing market rules with respect to the provision of ancillary

[[Page 9598]]

services.\141\ Specifically, Advanced Energy Economy argues that the 
Commission should require each RTO/ISO to revise its tariff to allow an 
electric storage resource to account for its charge and discharge 
parameters. In addition, Advanced Energy Economy states that the 
Commission should provide assurances that an electric storage resource 
that manages its state of charge through energy offers will not be 
mitigated or deemed engaged in withholding. Electric Vehicle R&D Group 
argues that electric storage resources should be allowed to set their 
energy schedule to zero or a small negative number to compensate for 
losses.
---------------------------------------------------------------------------

    \141\ See Advanced Energy Economy Comments at 27; Electric 
Vehicle R&D Group Comments at 1.
---------------------------------------------------------------------------

c. Commission Determination
    119. Upon consideration of the comments, we will not require each 
RTO/ISO to modify rules requiring resources to have an energy schedule 
to participate in the ancillary service markets. While some electric 
storage resources may be technically capable of providing ancillary 
services without an energy schedule and could represent those 
capabilities in their bidding parameters and performance tests, we are 
persuaded by commenters that requiring the RTOs/ISOs to adjust the 
requirement to have an energy schedule to provide ancillary services 
could result in less efficient dispatch, potentially increasing costs. 
Moreover, we recognize the importance of co-optimization in clearing 
and dispatch software and appreciate that the RTOs/ISOs have developed 
different, individual approaches to co-optimizing their energy and 
ancillary service markets. Upon consideration of the comments, we do 
not find, on a generic basis, that a requirement to have an energy 
schedule to participate in the ancillary service markets is necessarily 
an unreasonable requirement for the participation of electric storage 
resources in those markets because such a requirement may be necessary 
to support economically efficient dispatch within a particular RTO/ISO 
market.
    120. However, we agree with commenters that some fast-responding 
electric storage resources are technically capable of providing 
ancillary services without an energy schedule. We also acknowledge that 
some RTO/ISO market rules already allow resources to provide some 
ancillary services, namely regulation, without the requirement to 
participate in the energy market. Such opportunities for participation 
in certain ancillary service markets without an energy schedule suggest 
that there may be instances (i.e., for certain ancillary services in 
certain RTO/ISO markets) in which allowing a resource to provide an 
ancillary service without an energy schedule may enhance market 
efficiency. Therefore, we encourage each RTO/ISO to consider whether 
fast-responding electric storage resources may be able to provide 
certain ancillary services in its markets without an energy schedule.
4. NERC Definitions
a. NOPR Request for Comment
    121. In the NOPR, the Commission noted that it appears that some of 
the Glossary of Terms definitions used in NERC reliability standards 
were created for synchronous generation.\142\ Therefore, the Commission 
sought comment on whether and to what extent the Commission-approved 
NERC Glossary of Terms and associated reliability standards or regional 
reliability requirements may create barriers to the participation of 
electric storage resources or other non-synchronous technologies in the 
RTO/ISO markets.
---------------------------------------------------------------------------

    \142\ See NOPR at P 52.
---------------------------------------------------------------------------

b. Comments
    122. Several commenters argue that the NERC reliability standards 
and regional reliability requirements do not present a barrier to 
electric storage resources participating in wholesale electric 
markets.\143\ Both AES Companies and EEI note, however, that 
modifications to the reliability standards may be appropriate in the 
future. NERC argues that its reliability standards are technology 
neutral and provide the responsible entity, usually the balancing 
authority, with flexibility to meet their performance-based 
requirements.\144\ Furthermore, Imperial Irrigation District and NERC 
point to an interpretation of regional Reliability Standard BAL-002-
WECC-2 that acknowledges that non-traditional resources, including 
electric storage resources, are capable of meeting the operating 
reserves-spinning requirement of the regional standard.\145\
---------------------------------------------------------------------------

    \143\ See AES Companies Comments at 24; CAISO Comments at 8; EEI 
Comments at 8; NERC Comments at 2.
    \144\ See NERC Comments at 4-5.
    \145\ See Imperial Irrigation District Comments at 4; NERC 
Comments at 6 (citing N. Am. Elec. Reliability Corp., Docket No. 
RD17-3-000 (Jan. 24, 2017) (delegated letter order)).
---------------------------------------------------------------------------

    123. Other commenters contend that it may be appropriate to revise 
the NERC Glossary of Terms to ensure that the definitions reflect the 
physical and operational characteristics of electric storage resources 
and other non-synchronous technologies.\146\ NESCOE contends that 
certain definitions in the NERC Glossary of Terms may limit electric 
storage resources' participation in the reserves markets, while 
Massachusetts State Entities assert that Northeast Power Coordinating 
Council rules, which Massachusetts State Entities do not specifically 
identify, may prohibit inverter-based resources, including electric 
storage resources, from providing spinning reserves. Exelon notes that 
the NERC definitions were written before the development of electric 
storage resources and if those definitions or reliability standards are 
being read to exclude certain resources, then those definitions or 
reliability standards should be carefully reviewed to determine whether 
the exclusionary language is necessary for purposes of reliability.
---------------------------------------------------------------------------

    \146\ See, e.g., ELCON Comments at 5, 9-10 (citing the NOPR's 
summary of comments that asserted, for example, that the NERC 
Glossary's definitions of Spinning Reserves and Operating Reserve-
Spinning may be barriers to non-synchronous resources seeking to 
provide reserve products; see, e.g., NOPR at P 44); EPRI Comments at 
15-16; Exelon Comments at 7-8; Massachusetts State Entities Comments 
at 15-16; MISO Comments at 14; National Hydropower Association 
Comments at 8; NYISO Comments at 7; Tesla/SolarCity Comments at 12-
14.
---------------------------------------------------------------------------

    124. Tesla/SolarCity suggest that (1) NERC should modify the 
definitions of ancillary services in its Glossary of Terms to eliminate 
any apparent requirement that ancillary service providers must be 
``generation'' or ``synchronized;'' (2) in its compliance filing, each 
RTO/ISO should identify any reliability standards that prevent it from 
making Commission-directed tariff changes to accommodate electric 
storage resource participation; and (3) the Commission should make 
clear in the final rule that reliability standards that were developed 
for or favor conventional generators without technical justification 
must be changed to allow the participation of all resources unless 
there are technical limitations.
    125. EPRI discusses the following potential revision to the NERC 
Glossary of Terms. While EPRI notes that the NERC definition of 
Operating Reserve-Spinning includes the phrase ``generation 
synchronized to the system,'' according to EPRI, resources providing 
spinning/synchronized reserves do not necessarily need to be 
synchronous resources but rather must be able to respond as soon as 
they are directed to do so. EPRI states that it would be useful to 
discuss this clarification with NERC and industry. SPP also notes that 
a spinning reserve

[[Page 9599]]

product, by definition, means the resource must be synchronized and 
spinning.\147\
---------------------------------------------------------------------------

    \147\ See SPP Comments at 8.
---------------------------------------------------------------------------

c. Commission Determination
    126. Upon consideration of the comments, we find that the 
Commission-approved NERC reliability standards, the associated Glossary 
of Terms, and regional reliability standards do not create barriers to 
the participation of electric storage resources or other non-
synchronous technologies in the RTO/ISO markets. We find persuasive 
NERC's argument that its reliability standards are technology neutral 
and provide electric storage resources with flexibility to meet their 
performance-based requirements. Moreover, no commenter has demonstrated 
that the NERC Glossary of Terms and associated reliability standards or 
regional reliability requirements preclude electric storage resources 
or other non-synchronous technologies from providing the services that 
they are technically capable of providing in the RTO/ISO markets.

D. Participation in the RTO/ISO Markets as Supply and Demand

1. Eligibility To Participate as a Wholesale Seller and Wholesale Buyer
a. NOPR Proposal
    127. In the NOPR, the Commission proposed to require each RTO/ISO 
to revise its tariff to ensure that electric storage resources can be 
dispatched and can set the wholesale market clearing price as both a 
wholesale seller and wholesale buyer, consistent with existing rules 
that govern when a resource can set the wholesale price.\148\ The 
Commission also proposed that, for a resource using the proposed 
participation model for electric storage resources to be able to set 
prices in the RTO/ISO markets as either a wholesale seller or a 
wholesale buyer, it must be available to the RTO/ISO as a dispatchable 
resource.\149\ This proposal included the requirements that the RTOs/
ISOs accept wholesale bids from electric storage resources to buy 
energy so that the economic preferences of electric storage resources 
are fully integrated into the market, the electric storage resource can 
set the price as a load resource where market rules allow, and the 
electric storage resource can be available to the RTO/ISO as a 
dispatchable demand asset.\150\ The Commission noted that these 
requirements must not prohibit electric storage resources from 
participating in the RTO/ISO markets as price takers, consistent with 
the existing rules for self-scheduled load resources. The Commission 
also proposed that resources using the participation model for electric 
storage resources be able to set the price in the capacity markets, 
where applicable.
---------------------------------------------------------------------------

    \148\ See NOPR at P 81.
    \149\ See id. P 84.
    \150\ See id. P 81.
---------------------------------------------------------------------------

    128. Finally, the Commission sought comment on whether any existing 
RTO/ISO rules may unnecessarily limit the ability of resources using 
the participation model for electric storage resources to set prices in 
the RTO/ISO markets.\151\
---------------------------------------------------------------------------

    \151\ See id. P 84.
---------------------------------------------------------------------------

b. Comments
i. Wholesale Seller/Wholesale Buyer
    129. Numerous commenters agree with the Commission's proposal to 
require each RTO/ISO to permit electric storage resources to be able to 
be dispatched as both supply and demand and to set wholesale market 
clearing prices as both a wholesale seller and wholesale buyer.\152\ 
Commenters state that this proposal appropriately recognizes the full 
bidirectional value of electric storage resources, their fast response 
times, and limited energy and allows for greater grid efficiency, 
greater competition, and downward pressure on wholesale prices and 
system costs.\153\ Institute for Policy Integrity also argues that such 
participation could reduce peak energy costs by replacing inefficient 
thermal units, reduce price volatility by shifting load from peak to 
off-peak, improve overall reliability on the electric grid, and reduce 
the need for cost-intensive investment in electric transmission 
infrastructure.
---------------------------------------------------------------------------

    \152\ See, e.g., Efficient Holdings Comments at 17; Imperial 
Irrigation District Comments at 10-11; National Hydropower 
Association Comments at 9; NYPA Comments at 11; R Street Institute 
Comments at 6; Tesla/SolarCity Comments at 15.
    \153\ See, e.g., Avangrid Comments at 7; Energy Storage 
Association Comments at 6-7, 17, 18; Imperial Irrigation District 
Comments at 11; Institute for Policy Integrity Comments at 3-4; SPP 
Comments at 13.
---------------------------------------------------------------------------

    130. Tesla/SolarCity add that, as more variable energy resources 
come online, the value of having dispatchable loads capable of setting 
market prices will become greater and this feature of the market will 
become increasingly valuable.\154\ Research Scientists agree that the 
economic preferences of energy storage resources should be reflected in 
the market clearing as both load and supply, in line with other load 
resources in the grid.\155\ Magnum supports the ability of electric 
storage resources to participate as a dispatchable load but not if it 
precludes the generation function of its technology from participating 
in market opportunities because the two functions can occur 
simultaneously.\156\
---------------------------------------------------------------------------

    \154\ See Tesla/SolarCity Comments at 15.
    \155\ See Research Scientists Comments at 8.
    \156\ See Magnum Comments at 13.
---------------------------------------------------------------------------

    131. Several RTOs/ISOs, including CAISO, ISO-NE, NYISO, and SPP, 
also express general support for the Commission's proposals.\157\ MISO 
agrees that a resource optimized through the market clearing process 
should be allowed to set wholesale prices but states that determining 
the rules and conditions under which electric storage resources should 
be cleared and optimized in the markets will require significant time 
and resources.\158\
---------------------------------------------------------------------------

    \157\ See CAISO Comments at 13; ISO-NE Comments at 21; NYISO 
Comments at 10; SPP Comments at 13.
    \158\ See MISO Comments at 7.
---------------------------------------------------------------------------

    132. MISO Transmission Owners caution that state laws may affect an 
electric storage resource's status as a seller or buyer, arguing that 
states and distribution utilities should retain authority to manage 
this aspect of electric storage resources in their areas.\159\ MISO 
Transmission Owners also assert that it is technologically challenging 
to enforce a requirement for a behind-the-meter electric storage 
resource to buy electricity at wholesale. Xcel Energy Services 
conditions its support upon resources being dedicated wholesale 
resources that do not have the ability to arbitrage wholesale and 
retail rates.\160\ EEI supports the proposal on the condition that the 
Commission clarify that an electric storage resource bidding into the 
wholesale markets that is interconnected to the transmission system 
must charge at wholesale rates, while an electric storage resource 
interconnected to the distribution system must pay any applicable 
charges under state jurisdictional tariffs for its use of state 
jurisdictional facilities.\161\
---------------------------------------------------------------------------

    \159\ See MISO Transmission Owners Comments at 11-12.
    \160\ See Xcel Energy Services Comments at 23.
    \161\ See EEI Comments at 12.
---------------------------------------------------------------------------

    133. While Open Access Technology conditionally supports the NOPR 
proposal, it requests that the Commission clarify whether a storage 
resource in charging mode is considered as negative demand response 
(i.e., load increase instead of load reduction).\162\
---------------------------------------------------------------------------

    \162\ See Open Access Technology Comments at 2.
---------------------------------------------------------------------------

    134. Several commenters state that electric storage resources 
should have the same ability as other resources to self-schedule within 
the requirements of the RTO/ISO and participate in the

[[Page 9600]]

RTO/ISO markets as a price taker.\163\ Energy Storage Association 
further recommends that the Commission clarify that the option to self-
schedule should apply to storage resources both as buyers and as 
sellers and not just as ``load resources.'' APPA/NRECA contend that, if 
electric storage resources are not permitted to participate as price 
takers on the same basis as any other self-scheduled resource, it will 
create a disincentive to load serving entity investment and utilization 
of electric storage resources, which will undermine the Commission's 
goals.
---------------------------------------------------------------------------

    \163\ See, e.g., APPA/NRECA Comments at 15-16; Avangrid Comments 
at 7; Energy Storage Association Comments at 18; NYISO Comments at 
10; Tesla/SolarCity Comments at 15.
---------------------------------------------------------------------------

    135. Dominion asserts that, in order to improve price transparency, 
the Commission should consider allowing a pumped-hydro resource to 
submit its dispatch cost to the RTO while preserving its right to self-
schedule in the real-time market.\164\ While MISO Transmission Owners 
generally support the Commission's proposal to allow electric storage 
resources to participate as a wholesale buyer and seller, they state 
that it is important to consider any unintended consequences regarding 
an electric storage resource owner's ability to self-schedule the unit 
if needed to meet load demand conditions and maintain power quality and 
reliability.\165\ NYISO points out that self-schedule offers will not 
allow the resource to participate as a supply and demand resource 
simultaneously because self-schedule offers indicate the resource's 
desired schedule.\166\ AES Companies argue that the Commission should 
not require the RTOs/ISOs to allow electric storage resources to be 
price takers; rather, this should be an RTO/ISO-specific decision 
because the markets are different and the decision to self-schedule may 
have unintended consequences and could skew market results.\167\
---------------------------------------------------------------------------

    \164\ See Dominion Comments at 6.
    \165\ See MISO Transmission Owners Comments at 11.
    \166\ See NYISO Comments at 10.
    \167\ See AES Companies Comments at 25.
---------------------------------------------------------------------------

ii. Dispatchability
    136. Some commenters support the Commission's proposal that an 
electric storage resource must be available to the RTO/ISO as a 
dispatchable resource to set prices in the RTO/ISO markets.\168\ EPRI 
asserts that, assuming an energy storage resource is dispatchable with 
a range of output, it should have no limitations to setting the price 
as either a wholesale seller or a wholesale buyer when it is marginal.
---------------------------------------------------------------------------

    \168\ See, e.g., EPRI Comments at 24; Imperial Irrigation 
District Comments at 11; Starwood Energy Comments at 6.
---------------------------------------------------------------------------

    137. SPP states that, while any resource type may set the price for 
any product that the resource is qualified to provide and offers to 
provide in the market, the resource must be dispatchable and must have 
available range to provide the system's marginal MW.\169\
---------------------------------------------------------------------------

    \169\ See SPP Comments at 15.
---------------------------------------------------------------------------

iii. Limitations on Price Setting
    138. Generally, the RTOs/ISOs do not believe that their rules limit 
the ability of an electric storage resource to set prices.\170\ SPP 
adds that, other than dispatchability and range requirements described 
in the preceding section, it does not have restrictions that would 
unnecessarily limit the ability of any resource type, including 
electric storage resources, to set price. MISO states that it is 
unaware of any rules that limit the ability of pumped-hydro resources 
to set prices in its markets. MISO also states that stored energy 
resources provide only regulation and are price-takers for energy. MISO 
recommends studying the basic participation model(s) for electric 
storage resources in more detail before identifying any necessary 
adjustments to an RTO/ISO market's price-setting rules.
---------------------------------------------------------------------------

    \170\ See, e.g., ISO-NE Comments at 21; MISO Comments at 18; PJM 
Comments at 18; SPP Comments at 15.
---------------------------------------------------------------------------

    139. SoCal Edison and Xcel Energy Services state that they are not 
aware of any RTO/ISO rules that would unnecessarily limit the ability 
of storage resources to set market prices, except in some cases where 
RTO market software does not allow a resource at minimum output to set 
price.\171\
---------------------------------------------------------------------------

    \171\ See SoCal Edison Comments at 17; Xcel Energy Services 
Comments at 23.
---------------------------------------------------------------------------

    140. Some commenters argue that electric storage resources should 
be allowed to set prices if they meet certain requirements, including 
the minimum requirements for each service.\172\ PJM Market Monitor 
argues that storage resources should be eligible to set price on the 
basis of dispatch if the storage resource meets all other relevant 
requirements and has the necessary telemetry and metering. Dominion 
supports the ability for electric storage resources to set prices in 
the energy market when applicable if (1) the current day-ahead market 
pricing rules applicable to pumped-hydro optimization are preserved and 
(2) the Commission directs each RTO/ISO to create a methodology to 
calculate accurate real-time offers and in situations where electric 
storage resources designate themselves dispatchable.
---------------------------------------------------------------------------

    \172\ See, e.g., Dominion Comments at 6; NYPA Comments at 11; 
PJM Market Monitor Comments at 7.
---------------------------------------------------------------------------

    141. AES Companies assert that the individual RTOs/ISOs and their 
stakeholders should decide whether and how electric storage resources 
may set prices in the capacity markets because the capacity constructs 
in each differ.\173\ Avangrid contends that electric storage resources 
should be able to set the capacity clearing price.\174\ However, 
Avangrid notes that capacity constructs that are based on real-time 
performance (such as ISO-NE's Pay for Performance and PJM's Capacity 
Performance) may need to guard against the ability of electric storage 
resources to switch from generation to load during a capacity emergency 
because it could exacerbate the need for generating capacity. Avangrid 
suggests that these resources could be subjected to more severe 
penalties than a generator that performs less than its capacity 
commitment to guard against such concerns. Relatedly, SPP asks the 
Commission to clarify the effects on scarcity pricing when an electric 
storage resource moves its capacity instantly from charging to 
discharging, eliminating any scarcity.\175\
---------------------------------------------------------------------------

    \173\ See AES Companies Comments at 25.
    \174\ See Avangrid Comments at 8.
    \175\ See SPP Comments at 14.
---------------------------------------------------------------------------

c. Commission Determination
    142. In this Final Rule, we adopt the NOPR proposal and add section 
35.28(g)(9)(i)(B) to the Commission's regulations to require each RTO/
ISO to revise its tariff to ensure that a resource using the 
participation model for electric storage resources can be dispatched as 
supply and demand and can set the wholesale market clearing price as 
both a wholesale seller and wholesale buyer, consistent with rules that 
govern the conditions under which a resource can set the wholesale 
price. Consistent with the NOPR proposal, we find that, for a resource 
using the proposed participation model for electric storage resources 
to be able to set prices in the RTO/ISO markets as either a wholesale 
seller or a wholesale buyer, it must be available to the RTO/ISO as a 
dispatchable resource. Also, consistent with the NOPR, we require that 
(1) resources using the participation model for electric storage 
resources be able to set the price in the capacity markets, where 
applicable; (2) RTOs/ISOs must accept wholesale bids from resources 
using the participation model for electric storage resources to buy 
energy; and (3) resources using the

[[Page 9601]]

participation model for electric storage resources must be allowed to 
participate in the RTO/ISO markets as price takers, consistent with the 
existing rules for self-scheduled resources.
    143. Improving electric storage resources' opportunity to 
participate as both wholesale sellers of services and wholesale buyers 
of energy will improve market efficiency and, in turn, competition, by 
allowing the RTO/ISO to dispatch these resources in accordance with 
their most economically efficient use (i.e., as supply when the market 
clearing price for energy is higher than their offer and as demand when 
the market clearing price is lower than their bid). Additionally, 
allowing electric storage resources to participate in the RTO/ISO 
markets as dispatchable load will allow these resources to set the 
market clearing price under certain circumstances, thus better 
reflecting the value of the marginal resource and ensuring that 
electric storage resources are dispatched in accordance with the 
highest value service that they are capable of providing during a set 
market interval. A wide range of commenters, including most RTOs/ISOs, 
generally support this requirement as one that will increase economic 
efficiency to the benefit of both electric storage resources and the 
RTO/ISO markets in which they will more fully be able to participate.
    144. We reject AES Companies' assertion that an RTO/ISO must decide 
whether to allow electric storage resources to be price takers. None of 
the RTOs/ISOs have indicated that this need exists. We also find that 
AES Companies have not provided support for their assertion that the 
decision to self-schedule may have unintended consequences and could 
skew market results. To ensure consistent treatment in the RTO/ISO 
markets, we find that electric storage resources must maintain the same 
ability to self-schedule their resource as other market participants.
    145. In response to EEI's, MISO Transmission Owners', and Xcel 
Energy Services' jurisdictional concerns, we find that the Commission 
has authority to require the RTOs/ISOs to permit any resource using the 
participation model for electric storage resources participating in the 
RTO/ISO markets to buy energy from those markets, consistent with the 
rules related to wholesale purchasers of energy in each RTO/ISO. As 
discussed in the Price for Charging Energy section below,\176\ we find 
that the sale of electric energy from the grid that is used to charge 
electric storage resources for later resale into the energy or 
ancillary service markets constitutes a sale for resale. Therefore, to 
better facilitate these wholesale purchases and improve economic 
efficiency in the RTO/ISO markets, it is reasonable for the RTOs/ISOs 
to allow electric storage resources to choose to participate in the 
RTO/ISO markets as both supply and demand. This approach maximizes the 
ability of electric storage resources to participate as wholesale 
sellers and wholesale buyers in RTO/ISO markets, which will enhance 
competition and, in turn, helps to ensure these markets produce just 
and reasonable rates. Additionally, we note that we address EEI's 
concern about an electric storage resource's use of the distribution 
system in the Price for Charging Energy section below.\177\
---------------------------------------------------------------------------

    \176\ See infra P 294.
    \177\ See infra P 301.
---------------------------------------------------------------------------

    146. We disagree with SPP that there is a need to clarify in this 
Final Rule the effects on scarcity pricing when an electric storage 
resource moves its capacity instantly from charging to discharging. 
Scarcity pricing rules vary between RTOs/ISOs and we do not have 
information on the record to consider a generic clarification for all 
RTOs/ISOs, nor do we find clarification is necessary to ensure that the 
reforms in this Final Rule are just and reasonable and can be 
implemented. In response to Avangrid, we find that it is not 
appropriate to require stricter penalties for electric storage 
resources during capacity emergencies. Avangrid has not shown why 
electric storage resources should be subject to stricter penalties than 
other resources. While we are not establishing a requirement for 
resources using the participation model for electric storage resources 
to pay stricter penalties during capacity emergencies, we note that 
each RTO/ISO is free to evaluate the potential impacts of electric 
storage resources during scarcity events and propose in a separate FPA 
section 205 filing \178\ any market rules that it believes are 
necessary to account for the unique physical and operational 
characteristics of electric storage resources.
---------------------------------------------------------------------------

    \178\ See 16 U.S.C. 824d.
---------------------------------------------------------------------------

    147. We also reject MISO's recommendation to study in more detail 
the basic participation model(s) for electric storage resources before 
identifying any necessary adjustments to an RTO/ISO market's price-
setting rules. We believe that the flexibility that we provide each 
RTO/ISO to implement this Final Rule renders moot MISO's assertion that 
more study is necessary.
    148. In response to Energy Storage Association's recommendation 
that the option to self-schedule should apply to electric storage 
resources both as buyers and as sellers, we clarify that the ability of 
electric storage resources to participate as price takers will not be 
limited to their participation as load. Electric storage resources 
should also be able to self-schedule when they participate in the RTO/
ISO markets as a supply resource consistent with rules governing how 
other resources self-schedule. This requirement helps to ensure that 
electric storage resources are treated consistently with the ability of 
self-scheduled load resources and traditional generation resources to 
participate in the RTO/ISO markets.
    149. Additionally, in response to Dominion's concerns regarding the 
ability of electric storage resources to set prices in the energy 
market, particularly as it relates to pumped-hydro resources and the 
preservation of existing rules related to their optimization, we 
clarify that we are not requiring the RTOs/ISOs to change their 
participation models for pumped-hydro resources in response to this 
Final Rule. However, we require each RTO/ISO to establish means by 
which all electric storage resources, including pumped-hydro resources, 
can participate as wholesale sellers and wholesale buyers in the RTO/
ISO markets using a participation model for electric storage resources. 
This requirement ensures that the RTO/ISO markets value the 
participation of all electric storage resources as both supply and 
demand.
    150. Additionally, in response to Open Access Technology, we 
clarify that we do not consider electric storage resources in charging 
mode to be negative demand response. This Final Rule requires an 
electric storage resource to be eligible to participate in the RTO/ISO 
markets as a wholesale buyer and for each RTO/ISO to be able to 
dispatch them as such. Such a mechanism would entail participation in 
the energy markets, not the provision of a new service, recognizing 
that electric storage resources may also be dispatched to consume 
electricity when they are providing certain ancillary services (such as 
frequency regulation).
2. Mechanisms To Prevent Conflicting Dispatch Instructions
a. NOPR Request for Comments
    151. In the NOPR, the Commission preliminarily concluded that the 
proposed requirement to participate as a supply and demand resource 
simultaneously (i.e., submit bids to buy and offers to sell during the 
same market interval) is necessary to maximize the value that electric 
storage resources can provide in the RTO/ISO

[[Page 9602]]

markets, allowing the markets to identify whether it is more economic 
to dispatch an electric storage resource as supply or demand during a 
given market interval.\179\ The Commission stated that it expected 
that, through its bidding strategy, a resource using the electric 
storage resource participation model would be able to prevent any 
conflicting dispatch signals to itself. However, the Commission sought 
comment on whether there should be a mechanism that identifies bids and 
offers coming from the same resource to ensure the price for the offer 
to sell is not lower than the price for the bid to buy during the same 
market interval so that an RTO/ISO does not accept both the offer and 
bid of a resource using the electric storage resource participation 
model for that interval.
---------------------------------------------------------------------------

    \179\ See NOPR at P 83.
---------------------------------------------------------------------------

b. Comments
    152. Regarding the issue of preventing conflicting dispatch 
signals, AES Companies, Efficient Holdings, and PJM Market Monitor 
agree with the Commission that a resource using the electric storage 
resource participation model would be able to prevent any conflicting 
dispatch signals itself through a bidding strategy and fuel management 
plan.\180\
---------------------------------------------------------------------------

    \180\ See AES Companies Comments at 26; Efficient Holdings 
Comments at 17; PJM Market Monitor Comments at 8.
---------------------------------------------------------------------------

    153. In contrast, Bonneville, Imperial Irrigation District, and NRG 
argue that the Commission should not rely on an electric storage 
resource's bidding strategy to prevent conflicting dispatch signals to 
itself and argue that a screening mechanism in RTO/ISO software would 
be a more robust approach than relying on rational bids and offers 
coming from the same resource.\181\ Xcel Energy Services agrees but 
seeks assurance that any RTO/ISO mechanism to prevent such conflicts 
would work and not create unintended consequences for market dispatch 
of the resource.\182\ EPRI states that an RTO/ISO can likely put a 
fairly straightforward constraint within its security-constrained unit 
commitment or security-constrained economic dispatch model to prevent 
conflicting dispatch signals.\183\ R Street Institute and Research 
Scientists believe that building logical checks into the market 
clearing software could avoid this problem.\184\
---------------------------------------------------------------------------

    \181\ See Bonneville Comments at 5; Imperial Irrigation District 
Comments at 11; NRG Comments at 14.
    \182\ See Xcel Energy Services Comments at 23.
    \183\ See EPRI Comments at 23-24.
    \184\ See R Street Institute Comments at 6; Research Scientists 
Comments at 8-9.
---------------------------------------------------------------------------

    154. Avangrid, Imperial Irrigation District, and SoCal Edison agree 
with the Commission that the RTOs/ISOs should not allow an electric 
storage resource to submit a buy bid that is higher than its sell offer 
in the same market interval because there is no economic reason to do 
so.\185\ Imperial Irrigation District and NRG argue that RTO/ISO 
software should ensure that, when an electric storage resource submits 
both supply and demand bids, the offer to sell is not lower than the 
price for the bid to buy during a single market interval.\186\ SoCal 
Edison is also concerned that there may be an incentive for an electric 
storage resource to submit conflicting bids and offers in markets that 
allow some form of uplift payments.
---------------------------------------------------------------------------

    \185\ See Avangrid Comments at 8; Imperial Irrigation District 
Comments at 11; SoCal Edison Comments at 17.
    \186\ See Imperial Irrigation District Comments at 11; NRG 
Comments at 14.
---------------------------------------------------------------------------

    155. CAISO states that its Non-Generator Resource participation 
model, which was designed with electric storage resources in mind, 
allows Non-Generator Resources to submit an economic bid that spans a 
negative to positive capacity range.\187\ CAISO explains that this 
single bid curve avoids conflicting dispatch. MISO similarly states 
that it has a method for Demand Response Resources--Type II that could 
be implemented for electric storage resources to allow a smooth 
dispatch range between a negative minimum limit and a positive maximum 
limit.\188\
---------------------------------------------------------------------------

    \187\ See CAISO Comments at 14.
    \188\ See MISO Comments at 17.
---------------------------------------------------------------------------

    156. SPP agrees that the coordination of a single asset as both 
load and generation is important, stating that both the mechanism 
utilized and the rules should ensure that the offers for use as load 
and generation would be monotonically increasing.\189\ However, SPP 
notes that non-LMP components (e.g., start-up costs) may need specific 
consideration to avoid a situation where such costs are not considered 
in dispatch. ISO-NE does not believe any mechanism is necessary to 
avoid conflicting dispatch instructions, noting that to avoid this 
problem, starting in December 2018, it plans to use a single dispatch 
signal that reflects the net supply and demand dispatch.\190\ ISO-NE 
adds that the Commission should not be overly prescriptive in this 
area, instead allowing each RTO/ISO to address these sorts of issues as 
necessary. NYISO requests that offers for simultaneous participation as 
supply and demand include an incremental cost construct that allows an 
electric storage resource's offer price for demand to be less than its 
offer price for supply and gives each RTO/ISO flexibility to determine 
an offer construct that best fits its software design.\191\
---------------------------------------------------------------------------

    \189\ See SPP Comments at 15.
    \190\ See ISO-NE Comments at 22.
    \191\ See NYISO Comments at 10.
---------------------------------------------------------------------------

    157. Consistent with the single bid curve approach suggested by 
some RTOs/ISOs, Energy Storage Association, and NextEra request that 
the Commission direct RTOs/ISOs to permit electric storage resources to 
enter an energy bid curve with price/quantity pairs for providing and 
withdrawing energy (bidding different quantities of positive or 
negative MW for different energy prices) in both day-ahead and real-
time markets.\192\
---------------------------------------------------------------------------

    \192\ See Energy Storage Association Comments at 17-18; NextEra 
Comments at 10, n.14.
---------------------------------------------------------------------------

    158. Ohio Commission recommends that the market monitors review all 
buy bids and sell offers to confirm that a resource is appropriately 
providing a marginal cost-based bid and not exercising market 
power.\193\ While EEI is not aware of this issue currently, it claims 
that it could arise as new technologies buy and sell in the same 
interval; therefore, it suggests that the Commission discuss this issue 
at a technical conference to determine if adequate monitoring 
mechanisms exist.\194\
---------------------------------------------------------------------------

    \193\ See Ohio Commission Comments at 8.
    \194\ See EEI Comments at 13.
---------------------------------------------------------------------------

    159. Efficient Holdings, Energy Storage Association, and NYPA 
support requiring electric storage resources to participate 
simultaneously as generation and load to maximize the value they can 
provide and provide the RTO/ISO with more flexibility to operate its 
system.\195\ Efficient Holdings contends that simultaneous buy and sell 
offers allow storage operators to absorb extra power when prices are 
low, thus lowering operators' fuel costs and adding greater flexibility 
to market operations and optimizing energy costs.
---------------------------------------------------------------------------

    \195\ See Efficient Holdings Comments at 17; Energy Storage 
Association Comments at 18; NYPA Comments at 9.
---------------------------------------------------------------------------

    160. While Energy Storage Association argues that electric storage 
resources should be permitted to participate in the RTO/ISO markets 
simultaneously as generation and load, it argues that they should not 
have to register as, or be modeled as, two separate resources (i.e., 
generation and load) because it would limit the flexibility of 
scheduling and dispatching

[[Page 9603]]

the storage resource in several ways.\196\ Energy Storage Association 
asserts that this would generally (1) only allow a resource to inject 
or withdraw energy on a bidding interval (i.e., hourly) basis, rather 
than allowing switching between buying and selling energy on a dispatch 
interval (i.e., five-minute) basis; and (2) include transition time for 
switching from one mode of operation to another, which newer electric 
storage resources do not require. Energy Storage Association believes 
that an electric storage resource should be able to both withdraw 
energy from, and provide energy to, the grid and switch between states 
from one (five-minute) dispatch interval to the next, so it can be 
dispatched seamlessly across its full range (i.e., from positive to 
negative). Energy Storage Association contends that permitting 
resources to indicate their willingness to charge or discharge based on 
5-minute pricing will allow RTOs/ISOs to more fully utilize the unique 
capabilities of electric storage resources.
---------------------------------------------------------------------------

    \196\ See Energy Storage Association Comments at 13, 18.
---------------------------------------------------------------------------

    161. In contrast, AES Companies argue that there is no reason to 
restrict an electric storage resource from both buying and selling in 
the same market interval because some electric storage technologies 
allow the resource owner to operate separate nodes independently.\197\ 
Tesla/SolarCity argue that, while it is very likely that many electric 
storage resources will participate both as demand and supply resources 
in the same intervals during most times, the Commission should not 
require this because there are no efficiency gains and some optionality 
will be lost.\198\
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    \197\ See AES Companies Comments at 25-26.
    \198\ See Tesla/SolarCity Comments at 16.
---------------------------------------------------------------------------

c. Commission Determination
    162. While we find that simultaneous participation of resources 
using the participation model for electric storage resources as supply 
and demand may enable more efficient use of those resources, we also 
find that each RTO/ISO must have in place market rules that prevent 
conflicting dispatch signals in the same market interval in order to 
avoid any operational uncertainties or reliability concerns that could 
arise. In addition, while we agree with commenters that conflicting 
dispatch instructions will be prevented if market participants 
accurately represent their economic preferences in their bids, we find 
that relying on the expected behavior of market participants is not 
sufficient to alleviate the related operational concerns. Therefore, to 
mitigate the potential occurrence of conflicting dispatch instructions 
and to implement the new requirement in section 35.28(g)(9)(i)(B) of 
the Commission's regulations, on compliance to this Final Rule, we 
require each RTO/ISO to either (1) demonstrate that its market design 
will not allow for conflicting supply offers and demand bids from the 
same resource for the same market interval or (2) modify its market 
rules to prevent conflicting supply offers and demand bids from the 
same resource for the same market interval.
    163. Several approaches could address conflicting dispatch. We 
agree with commenters that allowing electric storage resources to 
represent their full economic range (both charging and discharging) in 
a single bid could avoid concerns with conflicting dispatch signals and 
give electric storage resources the flexibility to participate as 
supply, demand, or both through one bid. However, while we agree this 
approach could be effective at mitigating conflicting dispatch signals, 
there may be other reasonable approaches compatible with existing 
market designs in other RTOs/ISOs to prevent conflicting dispatch. For 
example, we agree with Bonneville, Imperial Irrigation District, and 
NRG that a screening mechanism in RTO/ISO software could also prevent 
conflicting dispatch. We also agree with NYISO that a cost construct 
that ensures that the price of offers to sell are not lower than the 
price for bids to buy may be reasonable. Therefore, we will not require 
a specific approach in this Final Rule but require that the approach 
chosen by each RTO/ISO mitigates the possibility of conflicting 
dispatch instructions. However, we disagree with the Ohio Commission 
that it could be the responsibility of the market monitors to review 
bids to address conflicting dispatch and clarify that the RTO/ISO is 
responsible for preventing conflicting dispatch.
    164. In response to the comment suggesting resources using the 
participation model for electric storage resources should be able to 
enter an energy bid curve providing and withdrawing energy in both day-
ahead and real-time markets, we clarify that resources using the 
participation model for electric storage resources should be able to 
submit offers to sell and bids to buy energy consistent with the 
opportunities available to other market participants in both the day-
ahead and real-time markets. We also find a technical conference, as 
recommended by EEI, is unnecessary at this time given the existence of 
viable solutions to this issue identified by other commenters and given 
the flexibility that we provide each RTO/ISO and other market 
participants to address this issue.
    165. Lastly, we clarify that, while each RTO/ISO should allow 
resources using the participation model for electric storage resources 
to participate as supply and demand simultaneously (i.e., submit bids 
to buy and offers to sell during the same market interval), the RTOs/
ISOs should not require resources using the participation model for 
electric storage resources to participate as supply and demand 
simultaneously.
3. Make-Whole Payments
a. NOPR Request for Comments
    166. In the NOPR, the Commission noted that a resource using the 
proposed participation model for electric storage resources that elects 
to submit an economic bid as a wholesale buyer and participate as a 
dispatchable demand resource would still be able to self-schedule its 
charging and be a price taker.\199\ However, the Commission noted that 
it is possible that the RTO/ISO could dispatch an electric storage 
resource as load when the wholesale price for energy is above the price 
of their bid to buy (a circumstance under which they would lose the 
opportunity to earn greater revenues as a supply resource). Therefore, 
to help alleviate any potential financial risk to electric storage 
resources when being dispatched as a demand resource, the Commission 
sought comments on whether the proposed participation model for 
electric storage resources should allow make-whole payments when a 
resource participating under this participation model is dispatched as 
load and the price of energy is higher than the resource's bid price.
---------------------------------------------------------------------------

    \199\ See NOPR at P 85.
---------------------------------------------------------------------------

b. Comments
    167. Several commenters support allowing make-whole payments when 
an electric storage resource is dispatched as load and the price of 
energy is higher than the resource's bid price.\200\ Avangrid, EEI, and 
ISO-NE state that electric storage resources should be treated 
comparably to other resources with regard to make-whole payments.\201\ 
Avangrid states that, if the RTO/ISO uses electric storage resources as 
both generation and load, the reasoning for make-whole payments

[[Page 9604]]

exists in either direction. California Energy Storage Alliance asks the 
Commission to require all electric storage participation models to 
include the ability to recover commitment costs and receive make-whole 
payments.\202\ Trans Bay asks the Commission to clarify that the NOPR 
does not preclude electric storage resources from receiving any non-
market payments, including make-whole payments.\203\ While American 
Petroleum Institute does not oppose make-whole payments in principle, 
it argues these payments should not subsidize some technologies by 
mitigating the higher downside risk that should be managed by the 
owners of those resources.\204\
---------------------------------------------------------------------------

    \200\ See, e.g., CAISO Comments at 15; NRG Comments at 19; SoCal 
Edison Comments at 17-18; Tesla/SolarCity Comments at 17.
    \201\ See Avangrid Comments at 8; EEI Comments at 13; ISO-NE 
Comments at 21-22.
    \202\ See California Energy Storage Alliance Comments at 11.
    \203\ See Trans Bay Comments at 4.
    \204\ See American Petroleum Institute Comments at 6.
---------------------------------------------------------------------------

    168. Several commenters suggest that the Commission should not set 
specific requirements for make-whole payments in this final rule but 
should provide the RTOs/ISOs flexibility to establish rules for make-
whole payments, if appropriate.\205\ Six Cities state that, if the 
Commission allows RTOs/ISOs to propose make-whole payments for electric 
storage resources, such payments should only be allowed in limited 
circumstances to prevent any undue preference for electric storage 
resources. Six Cities assert, if make-whole payments are allowed, they 
should be analogous to criteria for bid cost recovery within CAISO or 
other analogous payments.
---------------------------------------------------------------------------

    \205\ See MISO Transmission Owners Comments at 12; Six Cities 
Comments at 7-8 (citing CAISO Tariff at Sec.  11.8); SoCal Edison 
Comments at 18.
---------------------------------------------------------------------------

    169. Several commenters raise concerns about the complexity of 
requiring make-whole payments.\206\ MISO requests that the Commission 
hold a series of technical conferences to address significant design 
and compensation issues. SoCal Edison contends that make-whole payments 
need to work in conjunction with other mechanisms (such as market power 
mitigation, temporal and product revenue netting, and specific bidding 
rules). Xcel Energy Services states that make-whole payments require 
further consideration to ensure electric storage resources are treated 
comparably to other resources and to avoid unnecessary uplift charges.
---------------------------------------------------------------------------

    \206\ See MISO Comments at 18-19; SoCal Edison Comments at 18; 
Xcel Energy Services Comments at 18.
---------------------------------------------------------------------------

    170. Some commenters assert that make-whole payments are not 
necessary in certain circumstances.\207\ ELCON and PJM reason that 
make-whole payments are not necessary for electric storage resources 
when they are dispatched as load and the price of energy is higher than 
the resource's bid price. Similarly, Electric Vehicle R&D Group states 
that make-whole payments do not seem necessary. ELCON believes that the 
resource should bear the financial risk of uneconomic dispatch.
---------------------------------------------------------------------------

    \207\ See ELCON Comments at 5-6; Electric Vehicle R&D Group 
Comments at 1; PJM Comments at 18-19.
---------------------------------------------------------------------------

    171. Similar to how self-committed resources may not be able to 
receive make-whole payments for start-up costs, EPRI cautions that each 
RTO/ISO should consider whether certain costs should be eligible for 
make-whole payments when an electric storage resource self-manages its 
state-of-charge.\208\ MISO contends that the potential appropriateness 
of make-whole payments may depend on whether the state of charge is 
managed by an electric storage resource or optimized by the RTO.\209\ 
NYPA argues that, if the system operator is given state of charge 
control over a storage resource, RTO/ISO tariffs must compensate the 
resource if and when it is dispatched out of economic merit order.\210\ 
NYPA asserts that this compensation should apply to: (1) Electric 
storage resources that are dispatched as load when the wholesale price 
for energy is above the price of their bid to buy and (2) resources 
withheld from generating when their energy offer is infra-marginal.
---------------------------------------------------------------------------

    \208\ See EPRI Comments at 26.
    \209\ See MISO Comments at 18-19.
    \210\ See NYPA Comments at 12.
---------------------------------------------------------------------------

    172. Other commenters believe that the Commission should not 
require the RTO/ISO to provide make-whole payments to electric storage 
resources because they should be able to self-manage in a way that 
eliminates the need for make-whole payments and achieves better price 
formation.\211\ Acknowledging that make-whole payments are one 
potential solution to mitigate potential financial shortfalls, AES 
Companies contend that changes to the optimization price determination 
and the granting of flexibility for electric storage resources to 
manage their fuel use is preferable to make-whole payments. PJM Market 
Monitor similarly argues that market participants should decide when it 
is economic to buy and sell rather than create rules through which the 
market operator could dispatch a storage resource in a way inconsistent 
with its economics and then compensate it through an uplift payment.
---------------------------------------------------------------------------

    \211\ See AES Companies Comments at 28; PJM Market Monitor 
Comments at 8.
---------------------------------------------------------------------------

    173. Given that PJM does not dispatch load increases, it explains 
that, before engaging in this practice, it would need to consult with 
stakeholders to analyze whether the benefits would justify the 
costs.\212\ NYISO discourages creating price protections for electric 
storage resources when they are scheduled as demand because such 
treatment would not be comparable to the treatment of other resources 
that are scheduled as demand, noting that regional flexibility will 
provide the RTOs/ISOs with the opportunity to treat resources 
comparably.\213\
---------------------------------------------------------------------------

    \212\ See PJM Comments at 18.
    \213\ See NYISO Comments at 10.
---------------------------------------------------------------------------

c. Commission Determination
    174. Given the unique capability of electric storage resources to 
serve as both a supply of, and demand for, energy and to implement the 
new requirement in section 35.28(g)(9)(i)(B) of the Commission's 
regulations that resources using the participation model for electric 
storage resources be able to be dispatched and set the wholesale market 
clearing price as both a wholesale seller and wholesale buyer, we find 
that the participation model for electric storage resources must allow 
make-whole payments when a resource is dispatched as load and the 
wholesale price is higher than the resource's bid price and when it is 
dispatched as supply and the wholesale price is lower than the 
resource's offer price. Therefore, as part of this Final Rule, we 
require each RTO/ISO to revise its tariff to ensure that resources 
available for manual dispatch as a wholesale buyer and wholesale seller 
under the participation model for electric storage resources are held 
harmless for manual dispatch by being eligible for make-whole payments. 
Any such make-whole payments must be consistent with the rules for 
make-whole payments for other dispatchable resources. This requirement 
is necessary to ensure that electric storage resources are treated like 
dispatchable resources that participate in the RTO/ISO markets. Because 
the rules for make-whole payments vary by RTO/ISO and there are 
inherent complexities in implementing this requirement, we will not 
require a specific method of make-whole payments. Instead, each RTO/ISO 
will have the flexibility to establish a methodology under which 
resources using the participation model for electric storage resources 
can receive make-whole payments.

[[Page 9605]]

    175. Recognizing that comprehensive market design changes could be 
necessary to implement this requirement, we believe that the compliance 
deadline and implementation schedule set forth in the Compliance 
Requirements section \214\ should provide sufficient time for the each 
RTO/ISO to work with its stakeholders to establish the necessary market 
rules for make-whole payments. In addition, given the time provided for 
each RTO/ISO to work with its stakeholders on this issue, we decline to 
hold the technical conferences requested by MISO.
---------------------------------------------------------------------------

    \214\ See infra P 348.
---------------------------------------------------------------------------

    176. We disagree with commenters who suggest that make-whole 
payments are not necessary because electric storage resources should 
bear the risk of uneconomic dispatch. Modeling, software, and certain 
other limitations are inherent in the complexity of the electric system 
and the tools available to maintain reliable operations. Uplift, or 
make-whole, payments may be needed to ensure that resources committed 
and dispatched out-of-market are able to recover their operating costs. 
Electric storage resources participating in the RTO/ISO markets are 
subject to the same system conditions as other resources that may cause 
them to be dispatched out-of-market and unable to recover their 
operating costs. Therefore, resources using the electric storage 
resource participation model should be able to receive the same make-
whole payments that other resources receive to remedy the problem. Not 
offering make-whole payments to resources using the electric storage 
resource participation model could create a barrier to their 
participation in the RTO/ISO markets and be inconsistent with the 
treatment of other market participants.
    177. Additionally, while the NOPR did not propose a requirement 
regarding make-whole payments for resources using the participation 
model for electric storage resources that are manually dispatched as 
supply, we agree with commenters' concerns that, if a resource using 
the participation model for electric storage resources is available to 
be used by the RTO/ISO as both a supply and demand resource, then the 
RTO/ISO should provide make-whole payments for the resource in both 
directions. Therefore, we require each RTO/ISO to modify its tariff to 
allow a resource using the participation model for electric storage 
resources to be eligible for make-whole payments when acting as a 
supply resource consistent with the rules governing the eligibility of 
other supply resources to receive make-whole payments. This requirement 
will further ensure that resources using the participation model for 
electric storage resources are treated like other dispatchable 
resources in the RTO/ISO markets and help make resources using the 
participation model for electric storage resources available to grid 
operators to address any reliability concerns through manual dispatch. 
As for NYPA's suggestion to make electric storage resources whole when 
they are withheld from generating when their energy offer is infra-
marginal, we find that such payments should only be provided to 
resources using the participation model for electric storage resources 
to the extent that such payments are already provided to other market 
participants.
    178. Regarding state-of-charge management, we agree with commenters 
that, if the market participant is controlling its resource, and it has 
not been dispatched uneconomically by the RTO/ISO, then it would not be 
appropriate for the resource using the participation model for electric 
storage resources to receive make-whole payments. Similar to other 
market participants, make-whole payments should only be available to 
resources using the electric storage resource participation model if 
the system operator dispatches that resource in a way that is 
inconsistent with its bids to buy and offers to sell energy. We agree 
with commenters that self-management could be a means to minimize make-
whole payments. As discussed in the State of Charge Management 
section,\215\ in this Final Rule, we require each RTO/ISO to allow 
electric storage resources to self-manage their state of charge. 
However, to the extent that an RTO/ISO manually dispatches a resource 
using the participation model for electric storage resources, that 
resource must be able to recover their costs consistent with the manner 
in which other market participants are able to recover their costs if 
the RTO/ISO dispatches them uneconomically.
---------------------------------------------------------------------------

    \215\ See infra P 253.
---------------------------------------------------------------------------

    179. In response to NYISO and PJM, we note that one of the 
requirements of this Final Rule is that each RTO/ISO have the ability 
to dispatch electric storage resources as load.\216\ Therefore, in 
response to PJM, it is necessary for each RTO/ISO to establish a 
methodology under which resources using the participation model for 
electric storage resources that participate as load are able to receive 
make-whole payments. Additionally, in response to NYISO, because 
electric storage resources must be able to be dispatched as load, their 
eligibility to receive make-whole payments when dispatched as load 
would need to be consistent with other dispatchable resources but would 
not need to be consistent with the eligibility of other load resources 
that are not dispatchable by the RTO/ISO.
---------------------------------------------------------------------------

    \216\ See supra P 142.
---------------------------------------------------------------------------

E. Physical and Operational Characteristics of Electric Storage 
Resources

1. Requirement To Incorporate Bidding Parameters as Part of the 
Electric Storage Resource Participation Model
a. NOPR Proposal
    180. In the NOPR, the Commission proposed to require each RTO/ISO 
to revise its tariff to include a participation model for electric 
storage resources that incorporates bidding parameters that reflect and 
account for the physical and operational characteristics of electric 
storage resources.\217\ Specifically, the Commission proposed that the 
RTOs/ISOs establish state of charge, upper charge limit, lower charge 
limit, maximum energy charge rate, and maximum energy discharge rate as 
bidding parameters for the participation model for electric storage 
resources that participating resources must submit, as applicable.\218\ 
The Commission also proposed that the participation model for electric 
storage resources include the following bidding parameters that market 
participants may submit, at their discretion, for their resource based 
on its physical constraints or desired operation: Minimum charge time, 
maximum charge time, minimum run time, and maximum run time.\219\
---------------------------------------------------------------------------

    \217\ See NOPR at P 66.
    \218\ See id. P 67.
    \219\ See id. P 68.
---------------------------------------------------------------------------

b. Comments
    181. Several commenters support the NOPR proposal to require each 
RTO/ISO to establish bidding parameters that reflect and account for 
the physical and operational characteristics of electric storage 
resources because they assert it will support efficient procurement of 
resources in the RTO/ISO markets and reduce system costs.\220\
---------------------------------------------------------------------------

    \220\ See, e.g., Advanced Energy Economy Comments at 24-25; 
Energy Storage Association Comments at 14; IRC Comments at 5; MISO 
Comments at 6; NESCOE Comments at 11; NYISO Comments at 9; Ohio 
Commission Comments at 7; Starwood Energy Comments at 5.
---------------------------------------------------------------------------

    182. Other commenters support the NOPR proposal, subject to 
clarification.\221\ EPRI contends that the

[[Page 9606]]

definitions of the bidding parameters proposed in the NOPR are 
ambiguous and asks the Commission to explicitly define them. Beacon 
Power asks the Commission to ensure that, when implementing the 
proposed bidding parameters, the RTOs/ISOs do not impose any arbitrary 
requirements that limit electric storage resources' participation in 
their markets (such as a minimum time period over which energy must be 
dispatchable continuously at full capacity).
---------------------------------------------------------------------------

    \221\ See Beacon Power Comments at 5; EPRI Comments at 16-17.
---------------------------------------------------------------------------

    183. Several commenters do not necessarily oppose the NOPR proposal 
that each RTO/ISO incorporate certain bidding parameters into its 
participation model for electric storage resources but request that the 
Commission grant each RTO/ISO flexibility on compliance with respect to 
the bidding parameters that it ultimately adopts.\222\ NYISO, Pacific 
Gas & Electric, and PJM ask the Commission to give each RTO/ISO 
flexibility to develop bidding parameters that are tailored to its 
market and reliability needs and to determine how to best use those 
bidding parameters in its market. Magnum agrees and further contends 
that the Commission should not mandate that each RTO/ISO adopt bidding 
parameters for specific types of electric storage resources. 
Connecticut State Entities argue that bidding parameters should not be 
so prescriptive as to determine prematurely which electric storage 
resource technologies to deploy. Connecticut State Entities claim that 
overly prescriptive bidding parameters would constrain load-serving 
entities' ability to adopt least-cost solutions.
---------------------------------------------------------------------------

    \222\ See Connecticut State Entities Comments at 6; Magnum 
Comments at 10-11; NYISO Comments at 9; PJM Comments at 10; Pacific 
Gas & Electric Comments at 9.
---------------------------------------------------------------------------

    184. APPA/NRECA also argue for flexibility, stating that the 
Commission should allow each RTO/ISO to demonstrate on compliance that 
the proposed minimum bidding requirements would harm the participation 
of electric storage resources in its markets and to propose a superior 
alternative.\223\ Similarly, Imperial Irrigation District asks the 
Commission to allow an RTO/ISO to decline to adopt a bidding parameter 
if it can demonstrate that it would be unnecessary or impractical.\224\ 
R Street Institute states that, while the required and optional bidding 
parameters are reasonable, each RTO/ISO should incorporate the proposed 
optional bidding parameters in its software only if justified by 
forward cost/benefit analysis.\225\
---------------------------------------------------------------------------

    \223\ See APPA/NRECA Comments at 14-15.
    \224\ See Imperial Irrigation District Comments at 9.
    \225\ See R Street Institute Comments at 5.
---------------------------------------------------------------------------

    185. Some commenters argue that certain of the physical and 
operational characteristics that the Commission proposed as bidding 
parameters in the NOPR are better represented through other means.\226\ 
For example, ISO-NE argues that it is a misnomer to characterize state 
of charge as a bidding parameter because it is a physical 
characteristic that constantly changes in real time. Likewise, CAISO, 
IRC, and Pacific Gas & Electric assert that certain electric storage 
resource-specific characteristics (such as charging and discharging 
rates, charge limits, and minimum charge times) are physical 
characteristics that should be static and not subject to change through 
a resource's offer or bid. Pacific Gas & Electric notes that it may be 
better to include such physical and operational characteristics in each 
resource's data file, while CAISO suggests that they may be accounted 
for through other means besides bidding parameters.
---------------------------------------------------------------------------

    \226\ See CAISO Comments at 10-11; IRC Comments at 5; ISO-NE 
Comments at 18; Pacific Gas & Electric Comments at 10.
---------------------------------------------------------------------------

    186. A few commenters oppose any requirement that each RTO/ISO 
incorporate bidding parameters into its participation model for 
electric storage resources.\227\ AES Companies contend that the 
proposed bidding parameters may artificially limit the performance of 
some electric storage technologies, while MISO Transmission Owners 
argue that they have the potential to limit the services that a 
resource can provide. AES Companies and MISO Transmission Owners argue 
that, in place of the NOPR proposal, the Commission should require each 
RTO/ISO to determine the parameters and data requirements necessary for 
it to efficiently dispatch a resource given the services offered and 
then set performance-based standards for each service. Both AES 
Companies and MISO Transmission Owners further suggest that each RTO/
ISO should include these technology-specific bidding parameters in its 
business practice manuals rather than its tariff.
---------------------------------------------------------------------------

    \227\ See AES Companies Comments at 5-6; MISO Transmission 
Owners Comments at 10-11.
---------------------------------------------------------------------------

    187. In addition, DER/Storage Developers contend that bidding 
parameters should be flexible and differ for different services.\228\ 
DTE Electric/Consumers Energy assert that the proposed bidding 
parameters are not clear, may not be applicable to all resource types, 
and may not take full advantage of the value of the existing pumped-
hydro resources. Therefore, DTE Electric/Consumers Energy asks the 
Commission to allow each RTO/ISO to work with its stakeholders to 
develop bidding parameters that accommodate all electric storage 
resources or hold a technical conference on the issue.
---------------------------------------------------------------------------

    \228\ See DER/Storage Developers Comments at 4-5.
---------------------------------------------------------------------------

    188. A few commenters opine on the ability of resources using the 
electric storage resource participation model to update their bidding 
parameters as those values change.\229\ Energy Storage Association 
states that the Commission should require each RTO/ISO to allow a 
resource using the electric storage resource participation model to 
submit the state-of-charge bidding parameter in both the day-ahead and 
real-time markets. According to Energy Storage Association, allowing a 
resource using the electric storage resource participation model to 
update its state-of-charge bidding parameter in the real-time market 
will provide the RTO/ISO with better information about such a 
resource's limitations and availability in the next market interval. 
DER/Storage Developers contend that electric storage resources should 
be able to adjust their bidding parameters hourly to account for their 
state of charge. Similarly, Tesla/SolarCity assert that, to maintain 
feasibility of schedules and increase asset value, electric storage 
resources should be able to change their bidding parameters as their 
state of charge changes.
---------------------------------------------------------------------------

    \229\ See DER/Storage Developers Comments at 5; Energy Storage 
Association Comments at 15; Tesla/SolarCity Comments at 14-15.
---------------------------------------------------------------------------

c. Commission Determination
    189. Upon consideration of the comments, we will modify the NOPR 
proposal in this Final Rule to provide greater flexibility for each 
RTO/ISO to demonstrate that its participation model for electric 
storage resources accounts for the physical and operational 
characteristics of electric storage resources. As the Commission stated 
in the NOPR, requiring each RTO/ISO to revise its tariff to include a 
participation model for electric storage resources that incorporates 
bidding parameters that account for the physical and operational 
characteristics of electric storage resources will allow such resources 
to provide all of the services that they are technically capable of 
providing and allow the RTOs/ISOs to procure these services more 
efficiently.\230\ We continue to believe that the lack of any means of 
accounting for the physical and operational characteristics of electric 
storage resources could present

[[Page 9607]]

barriers to the participation of these resources in the RTO/ISO 
markets, limiting competition and thereby potentially rendering the 
resulting rates unjust and unreasonable.
---------------------------------------------------------------------------

    \230\ See NOPR at P 66.
---------------------------------------------------------------------------

    190. We are persuaded, however, by commenters' arguments that there 
may be other means of accounting for the physical and operational 
characteristics of electric storage resources than bidding parameters. 
For example, some of the bidding parameters that the Commission 
proposed in the NOPR may account for physical characteristics that do 
not change over time, such that an electric storage resource could 
report that information when registering as a market participant in an 
RTO/ISO without updating that information continually through its 
bidding parameters. However, we note that it may only be possible to 
represent some of the physical and operational characteristics (such as 
a forecasted State of Charge) through bidding parameters. Furthermore, 
we agree with commenters that greater regional flexibility than the 
Commission proposed in the NOPR is appropriate; different RTOs/ISOs may 
be able to more effectively account for the physical and operational 
characteristics of electric storage resources through different 
mechanisms given their unique market designs.
    191. Therefore, we add section 35.28(g)(9)(i)(C) to the 
Commission's regulations to require each RTO/ISO to have tariff 
provisions providing a participation model for electric storage 
resources that accounts for the physical and operational 
characteristics of electric storage resources through bidding 
parameters or other means. In its compliance filing, each RTO/ISO must 
demonstrate how its proposed or existing tariff provisions account for 
the specific physical and operational characteristics of electric 
storage resources described below. We find that this requirement will 
improve the ability of electric storage resources to provide all of the 
services that they are technically capable of providing and allow the 
RTOs/ISOs to procure these services more efficiently, which will 
enhance competition and, in turn, help to ensure that the RTO/ISO 
markets produce just and reasonable rates.
    192. Additionally, as discussed in further detail below, we will 
not require the RTOs/ISOs to make the submission of any information by 
the resource owner/operator mandatory. Instead, we provide flexibility 
to each RTO/ISO to determine whether it is mandatory for resources 
using the participation model for electric storage resources to submit 
information regarding their physical and operational characteristics, 
or whether resources using the participation model for electric storage 
resources should be allowed to submit such information at their 
discretion. This flexibility will allow each RTO/ISO to accept 
information from resources using the participation model for electric 
storage resources consistent with how it accepts information from other 
market participants. It also may help prevent resources using the 
participation model for electric storage resources from having to 
submit information that is not applicable given their physical, 
operational, or commercial circumstances.
    193. With respect to commenters' request that the RTOs/ISOs should 
allow electric storage resources to update their bidding parameters, we 
find that, to the extent that an RTO/ISO adopts bidding parameters to 
account for the physical and operational characteristics set forth in 
this Final Rule, it must permit a resource using the participation 
model for electric storage resources to submit those bidding parameters 
in both the day-ahead and the real-time markets. To efficiently 
dispatch its system, an RTO/ISO must have accurate information about 
the physical and operational characteristics of the resources 
participating in its markets. Allowing a resource using the 
participation model for electric storage resources to provide updated 
information through any applicable bidding parameters, consistent with 
the opportunities that other market participants have to do so, will 
help to ensure that each RTO/ISO has the information necessary to 
efficiently dispatch its system, fully accounting for the physical and 
operational capabilities of the resources using the participation model 
for electric storage resources participating in its markets.
    194. In the following subsections, we set forth the physical and 
operational characteristics for which each RTO's/ISO's participation 
model for electric storage resources must account, whether through 
bidding parameters or other means. We discuss these physical and 
operational characteristics in terms of the bidding parameters proposed 
in the NOPR, making clarifications as necessary. First, we discuss the 
physical and operational characteristics of electric storage resources 
associated with the bidding parameters that the Commission proposed a 
resource using an electric storage resource participation model must 
submit to the RTO/ISO, which were identified as the mandatory bidding 
parameters, including state of charge, upper and lower charge limits, 
and maximum charge and discharge rates. Second, we discuss the physical 
and operational characteristics of electric storage resources 
associated with the bidding parameters that the Commission proposed a 
resource using an electric storage resource participation model could 
submit to the RTO/ISO at the resource's discretion, which were 
identified as the optional bidding parameters, including maximum and 
minimum charge time and maximum and minimum run time. Finally, we 
address the physical and operational characteristics for which each 
RTO's/ISO's participation model for electric storage resources must 
account that are not associated with any bidding parameter proposed in 
the NOPR but instead were suggested by commenters and we believe are 
appropriate to adopt here.
2. State of Charge, Upper and Lower Charge Limits, and Maximum Charge 
and Discharge Rates
a. NOPR Proposal
    195. In the NOPR, the Commission proposed that each RTO/ISO 
establish the following bidding parameters for the participation model 
for electric storage resources that participating resources must 
submit, as applicable: State of charge, upper charge limit, lower 
charge limit, maximum energy charge rate, and maximum energy discharge 
rate.\231\ The Commission explained that the state-of-charge bidding 
parameter would allow resources using the participation model for 
electric storage resources to identify their forecasted state of charge 
at the end of a market interval, as defined by the RTO/ISO, while the 
upper and lower charge limits would prevent the operator from trying to 
give too much energy to or take too much energy from the resource. The 
Commission further stated that it expected that the state of charge 
would be telemetered in real time when the RTO/ISO is managing the 
state of charge so that the upper and lower charge limits are not 
exceeded. However, the Commission did not propose any specific 
telemetry requirements. Finally, the Commission explained that the 
maximum energy charge rate and maximum energy discharge rate would be 
used to indicate how quickly the resource can receive energy from or 
inject it back to the grid.
---------------------------------------------------------------------------

    \231\ See id. P 67.
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b. Comments
    196. The Commission received a number of comments on the NOPR 
proposal requiring each RTO/ISO to establish state of charge, upper and 
lower charge limit, and maximum

[[Page 9608]]

energy charge and discharge rate as mandatory bidding parameters for 
resources using the electric storage resource participation model. 
Below, we present the comments received with respect to three groups of 
the proposed bidding parameters: (1) State of Charge, (2) Upper and 
Lower Charge Limit, and (3) Maximum Energy Charge and Discharge Rate.
i. State of Charge
    197. Several commenters support the proposed requirement that each 
RTO/ISO adopt a state-of-charge bidding parameter.\232\ Advanced Energy 
Economy claims that many RTOs/ISOs do not have tariff provisions in 
place to account for the state of charge of electric storage resources, 
despite the fact that it is a defining characteristic of such 
resources.
---------------------------------------------------------------------------

    \232\ See, e.g., Advanced Energy Economy Comments at 24-25; 
Massachusetts State Entities Comments at 15; NESCOE Comments at 11; 
Ohio Commission Comments at 7; Tesla/SolarCity Comments at 14.
---------------------------------------------------------------------------

    198. Other commenters argue that the Commission should modify the 
NOPR proposal so that a resource using the electric storage resource 
participation model is not required to submit information for the 
state-of-charge bidding parameter to the RTO/ISO, at least under 
certain circumstances.\233\ Specifically, CAISO, Energy Storage 
Association, NextEra, and NYPA ask the Commission to clarify that an 
electric storage resource is only required to use the state of charge 
bidding parameter if the resource owner has opted for the RTO/ISO to 
manage its state of charge. They argue that an electric storage 
resource that opts to manage its own state of charge would do so 
through its bidding strategy rather than the RTO/ISO market processes 
and that it is therefore unnecessary for such a resource to submit its 
state of charge to the RTO/ISO as a bidding parameter. SPP asserts 
that, to dispatch and clear the appropriate amount of resources, it 
must know the real-time state of charge for an electric storage 
resource for which it is managing state of charge.\234\ However, SPP 
states that it does not require information on the state of charge of 
electric storage resources that are self-managing their state of 
charge.
---------------------------------------------------------------------------

    \233\ See CAISO Comments at 11-12; Energy Storage Association 
Comments at 14-15; NextEra Comments at 9; NYPA Comments at 9.
    \234\ See SPP Comments at 10.
---------------------------------------------------------------------------

    199. While stating that it supports the NOPR proposal directing 
RTOs/ISOs to institute new electric storage resource-related bidding 
parameters, Energy Storage Association also explains that requiring 
electric storage resources that provide both retail and wholesale 
services to use the proposed bidding parameters could adversely affect 
their capability to provide retail service.\235\ California Energy 
Storage Alliance and Stem contend that certain bidding parameters, 
including state of charge, may be difficult or infeasible for some 
electric storage resources to provide.\236\ Thus, California Energy 
Storage Alliance, National Hydropower Association, and Stem argue that 
it should be optional for an electric storage resource to provide its 
state of charge to the RTO/ISO.\237\
---------------------------------------------------------------------------

    \235\ See Energy Storage Association Comments at 14. Energy 
Storage Association's statement applies equally to the proposed 
Upper and Lower Charge Limit and Maximum Energy Charge and Discharge 
Rate bidding parameters.
    \236\ See California Energy Storage Alliance Comments at 6-7; 
Stem Comments at 15-16.
    \237\ See California Energy Storage Alliance Comments at 6-7; 
National Hydropower Association Comments at 8-9; Stem Comments at 
15-16. California Energy Storage Alliance's and Stem's statements 
apply equally to the proposed Upper and Lower Charge Limit and 
Maximum Energy Charge and Discharge Rate bidding parameters.
---------------------------------------------------------------------------

    200. Pacific Gas & Electric supports the inclusion of a bidding 
parameter that a resource using the electric storage resource 
participation model can use in the day-ahead markets to indicate its 
state of charge at the beginning of the operating day.\238\ However, 
Pacific Gas & Electric opposes any requirement for each RTO/ISO to 
adopt an hourly or real-time state-of-charge bidding parameter. Pacific 
Gas & Electric claims that such a requirement could enable market 
manipulation by allowing resources to indicate that they are 
unavailable to provide energy to the market without reporting an 
outage. To the extent that a resource using the electric storage 
resource participation model desires to update its state of charge more 
frequently, Pacific Gas & Electric contends that it should manage its 
own state of charge through its market bidding.
---------------------------------------------------------------------------

    \238\ See Pacific Gas & Electric Comments at 8-9.
---------------------------------------------------------------------------

    201. ISO-NE opposes the NOPR proposal for a State of Charge bidding 
parameter and argues that it is a misnomer to characterize state of 
charge as a bidding parameter because it is a physical characteristic 
that constantly changes in real time.\239\ Thus, ISO-NE asserts that 
the Commission should not require state of charge as a day-ahead or 
real-time bidding parameter, nor require any optimization of this type 
of parameter in the day-ahead or real-time energy market. ISO-NE 
contends that, instead, the Commission should allow RTOs/ISOs to 
develop methods to acquire communication of a resource's current state 
of charge, use the state of charge data, and potentially require market 
participants to manage their state of charge using their energy market 
supply offers and demand bids.
---------------------------------------------------------------------------

    \239\ See ISO-NE Comments at 18.
---------------------------------------------------------------------------

    202. AES Companies explain that, for certain electric storage 
technologies, dispatching the resource based on a state-of-charge or 
upper or lower charge limit bidding parameter could lead to its under-
utilization.\240\ AES Companies add that the proposed state-of-charge 
bidding parameter does not reflect the availability of the resource or 
the sophisticated software used to optimize the resource's useful life. 
Moreover, AES Companies assert that, if a resource is deployed in a 
manner that violates its optimal state of charge management, then the 
associated costs should be included in market offers and the decision 
to offer must be at the asset owner's discretion.
---------------------------------------------------------------------------

    \240\ See AES Companies Comments at 20-22.
---------------------------------------------------------------------------

    203. Research Scientists explain that, to make use of the full 
flexibility of electric storage resources, a fixed state-of-charge 
target may not be ideal because it limits the dispatch flexibility in 
real-time operations.\241\ Research Scientists argue that state-of-
charge range is a better strategy to enable the use of an electric 
storage resource to address unexpected system deviations in real time.
---------------------------------------------------------------------------

    \241\ See Research Scientists Comments at 7.
---------------------------------------------------------------------------

    204. In addition, a few commenters, including those that support 
the NOPR proposal, take issue with the Commission's statement that the 
state-of-charge bidding parameter will allow resources using the 
participation model for electric storage resources to identify their 
forecasted state of charge at the end of a market interval.\242\ Beacon 
Power contends that any state-of-charge bidding parameters should 
reflect an actual state of charge at any point in time, rather than a 
forecasted state of charge, which would be difficult for the resource 
or RTO/ISO to predict. Pacific Gas & Electric argues that allowing an 
electric storage resource to target a particular state of charge at the 
end of a market interval could enable manipulation in circumstances in 
which the RTO/ISO is managing a resource's state of charge because the 
RTO/ISO would have to dispatch the resource as necessary to achieve its 
specified state of charge regardless of whether such dispatch were 
economic.
---------------------------------------------------------------------------

    \242\ See Beacon Power Comments at 6; Pacific Gas & Electric 
Comments at 9.
---------------------------------------------------------------------------

    205. Energy Storage Association clarifies that CAISO's tariff 
allows electric storage resources to submit a forecasted starting 
state-of-charge value

[[Page 9609]]

for the day-ahead market, not for the end of a market interval.\243\ 
NextEra agrees and asks the Commission to clarify that the state-of-
charge bidding parameter is not limited to the resource owner's 
forecasted state of charge at the end of the market interval.\244\ 
Similarly, Research Scientists request clarification on whether the 
state-of-charge bidding parameter provides an electric storage 
resource's desired state of charge at the beginning or end of a market 
interval.\245\ EPRI clarifies that it understands that the state of 
charge is the level of energy that an electric storage resource has 
available at present or anticipates to have at the start of the market 
interval.\246\
---------------------------------------------------------------------------

    \243\ See Energy Storage Association Comments at 14-15.
    \244\ See NextEra Comments at 9.
    \245\ See Research Scientists Comments at 7.
    \246\ See EPRI Comments at 17.
---------------------------------------------------------------------------

    206. Finally, several commenters opine on the Commission's 
statement in the NOPR that, when the RTO/ISO is managing the state of 
charge, it expects that the state of charge would be telemetered in 
real time.\247\ ISO-NE states that an electric storage resource's state 
of charge should be telemetered in real time, arguing that this data is 
essential for reliable and efficient system operation. IRC agrees that 
electric storage resources should provide information about their state 
of charge to the RTO/ISO, stating that the state of charge must be 
telemetered to the RTO/ISO in real time if other resources are required 
to be telemetered. Xcel Energy Services argues that RTOs/ISOs should 
have the capability to monitor state of charge so that they can verify 
that an electric storage resource could provide ancillary services if 
called upon to do so. Beacon Power asserts that an electric storage 
resource (whether or not the RTO/ISO is managing its state of charge) 
should be required to notify the RTO/ISO of its state of charge on a 
timely basis.
---------------------------------------------------------------------------

    \247\ See Beacon Power Comments at 6; IRC Comments at 5; ISO-NE 
Comments at 18; Xcel Energy Services Comments at 19.
---------------------------------------------------------------------------

    207. In contrast, Energy Storage Association also contends that the 
Commission should require each RTO/ISO to institute a capability to 
continually monitor an electric storage resource's state of charge but 
should only perform such monitoring when an electric storage resource 
submits its state of charge as a bidding parameter.\248\ Energy Storage 
Association contends that monitoring such a resource's state of charge 
will allow the RTO/ISO to better optimize the scheduling and dispatch 
of the resource.
---------------------------------------------------------------------------

    \248\ See Energy Storage Association Comments at 15-16.
---------------------------------------------------------------------------

ii. Upper and Lower Charge Limit
    208. ISO-NE, Massachusetts State Entities, and NESCOE support the 
proposed requirement that each RTO/ISO establish upper charge limit and 
lower charge limit as bidding parameters for resources using the 
electric storage resource participation model.\249\ NYPA supports the 
proposed bidding parameters conditional on the Commission clarifying in 
this Final Rule that an electric storage resource managing its own 
state of charge is not required to submit information on its upper and 
lower charge limit.\250\ EPRI states that it interprets the upper 
charge limit as the maximum amount of power the electric storage 
resource can withdraw at any given instant and the lower charge limit 
as the minimum amount of power the electric storage resource can 
withdraw at any instant in time.\251\
---------------------------------------------------------------------------

    \249\ See ISO-NE Comments at 17; Massachusetts State Entities 
Comments at 15; NESCOE Comments at 11.
    \250\ See NYPA Comments at 9.
    \251\ See EPRI Comments at 17.
---------------------------------------------------------------------------

iii. Maximum Energy Charge and Discharge Rate
    209. Several commenters support the proposed requirement that each 
RTO/ISO establish maximum energy charge rate and maximum energy 
discharge rate as bidding parameters for the participation model for 
electric storage resources.\252\ However, NextEra also states that 
electric storage resources can have different charge and discharge 
rates depending on their current state of charge and thus requests that 
the Commission clarify that it does not propose to require a single, 
static charge or discharge rate for an electric storage resource's 
entire operating range.\253\ NYPA and Pacific Gas & Electric argue that 
maximum charge and discharge rates should be optional bidding 
parameters, at least when an electric storage resource is managing its 
own state of charge.\254\
---------------------------------------------------------------------------

    \252\ See, e.g., IRC Comments at 5-6; ISO-NE Comments at 17; 
Massachusetts State Entities Comments at 15; NESCOE Comments at 11; 
NextEra Comments at 9; Ohio Commission Comments at 7.
    \253\ See NextEra Comments at 10.
    \254\ See NYPA Comments at 9; Pacific Gas & Electric Comments at 
9.
---------------------------------------------------------------------------

    210. Finally, EPRI requests clarification of the Commission's 
definitions for maximum energy charge and discharge rate.\255\ EPRI 
notes that it understands that ``maximum energy charge rate'' is the 
speed at which an electric storage resource can change its withdrawn 
power amount. EPRI also states that it understands that ``maximum 
energy discharge rate'' is the speed at which an electric storage 
resource can change its injected power amount, which is identical to 
the current ramp rates that generators provide.
---------------------------------------------------------------------------

    \255\ See EPRI Comments at 17.
---------------------------------------------------------------------------

c. Commission Determination
    211. To implement the new requirement in section 35.28(g)(9)(i)(C) 
of the Commission's regulations, in this Final Rule, we adopt the NOPR 
proposal, with the modifications discussed below, to require each RTO/
ISO to revise its tariff to include a participation model for electric 
storage resources that accounts for the following physical and 
operational characteristics of such resources: State of Charge, Minimum 
State of Charge, Maximum State of Charge, Minimum Charge Limit and 
Maximum Charge Limit. As discussed above in the Requirement to 
Incorporate Bidding Parameters as Part of the Electric Storage Resource 
Participation Model section,\256\ each RTO's/ISO's participation model 
for electric storage resources must account for these physical and 
operational characteristics, whether through bidding parameters or 
other means. To the extent that an RTO/ISO proposes to comply with this 
requirement through its existing bidding parameters or other existing 
market mechanisms, it must demonstrate in its compliance filing how its 
existing market rules already account for these characteristics of 
electric storage resources.
---------------------------------------------------------------------------

    \256\ See supra P 191.
---------------------------------------------------------------------------

    212. Upon consideration of the comments, however, we will modify 
the proposed requirement that a resource using an RTO's/ISO's 
participation model for electric storage resources must submit 
information concerning these physical and operational characteristics 
to the RTO/ISO. As commenters state, not all of these physical and 
operational characteristics are applicable to all electric storage 
resources, particularly when a resource is managing its own state of 
charge and when the resource is providing multiple services. We agree 
that the physical and operational characteristics adopted in this Final 
Rule may need to acknowledge commercial obligations in addition to 
physical and operational limitations. Thus, we find that an RTO/ISO 
should have flexibility in how a resource using a participation model 
for electric storage resources will be allowed to represent its 
physical, operational, and commercial circumstances. This flexibility 
will

[[Page 9610]]

allow an RTO/ISO to determine, consistent with how it treats other 
resources, whether it is mandatory for resources using the 
participation model for electric storage resources to submit 
information regarding these physical and operational characteristics, 
or whether resources using the participation model for electric storage 
resources should be allowed to submit this information at their 
discretion.
    213. In addition, we clarify the meaning of these proposed physical 
and operational characteristics of electric storage resources, as 
commenters request. First, we clarify that State of Charge represents 
the amount of energy stored in proportion to the limit on the amount of 
energy that can be stored, typically expressed as a percentage. 
Moreover, we agree with EPRI and other commenters that the State of 
Charge as a bidding parameter is the level of energy that an electric 
storage resource is anticipated to have available at the start of the 
market interval rather than the end. As noted above in the Requirement 
to Incorporate Bidding Parameters as Part of the Electric Storage 
Resource Participation Model section,\257\ we require each RTO/ISO to 
allow a resource using the participation model for electric storage 
resources to submit its State of Charge in both day-ahead and real-time 
markets. We find that this requirement will provide the RTOs/ISOs with 
more accurate market information regarding the resource's actual state 
of charge and prevent the RTO/ISO from needing to make assumptions 
about the state of charge of an electric storage resource, which is 
particularly important if the resource did not receive an award in the 
previous market interval. Moreover, it provides the electric storage 
resource owner/operator with a usable bidding parameter to reflect the 
actual operating conditions of the resource, providing more certainty 
to the RTO/ISO about the capabilities of the resource.
---------------------------------------------------------------------------

    \257\ See supra P 193.
---------------------------------------------------------------------------

    214. Additionally, while the NOPR indicated the Commission's 
expectation that the state of charge of a resource using the electric 
storage resource participation model would be telemetered in real time 
when the RTO/ISO manages that resource's state of charge, as discussed 
further below, we provide each RTO/ISO the flexibility to propose 
telemetry requirements for such resources in their compliance filings. 
This flexibility will allow the RTOs/ISOs to implement the requirements 
of this Final Rule consistent with the telemetry requirements for 
different services and other market participants in each RTO/ISO. For 
example, telemetry may be necessary if an electric storage resource is 
participating exclusively in the frequency regulation market but less 
important if that resource is providing capacity or energy to the RTOs/
ISOs.
    215. Second, we clarify that the upper and lower charge limits 
discussed in the NOPR represent the minimum and maximum state of charge 
of an electric storage resource. Because they are state of charge 
values, we will refer to these values in this Final Rule as the Maximum 
and Minimum State of Charge. More specifically, the Maximum State of 
Charge represents the state of charge that should not be exceeded 
(i.e., gone above) when the electric storage resource is receiving 
electric energy from the grid, while the Minimum State of Charge 
represents the state of charge that should not be exceeded (i.e., gone 
below) when an electric storage resource is injecting electric energy 
onto the grid. These values will allow a resource using the 
participation model for electric storage resources to place limits on 
the degree to which the RTO/ISO can charge or discharge the resource, 
ensuring that it is operated within its design limitations and 
preventing excessive wear and tear. These values may be either static 
values based on manufacturer specifications or dynamic values depending 
on the operational characteristics of the resource (e.g., if it is 
providing multiple services and needs to reserve part of its state of 
charge for another service).
    216. Finally, we clarify that the maximum charge and discharge 
rates discussed in the NOPR represent the operating limits of an 
electric storage resource. As such, we refer to them in this Final Rule 
as Maximum Charge Limit and Maximum Discharge Limit. Specifically, we 
clarify that the Maximum Charge Limit for a resource using the electric 
storage resource participation model is the maximum MW quantity of 
electric energy that it can receive from the grid, and the Maximum 
Discharge Limit is the maximum MW quantity that the resource can inject 
onto the grid. The Maximum Discharge Limit is analogous to, and could 
potentially be represented by, the economic maximum that traditional 
generation resources can generally submit with their offers. Having 
both a Maximum Charge Limit and Maximum Discharge Limit ensures that 
RTO/ISO modeling and dispatch can account for the capabilities of 
resources using the participation model for electric storage resources 
to both receive and inject electric energy in accordance with their 
maximum physical capabilities in both directions.
3. Minimum Charge Time, Maximum Charge Time, Minimum Run Time, and 
Maximum Run Time
a. NOPR Proposal
    217. In the NOPR, the Commission proposed to require that each RTO/
ISO include in its participation model for electric storage resources 
the following bidding parameters that market participants may submit, 
at their discretion, for their resource based on its physical 
constraints or desired operation: minimum charge time, maximum charge 
time, minimum run time, and maximum run time.\258\
---------------------------------------------------------------------------

    \258\ See NOPR at P 68. The Commission acknowledged that some of 
these optional bidding parameters may not be necessary for resources 
participating under the proposed participation model for electric 
storage resources that provide certain information to the RTO/ISO 
through telemetry. Id. n.130.
---------------------------------------------------------------------------

b. Comments
    218. Energy Storage Association, NESCOE, Open Access Technology, 
and SPP support the NOPR proposal.\259\ Specifically, Energy Storage 
Association and NESCOE contend that establishing these optional bidding 
parameters that reflect the physical and operational characteristics of 
electric storage resources may allow RTOs/ISOs to more efficiently 
dispatch all of the resources (including electric storage resources) 
that participate in their markets, thereby reducing system costs. 
Magnum supports the NOPR proposal given that the proposed bidding 
parameters are optional for resources using the electric storage 
resource participation model to submit; however, Magnum argues that 
these requirements should not require an electric storage resource to 
be a ``must run'' facility.\260\
---------------------------------------------------------------------------

    \259\ See Energy Storage Association Comments at 14; NESCOE 
Comments at 11-12; Open Access Technology Comments at 2; SPP 
Comments at 12.
    \260\ Magnum Comments at 12.
---------------------------------------------------------------------------

    219. CAISO and ISO-NE oppose the NOPR proposal.\261\ CAISO does not 
agree that minimum charge time, maximum charge time, minimum run time, 
and maximum run time should be bidding parameters because (1) they 
represent the physical characteristics of a particular electric storage 
resource and (2) other resources (such as pumped-hydro resources) are 
not permitted to change their physical operating characteristics 
through a bid. According to ISO-NE, these bidding parameters are not 
necessary for all electric storage resources to participate in the RTO/
ISO markets nor to clear these markets or

[[Page 9611]]

operate the power system. ISO-NE adds that these additional bidding 
parameters may increase the complexity of implementing the final rule's 
requirements but provide little value. Thus, ISO-NE requests that the 
Commission allow each RTO/ISO to determine whether and how to implement 
these parameters in the future based on their experience working with 
different types of electric storage technologies.
---------------------------------------------------------------------------

    \261\ See CAISO Comments at 10-11; ISO-NE Comments at 19.
---------------------------------------------------------------------------

c. Commission Determination
    220. To implement the new requirement in section 35.28(g)(9)(i)(C) 
of the Commission's regulations, in this Final Rule, we modify the NOPR 
proposal, with the clarification provided below, to require each RTO/
ISO to revise its tariff to include a participation model for electric 
storage resources that accounts for the following physical and 
operational characteristics of such resources: Minimum Charge Time, 
Maximum Charge Time, Minimum Run Time, and Maximum Run Time. As 
discussed above in the Requirement to Incorporate Bidding Parameters as 
Part of the Electric Storage Resource Participation Model section,\262\ 
each RTO's/ISO's participation model for electric storage resources 
must account for these physical and operational characteristics, 
whether through bidding parameters or other means. We do not adopt the 
component of the NOPR proposal to require the RTO/ISO to allow market 
participants to submit this information at their discretion. Instead, 
consistent with the discussion above, we provide flexibility to each 
RTO/ISO to determine, consistent with how it treats other resources, 
whether it is mandatory for resources using the participation model for 
electric storage resources to submit information regarding these 
physical and operational characteristics, or whether resources using 
the participation model for electric storage resources should be 
allowed to submit this information at their discretion. Additionally, 
to the extent that an RTO/ISO proposes to comply with this requirement 
through its existing bidding parameters or other existing market 
mechanisms, it must demonstrate in its compliance filing how its 
existing market rules account for these characteristics of electric 
storage resources.
---------------------------------------------------------------------------

    \262\ See supra P 191.
---------------------------------------------------------------------------

    221. We find that it is necessary for a resource using an RTO's/
ISO's participation model for electric storage resources to be able to 
provide information concerning these physical and operational 
characteristics to the RTO/ISO because, like traditional generation 
resources, it may only be economic for the resource to operate if it is 
guaranteed to do so for minimum amount of time. Additionally, unlike 
traditional generation resources, it is physically impossible for an 
electric storage resource to charge or discharge energy for longer than 
their state of charge would allow.
    222. However, we clarify the NOPR proposal, further explaining the 
meaning of these physical and operational characteristics. First, we 
clarify that Minimum Charge Time represents the shortest duration that 
a resource using the participation model for electric storage resources 
is able to be dispatched by the RTO/ISO to receive electric energy from 
the grid. For example, it may only be possible for resources with 
slower transition speeds (such as pumped-hydro resources) to receive 
electric energy from the grid if it can do so for some minimum period 
of time (e.g., for one hour). Minimum Charge Time is similar to the 
Minimum Run Time for traditional generation resources but represents 
the minimum time the resource can receive electric energy from the 
grid, rather than provide electric energy to the grid.
    223. We further clarify that Maximum Charge Time represents the 
maximum duration that a resource using the participation model for 
electric storage resources is able to be dispatched by the RTO/ISO to 
receive electric energy from the grid (e.g., for four hours). If the 
RTO/ISO is not managing the state of charge of the electric storage 
resource in real time, then this parameter will prevent it from 
dispatching the resource to charge for a duration that would exceed the 
resource's Maximum State of Charge. It also provides useful information 
about how long the electric storage resource can be relied upon to 
receive energy from the grid if the system operator needs to dispatch 
it to do so.
    224. Finally, we clarify that Minimum Run Time and Maximum Run Time 
are the minimum and maximum amounts of time that a resource using the 
participation model for electric storage resources is able to discharge 
electric energy. Maximum Run Time reflects the maximum amount of time 
that a resource using the participation model for electric storage 
resources is able to inject electric energy to the grid due to physical 
or operational constraints, such as its state of charge or potential 
obligations to provide other services. Similarly, Minimum Run Time 
allows the resource to identify the minimum amount of time the resource 
is physically able to discharge electric energy onto the grid. Minimum 
Run Time already exists in the RTOs/ISOs to prevent excessive wear and 
tear on traditional generation resources due to starting and stopping a 
resource too frequently and to ensure they are able to recover the 
costs of starting. To the extent that an RTO/ISO already accounts for 
this characteristic of the participation model for electric storage 
resources through its existing bidding parameters or other means, it 
must demonstrate in its compliance filing how its existing market rules 
do so.
4. Additional Physical and Operational Characteristics
a. Comments
    225. In addition to the bidding parameters that the Commission 
proposed in the NOPR, a number of commenters identify physical and 
operational characteristics that they argue the Commission should also 
require each RTO/ISO to incorporate into its participation model for 
electric storage resources.\263\ For example, EPRI contends that, to 
the extent that the Upper and Lower Charge Limit bidding parameters 
proposed in the NOPR do not represent the maximum and minimum amount of 
energy that an electric storage resource can store, the Commission 
should adopt additional bidding parameters in the final rule to capture 
this information. According to EPRI, this information is necessary for 
an RTO/ISO to manage an electric storage resource's state of charge 
within that resource's limits.
---------------------------------------------------------------------------

    \263\ See EPRI Comments at 7-8, 17-18; NRG Comments at 9, 15; 
NYPA Comments at 9; Pacific Gas & Electric Comments at 9.
---------------------------------------------------------------------------

    226. Several commenters support the concept of a bidding 
parameter(s) that reflects the time that an electric storage resource 
needs to transition from charging to discharging and from discharging 
to charging. NYPA asserts that an electric storage resource may also 
need a bidding parameter that reflects any ramp rate for those 
transitions. Relatedly, EPRI explains that energy storage resources 
that cannot transition from charging to discharging (and vice versa) 
instantaneously may require minimum charge level as a bidding 
parameter. EPRI further explains that software models may also require 
that the values for maximum energy charge and discharge rates (ramp 
rates) bidding parameters to be the same for these resources.
    227. Some commenters propose bidding parameters to reflect any 
limits on an electric storage resource's

[[Page 9612]]

operations.\264\ California Energy Storage Alliance and Pacific Gas & 
Electric suggest that the Commission could adopt through-put limit as a 
bidding parameter. California Energy Storage Alliance claims that such 
a bidding parameter is necessary because cycling multiple times a day 
can cause excessive wear and tear to electric storage resources. NYISO 
Indicated Transmission Owners suggest maximum and minimum allowable 
charge and maximum daily charging and discharging cycles as bidding 
parameters. NYPA argues that bidding parameters should reflect the 
unique operating costs of electric storage resources (such as wear and 
tear, lost opportunity costs, and efficiency losses). Research 
Scientists assert that, to contribute to their economic viability, 
bidding parameters for most electrochemical energy storage technologies 
should represent their power limits, efficiency/losses, and 
degradation.
---------------------------------------------------------------------------

    \264\ See California Energy Storage Alliance Comments at 13; 
NYISO Indicated Transmission Owners Comments at 6; NYPA Comments at 
9-10; Pacific Gas & Electric Comments at 9; Research Scientists 
Comments at 6-7.
---------------------------------------------------------------------------

    228. Other commenters propose various additional bidding 
parameters, including charge and discharge price, maximum consumption 
for dispatch asset-related demand, minimum time between discharge 
cycles for demand response resources,\265\ minimum energy charge and 
discharge rate, self-discharge rate,\266\ round-trip efficiency (i.e., 
the ratio of how much energy is lost from charge to discharge),\267\ 
and separate ramp rates for energy and reserves,\268\ as well as 
bidding parameters that reflect electric storage resources' ability to 
respond to transients with automatic voltage regulation, power system 
stability, and generator droop.\269\
---------------------------------------------------------------------------

    \265\ See NYISO Indicated Transmission Owners Comments at 6.
    \266\ See Pacific Gas & Electric Comments at 9.
    \267\ See EPRI Comments at 17-18.
    \268\ See Dominion Comments at 6-7.
    \269\ See Magnum Comments at 11.
---------------------------------------------------------------------------

b. Commission Determination
    229. Upon consideration of the comments, and to implement the new 
requirement in section 35.28(g)(9)(i)(C) of the Commission's 
regulations, we require each RTO/ISO to revise its tariff to 
incorporate a participation model for electric storage resources that 
accounts for the following physical and operational characteristics 
that were not proposed in the NOPR: Minimum Discharge Limit, Minimum 
Charge Limit, Discharge Ramp Rate, and Charge Ramp Rate. Each RTO's/
ISO's participation model for electric storage resources must account 
for these physical and operational characteristics, whether through 
bidding parameters or other means. Consistent with the discussion 
above, we provide flexibility to each RTO/ISO to determine, consistent 
with how it treats other resources, whether it is mandatory for 
resources using the participation model for electric storage resources 
to submit information regarding these physical and operational 
characteristics, or whether resources using the participation model for 
electric storage resources should be allowed to submit this information 
at their discretion. To the extent that an RTO/ISO proposes to comply 
with this requirement through its existing bidding parameters or other 
existing market mechanisms, it must demonstrate in its compliance 
filing how its existing market rules account for these characteristics 
of electric storage resources.
    230. We find that requiring each RTO's/ISO's electric storage 
resource participation model to account for these physical and 
operational characteristics is necessary to improve the ability of 
electric storage resources to provide all of the services that they are 
technically capable of providing and to allow the RTOs/ISOs to procure 
these services more efficiently, which will enhance competition and, in 
turn, help to ensure that the RTO/ISO markets produce just and 
reasonable rates.
    231. First, we are persuaded by EPRI's suggestion that some 
electric storage resources may need to identify their minimum operating 
limits when they are charging or discharging. Specifically, an electric 
storage resource may need to identify its Minimum Discharge Limit, 
which represents the minimum MW output level that the resource can 
inject onto the grid, and its Minimum Charge Limit, which represents 
the minimum MW level that the resource can receive from the grid.
    232. Like traditional generation resources, some electric storage 
resources may not be able to inject energy onto the grid below a 
minimum MW output level due to the physical capabilities of individual 
turbines or the power electronic of the system. Also like traditional 
generators, we find that resources using the participation model for 
electric storage resources should be able to represent such a minimum 
value in the RTO/ISO markets. Because electric storage resources are 
also able to receive electric energy from the grid, there may be a 
Minimum Charge Limit in MWs that they are able to receive from the grid 
as well due to similar physical constraints of the resource or its 
power electronics.
    233. Therefore, while the Commission did not propose in the NOPR to 
require each RTO's/ISO's electric storage resource participation model 
to account for the Minimum Charge Limit or Minimum Discharge Limit of a 
resource using the electric storage resource participation model, in 
this Final Rule, we require each RTO/ISO to revise its tariff to 
account for these physical characteristics as part of its participation 
model for electric storage resources.
    234. In addition, we agree with EPRI that the speed at which 
electric storage resources can move from zero output to full output, or 
its Maximum Discharge Limit, is the same as the current ramp rates 
provided by traditional generation resources. However, we find that it 
is important to ensure that electric storage resources are able to 
represent this physical characteristic consistent with how other market 
participants are able to do so. Therefore, for purposes of this Final 
Rule, we refer to this parameter as the Discharge Ramp Rate and require 
each RTO/ISO to account for this physical characteristic in its 
participation model for electric storage resources by either making 
existing ramp rate parameters available to resources using the 
participation model for electric storage resources or by other means. 
The unique consideration for electric storage resources is their 
ability to both charge and discharge energy and to transition from one 
operational state to the other. Therefore, in addition to a Discharge 
Ramp Rate, we require each RTO/ISO to account for a Charge Ramp Rate in 
its participation models for electric storage resources. The Charge 
Ramp Rate represents the speed at which an electric storage resource 
can move from zero output to fully charging, or the resource's Maximum 
Charge Limit. While electric storage resources are often designed to 
charge and discharge at the same speeds, that is not always the case, 
and there may be other physical or operational reasons that resources 
using the participation model for electric storage resources need to 
differentiate their Charge Ramp Rate from the Discharge Ramp Rate. 
Therefore, in this Final Rule, we require each RTO/ISO to revise its 
tariff to account for these characteristics as part of its 
participation model for electric storage resources.
    235. We do not find it necessary to require each RTO/ISO to account 
for the other physical and operational characteristics of electric 
storage resources that commenters suggest in its participation model 
for electric storage

[[Page 9613]]

resources. However, we recognize that, given the different market 
structures of the RTOs/ISOs, there may be additional physical and 
operational characteristics of electric storage resources that each 
RTO/ISO wishes to reflect in its participation model for such resources 
to allow it to more efficiently dispatch its system. Thus, we will 
allow each RTO/ISO to propose in its compliance filing bidding 
parameters or other means to account for physical and operational 
characteristics of electric storage resources besides those set forth 
in this Final Rule. To the extent that an RTO/ISO includes such a 
proposal in its compliance filing, the RTO/ISO must demonstrate that 
such bidding parameters or other mechanisms do not impose barriers to 
the participation of electric storage resources in its markets.
5. Summary of Physical and Operational Characteristics of Electric 
Storage Resources
    236. For ease of reference, the following chart summarizes the 
physical and operational characteristics of electric storage resources 
for which each RTO's/ISO's participation model for electric storage 
resources must account:

------------------------------------------------------------------------
   Physical or operational
        characteristic                         Definition
------------------------------------------------------------------------
State of Charge..............  State of Charge represents the amount of
                                energy stored in proportion to the limit
                                on the amount of energy that can be
                                stored, typically expressed as a
                                percentage. It represents the forecasted
                                starting State of Charge for the market
                                interval being offered into.
Maximum State of Charge......  Maximum State of Charge represents a
                                State of Charge value that should not be
                                exceeded (i.e., gone above) when a
                                resource using the participation model
                                for electric storage resources is
                                receiving electric energy from the grid
                                (e.g., 95% State of Charge).
Minimum State of Charge......  Minimum State of Charge represents a
                                State of Charge value that should not be
                                exceeded (i.e., gone below) when a
                                resource using the participation model
                                for electric storage resources is
                                injecting electric energy to the grid
                                (e.g., 5% State of Charge).
Maximum Charge Limit.........  Maximum Charge Limit represents the
                                maximum MW quantity of electric energy
                                that a resource using the participation
                                model for electric storage resources can
                                receive from the grid.
Maximum Discharge Limit......  Maximum Discharge Limit represents the
                                maximum MW quantity that a resource
                                using the participation model for
                                electric storage resources can inject to
                                the grid.
Minimum Charge Time..........  Minimum Charge Time represents the
                                shortest duration that a resource using
                                the participation model for electric
                                storage resources is able to be
                                dispatched by the RTO/ISO to receive
                                electric energy from the grid (e.g., one
                                hour).
Maximum Charge Time..........  Maximum Charge Time represents the
                                maximum duration that a resource using
                                the participation model for electric
                                storage resources is able to be
                                dispatched by the RTO/ISO to receive
                                electric energy from the grid (e.g.,
                                four hours).
Minimum Run Time.............  Minimum Run Time represents the minimum
                                amount of time that a resource using the
                                participation model for electric storage
                                resources is able to inject electric
                                energy to the grid (e.g., one hour).
Maximum Run Time.............  Maximum Run Time represents the maximum
                                amount of time that a resource using the
                                participation model for electric storage
                                resources is able to inject electric
                                energy to the grid (e.g., four hours).
Minimum Discharge Limit......  The minimum MW output level that a
                                resource using the participation model
                                for electric storage resources can
                                inject onto the grid.
Minimum Charge Limit.........  The minimum MW level that a resource
                                using the participation model for
                                electric storage resources can receive
                                from the grid.
Discharge Ramp Rate..........  The speed at which a resource using the
                                participation model for electric storage
                                resources can move from zero output to
                                its Maximum Discharge Limit.
Charge Ramp Rate.............  The speed at which a resource using the
                                participation model for electric storage
                                resources can move from zero output to
                                its Maximum Charge Limit.
------------------------------------------------------------------------

F. State of Charge Management

1. NOPR Proposal
    237. In the NOPR, the Commission proposed to require each RTO/ISO 
to allow electric storage resources to self-manage their state of 
charge and upper and lower charge limits.\270\ The Commission stated 
that an electric storage resource that self-manages its state of charge 
is subject to any penalties for deviating from a dispatch schedule to 
the extent the resource manages its state of charge by deviating from 
the dispatch schedule.\271\ However, the Commission sought comment on 
whether there are conditions under which an RTO/ISO should not allow an 
electric storage resource to manage its state of charge and upper and 
lower charge limits.
---------------------------------------------------------------------------

    \270\ See NOPR at P 69.
    \271\ See id. P 70.
---------------------------------------------------------------------------

2. Comments
    238. Numerous commenters support the NOPR proposal to require each 
RTO/ISO to allow electric storage resources to self-manage their state 
of charge and upper and lower charge limits.\272\ Some commenters 
assert that the proposal will allow for more efficient use of electric 
storage resources and will extend their useful lives.\273\ Other 
commenters state that permitting an electric storage resource to manage 
its state of charge would allow the asset owner to optimize the 
operations of its resource.\274\ Tesla/SolarCity point to CAISO's 
tariff for Non-Generator Resources to self-manage energy limits and 
state-of-charge in real time as a good model.\275\
---------------------------------------------------------------------------

    \272\ See, e.g., Beacon Power Comments at 6; DTE Electric/
Consumers Energy Comments at 4-5; EEI Comments at 10; Energy Storage 
Association Comments at 16-17; IRC Comments at 5; Microgrid 
Resources Coalition Comments at 7; NESCOE Comments at 11; Pacific 
Gas & Electric Comments at 8; Research Scientists Comments at 7-8.
    \273\ See AES Companies Comments at 22; Electric Vehicle R&D 
Group Comments at 1.
    \274\ See Avangrid Comments at 6; Energy Storage Association 
Comments at 16; Imperial Irrigation District Comments at 10; NRG 
Comments at 18; NYPA Comments at 10.
    \275\ See Tesla/SolarCity Comments at 14-15 (citing California 
Indep. Sys. Operator Corp., 156 FERC ] 61,110 at P1).
---------------------------------------------------------------------------

    239. Several commenters, however, urge the Commission to go farther 
than the NOPR proposal, stating that an electric storage resource 
should always, or almost always, be responsible for managing its own 
state of charge. Most RTOs/ISOs, PJM Market Monitor, and Xcel Energy 
Services argue that the RTO/ISO should not be responsible for managing 
an electric storage resource's

[[Page 9614]]

state of charge.\276\ For example, IRC argues that the RTOs/ISOs should 
only be responsible for following reasonable operating parameters 
provided by the electric storage resource owner.\277\ Generally, 
commenters state that it would be challenging for the RTO/ISO to manage 
a storage resource's state of charge, RTOs/ISOs traditionally do not 
manage how resources participate in the market, RTOs/ISOs should not be 
put in the position of managing market risk for or making business 
judgments on behalf of market participants, and electric storage 
resources should manage their own state of charge through their market 
offers, updates to market offers, and decisions to remove their 
resource from market dispatch.\278\
---------------------------------------------------------------------------

    \276\ See IRC Comments at 5; ISO-NE Comments at 20; PJM Comments 
at 10; PJM Market Monitor Comments at 4.
    \277\ See IRC Comments at 5.
    \278\ See AES Companies Comments at 23; PJM Comments at 10; PJM 
Market Monitor Comments at 4; Xcel Energy Services Comments at 17-
18.
---------------------------------------------------------------------------

    240. Other commenters argue that, to the extent the Commission 
permits an RTO/ISO to manage an electric storage resource's state of 
charge, that RTO/ISO should be required to meet certain 
conditions.\279\ For example, AES Companies argue the related software 
development and administrative costs of RTO/ISO management of a 
resource's state of charge should be allocated only to those resources 
requesting the state-of-charge management service from the RTO/ISO. In 
contrast, Microgrid Resources Coalition contends that, if an RTO/ISO 
seeks to manage the state of charge or readiness of an electric storage 
resource, it should compensate the resource for that privilege.\280\ 
NRG asserts that to the extent an RTO/ISO manages an electric storage 
resource's state of charge, it will have to include complex bidding 
parameters to ensure that the resource could meet any retail 
obligations that it has assumed.\281\ MISO Transmission Owners state 
that an RTO/ISO that manages an electric storage resource's state of 
charge must do so in accordance with the criteria that the resource 
owner establishes.\282\
---------------------------------------------------------------------------

    \279\ See AES Companies Comments at 23.
    \280\ See Microgrid Resources Coalition Comments at 7-8.
    \281\ See NRG Comments at 18.
    \282\ See MISO Transmission Owners Comments at 11.
---------------------------------------------------------------------------

    241. Imperial Irrigation District asserts that the RTO/ISO should 
manage an electric storage resource's state of charge only if the 
resource owner agrees.\283\ Relatedly, NYPA argues that, if an RTO/ISO 
is managing an electric storage resource's state of charge, that 
resource should be permitted to withdraw from RTO/ISO control without 
penalty if it believes it is under-recovering revenues due to the 
RTO's/ISO's directives.\284\ NYPA contends that several RTOs/ISOs have 
considered or implemented performance incentive structures and 
including electric storage resources in those market designs could 
provide the proper market incentive for such resources to be available 
when they are most needed, instead of having the RTO/ISO manage a 
resource's state of charge.
---------------------------------------------------------------------------

    \283\ See Imperial Irrigation District Comments at 10.
    \284\ See NYPA Comments at 10-11.
---------------------------------------------------------------------------

    242. Other commenters suggest that there are certain circumstances 
when RTO/ISO state of charge management is beneficial and that each 
RTO/ISO should be permitted to manage an electric storage resource's 
state of charge in certain circumstances.\285\ SPP asserts that RTOs/
ISOs should manage the state of charge of regulation resources but that 
electric storage resources that qualify to provide other services 
should manage their own states of charge.\286\ CAISO notes that, under 
its existing market rules, it manages the state of charge for some 
electric storage resources and allows others to manage their own state 
of charge. Specifically, CAISO notes that, for resources that seek to 
provide regulation, it can optimize a resource's state of charge, 
allowing a resource to offer its full capacity as regulation consistent 
with continuous energy requirements for that service. ISO-NE states 
that it recognizes that it may be necessary at times for an RTO/ISO to 
posture resources, including electric storage resources, to ensure 
reliability.
---------------------------------------------------------------------------

    \285\ See CAISO Comments at 10-11; EPRI Comments at 21-22 
(citing https://ncreview.org/smart_grid/pjms-frequency-regulation-market-and-the-changing-nature-of-energy-storage-gtm-squared/45256); 
ISO-NE Comments at n.23; Research Scientists Comments at 7; SPP 
Comments at 11, 12.
    \286\ See SPP Comments at 11, 12.
---------------------------------------------------------------------------

    243. EPRI states that it may be appropriate for the RTO/ISO to 
manage a storage resource's state of charge to ensure that sufficient 
regulating capability is available from the resource, noting that this 
has already occurred in some RTOs/ISOs. EPRI adds that RTO/ISO 
management of state of charge could lead to more efficient and more 
reliable operations and better mitigation of day-ahead forecast 
uncertainty because the RTO/ISO has better knowledge of system 
conditions. Research Scientists argue that, while it may be technically 
challenging to achieve, in principle, the RTO/ISO is in the best 
position to manage energy storage scheduling and state of charge in 
order to minimize system costs.
    244. EEI and Exelon assert that, if an electric storage resource is 
used to address reliability-related transmission needs or relieve 
congestion as a transmission asset, the RTO/ISO must have functional 
control over dispatch, including the timing and amount of energy that 
may be injected into or withdrawn from the transmission system and the 
amount of energy that must be made available for injection or 
withdrawal at the direction of the RTO/ISO to fulfill the resource's 
transmission function.\287\ Exelon states that the RTO/ISO could 
release control of the electric storage resource when it is not needed 
for such services, noting that the RTO/ISO may still have to determine 
the level of energy to be available at all times from resources that 
provide blackstart service. In contrast, AES Companies claim that, 
because advanced software is used to optimize a lithium array's life, 
state of charge should still be managed by the owner of a storage 
resource used as a transmission asset under the RTO's/ISO's functional 
control.\288\
---------------------------------------------------------------------------

    \287\ See EEI Comments at 11; Exelon Comments at 8-9, n.4.
    \288\ See AES Companies Comments at 21.
---------------------------------------------------------------------------

    245. EEI and Xcel Energy Services suggest that, given the lack of 
clarity about the proposal for state of charge management, a technical 
conference may be warranted to better explain the state of charge 
management concept and better ascertain the issues that need to be 
evaluated in determining how state of charge should be managed.\289\ 
EEI states that this technical conference should address the management 
of multiple payment streams for electric storage resources that are 
both receiving cost-based rates and participating in the RTO/ISO 
markets because such a resource must be able to fulfill both the 
obligations that it assumes in the market and as a transmission asset. 
MISO also argues that further study is needed to comprehend the 
reliability and economic outcomes of different approaches to state-of-
charge management for electric storage resources, noting that it must 
have an effective way to ensure that an electric storage resource 
managing its state of charge has enough stored energy to allow it to 
provide the services that it clears the market to provide.\290\
---------------------------------------------------------------------------

    \289\ See EEI Comments at 10-11; Xcel Energy Services Comments 
at 18.
    \290\ See MISO Comments at 15-16.
---------------------------------------------------------------------------

    246. Altametric and Bonneville assert that an RTO/ISO may need to 
directly manage the state of charge and upper and lower charge limits 
of electric storage resources during an abnormal

[[Page 9615]]

condition or system emergency to preserve system reliability.\291\ 
Bonneville encourages the Commission to allow the RTOs/ISOs to identify 
these reliability-based conditions. City of New York contends that, 
while there may be limited circumstances under which an RTO/ISO is 
better suited than the asset owner to manage an electric storage 
resource's state of charge and upper and lower charge limits, the scope 
of an RTO's/ISO's authority to do so should be established consistent 
with their limited experience with such resources, while changing over 
time as they gain additional experience.\292\
---------------------------------------------------------------------------

    \291\ See Altametric Comments at 6; Bonneville Comments at 5.
    \292\ See City of New York Comments at 7.
---------------------------------------------------------------------------

    247. Some commenters argue that the Commission should require each 
RTO/ISO to offer state-of-charge management to electric storage 
resources.\293\ NYISO Indicated Transmission Owners state that, because 
electric storage resources can be used to support local or bulk 
electric system reliability, the Commission should ensure that electric 
storage resource owners can voluntarily elect to cede control of their 
resources' state of charge to either an RTO/ISO or distribution 
utility. Dominion stresses the importance of pumped-hydro resources' 
ability to opt for PJM to optimize their pumping and dispatch in the 
day-ahead market when these facilities provide PJM with their starting 
and ending storage levels for the day, along with other resource-
specific operating parameters and suggests expanding this ability to 
other electric storage resources.
---------------------------------------------------------------------------

    \293\ See Dominion Comments at 5; NYISO Indicated Transmission 
Owners Comments at 6.
---------------------------------------------------------------------------

    248. To enable them to provide their full capabilities to the 
market in a continual manner, Energy Storage Association asks the 
Commission require each RTO/ISO to allow an electric storage resource 
to opt to have the RTO/ISO manage its state of charge.\294\ Energy 
Storage Association contends that, at a minimum, an active state-of-
charge management mechanism should be available for electric storage 
resources providing services that need operational decisions faster 
than bidding intervals (e.g., frequency regulation) and state of charge 
cannot be predicted or managed through bidding alone. Energy Storage 
Association notes that CAISO, MISO, and NYISO offer state of charge 
management for electric storage resources providing frequency 
regulation service and argues that these practices should be expanded 
to all RTOs/ISOs and be available for resources of any duration, not 
just short-duration storage resources providing frequency regulation.
---------------------------------------------------------------------------

    \294\ See Energy Storage Association Comments at 6, 17, n.24.
---------------------------------------------------------------------------

    249. Xcel Energy Services contends that issues associated with 
managing state of charge may impact opportunity costs included in 
offers and raise concerns regarding economic withholding of resources 
from the market and market monitors may need to develop new monitoring 
tools and exhibit flexibility in evaluating offer opportunity costs 
when evaluating behavior of storage resources in the market.\295\ R 
Street Institute posits that economic withholding may be difficult to 
detect, given that electric storage resources' offers reflect their 
opportunity costs (rather than physical marginal costs) and that these 
resources will likely supply energy when prices are high and the market 
is most vulnerable to the exercise of market power.\296\ R Street 
Institute explains that physical withholding detection will prove 
challenging due to the complexity and heterogeneity of physical 
characteristics of electric storage resources. Therefore, R Street 
Institute asks the Commission to seek comment on how electric storage 
resources may engage in economic or physical withholding.
---------------------------------------------------------------------------

    \295\ See Xcel Energy Services Comments at 18, n.27.
    \296\ See R Street Institute Comments at 6.
---------------------------------------------------------------------------

    250. With respect to the Commission's statement in the NOPR that an 
electric storage resource that self-manages its state of charge is 
subject to any penalties for deviating from a dispatch schedule to the 
extent the resource manages its state of charge by doing so, several 
commenters agree that, if an electric storage resource self-manages its 
state of charge and does not perform when obligated to do so, the 
resource should incur non-performance penalties.\297\ EPRI asserts that 
potential penalties will help incentivize energy storage resources that 
self-manage their state of charge to ensure that their state-of-charge 
constraints are met. EPRI adds, however, that the RTO/ISO may not have 
sufficient information about whether an electric storage resource that 
is providing spinning/synchronized reserve can meet its obligation to 
provide energy unless the RTO/ISO must call on that resource, making it 
more difficult to penalize such a resource for noncompliance unless an 
event has occurred.
---------------------------------------------------------------------------

    \297\ See, e.g., Energy Storage Association Comments at 17; EPRI 
Comments at 23; ISO-NE Comments at 20; Ohio Commission Comments at 
7; Xcel Energy Services Comments at 22.
---------------------------------------------------------------------------

3. Commission Determination
    251. Upon consideration of the comments, we agree with commenters 
that resource owners/operators using the participation model for 
electric storage resources must be able to manage the state of charge 
of their resources. Consistent with the NOPR, we find that each RTO/ISO 
must permit electric storage resources to manage their state of charge 
because it allows these resources to optimize their operations to 
provide all of the wholesale services that they are technically capable 
of providing, similar to the operational flexibility that traditional 
generation resources have to manage the wholesale services that they 
offer. We find that, while the RTOs/ISOs may be in a better position to 
effectively manage the state of charge for a resource using the 
participation model for electric storage resources that, for example, 
exclusively provides frequency regulation service, some electric 
storage resources may be able to provide multiple services or services 
to another entity outside of the RTO/ISO markets.
    252. We therefore agree with commenters that resources using the 
participation model for electric storage resources must have the 
ability to self-manage their state of charge and it is often desirable 
to allow them to do so. Providing this flexibility will allow resource 
owners/operators to ensure their own Minimum and Maximum States of 
Charge are not violated,\298\ which will help prevent excessive wear 
and tear on the resource and help maintain its technical capabilities 
to provide services in the RTO/ISO markets. Additionally, depending on 
the telemetry rules adopted by each RTO/ISO, ensuring that a resource 
owner/operator is able to manage its own state of charge may also limit 
the need for the RTO/ISO to telemeter the resource in real time to 
ensure that the Minimum and Maximum States of Charge are not violated. 
For these reasons, we find that a sufficient record exists in this 
proceeding to make these determinations without the need for additional 
process or a technical conference, as some commenters propose.
---------------------------------------------------------------------------

    \298\ See supra P 215. Consistent with the changes in 
terminology adopted in the State of Charge, Upper and Lower Charge 
Limits, and Maximum Charge and Discharge Rates section, we are using 
the terms Maximum State of Charge and Minimum State of Charge 
instead of Upper Charge Limit and Lower Charge Limit.
---------------------------------------------------------------------------

    253. Therefore, we require each RTO/ISO to allow resources using 
the participation model for electric storage resources to self-manage 
their state of

[[Page 9616]]

charge. We also find here that a resource using the participation model 
for electric storage resources that self-manages its state of charge 
will be subject to any applicable penalties for deviating from a 
dispatch schedule to the extent that the resource deviates from the 
dispatch schedule in managing its state of charge.\299\ We also clarify 
that, to the extent that the provision of a particular wholesale 
service, such as frequency regulation, requires a resource providing 
that service to follow a dispatch signal that has the effect of 
maintaining the resource's ability to provide the service, an electric 
storage resource that is managing its own state of charge would still 
be required to follow such a dispatch signal, just as all other 
resources providing that same service.
---------------------------------------------------------------------------

    \299\ See NOPR at P 70.
---------------------------------------------------------------------------

    254. Additionally, we clarify that the RTOs/ISOs are not required 
as part of this Final Rule to manage the state of charge for resources 
using the participation model for electric storage resources.\300\ 
However, if an RTO/ISO already has a mechanism to manage a resource's 
state of charge (such as regulation energy management in CAISO or 
pumped-hydro resource operation in PJM), then we require the RTO/ISO to 
make the use of such mechanism optional so that an electric storage 
resource owner/operator is able to manage its own state of charge if it 
elects to do so. Where an electric storage resource has the option to 
allow the RTO/ISO to manage its state of charge, we clarify that the 
electric storage resource is the default manager of the resource's 
state of charge.
---------------------------------------------------------------------------

    \300\ We note that, while the RTOs/ISOs must permit resources to 
manage their own state of charge, the RTOs/ISOs may provide an 
option for the RTO/ISO to manage an electric storage resource's 
state of charge for any particular service or circumstance as they 
deem appropriate in their markets with consent of the electric 
storage resource.
---------------------------------------------------------------------------

    255. In response to the concerns about the ability of the RTOs/ISOs 
to use electric storage resources to address any reliability challenges 
and to know that the resources have an adequate state of charge to 
perform the service to which they have committed, we note that the RTO/
ISO should be able to dispatch a resources using the participation 
model for electric storage resources in the same manner as any other 
market participant. Nothing in this Final Rule precludes an RTO/ISO 
from establishing telemetry or other communication requirements 
necessary to determine the capabilities of the electric storage 
resource in real time. We believe that this flexibility will ensure 
sufficient visibility of a resource using the participation model for 
electric storage resources to safeguard operational reliability and 
market integrity. We reiterate that self-managing electric storage 
resources, just like all market participants, are subject to any non-
performance penalties in the RTO/ISO tariff, thus incentivizing them to 
ensure that they have sufficient energy available to meet their 
obligations.
    256. As for commenters' concerns about economic and physical 
withholding, we agree that the energy limitations of electric storage 
resources will need to be factored into their market offers and that 
misrepresenting those limitations could constitute manipulation if an 
electric storage resource has an obligation to participate in an RTO/
ISO market. However, as discussed in the Ability to De-Rate Capacity to 
Meet Minimum Run-Time Requirements section above, in this Final Rule, 
we require each RTO/ISO to demonstrate how its existing market rules 
provide a means for energy-limited resources, including electric 
storage resources, to provide capacity.\301\ This may include ways for 
energy-limited resources, such as electric storage resources, to 
represent their energy limitations through their offer prices, which, 
if allowed by the RTO/ISO, would not constitute economic withholding. 
Also, as discussed above, we find that electric storage resources de-
rating to provide capacity or other services are not engaging in 
physical withholding if they are de-rating to meet minimum run-time 
requirements.
---------------------------------------------------------------------------

    \301\ See supra P 100.
---------------------------------------------------------------------------

    257. However, there may still be concerns that electric storage 
resources managing their own state of charge could be doing so 
inconsistent with the physical and operational characteristics of the 
resource, which may create a need to ensure those resources are not 
withholding services or otherwise violating its dispatch in a way 
inconsistent with its physical capabilities. Therefore, we note that, 
as with other resources, market monitors have the ability to review the 
bids from electric storage resources to detect economic or physical 
withholding. Additionally, if an RTO/ISO determines that additional 
rules are needed to ensure electric storage resources are not managing 
their state of charge in a way that could manipulate market outcomes 
through withholding, then the RTO/ISO could propose such rules in 
response to this Final Rule or through a separate FPA section 205 
filing.\302\
---------------------------------------------------------------------------

    \302\ See 16 U.S.C. 824d.
---------------------------------------------------------------------------

G. Minimum Size Requirement

1. NOPR Proposal
    258. In the NOPR, the Commission proposed to require each RTO/ISO 
to revise its tariff to include a participation model for electric 
storage resources that establishes a minimum size requirement for 
participation in the RTO/ISO markets that does not exceed 100 kW.\303\
---------------------------------------------------------------------------

    \303\ See NOPR at P 94. The Commission used the term ``minimum 
size requirement'' to collectively describe minimum capacity 
requirements to qualify to use a given participation model, 
``minimum offer requirements'' for offers to sell services in the 
RTO/ISO markets, and ``minimum bid requirements'' for bids to buy 
energy in these markets. Id. n.148.
---------------------------------------------------------------------------

2. Comments
    259. Several commenters agree with the proposed 100 kW minimum size 
requirement for electric storage resources.\304\ Many of these 
commenters argue that there is no justification for the minimum size 
requirement to be any higher. Minnesota Energy Storage Alliance asserts 
that large minimum size requirements have and continue to pose a 
barrier to electric storage resource development in Minnesota.\305\ 
Energy Storage Association and Tesla/SolarCity note that most or all of 
the RTOs/ISOs currently allow at least some type of resource to 
participate in their markets at a size of 100 kW, including PJM, which 
allows participation by 100 kW electric storage resources.\306\ 
Massachusetts State Entities and NESCOE state that the proposal would 
be technically feasible in ISO-NE and will not compromise the 
efficiency of market dispatch.\307\ Massachusetts State Entities note 
that the 100kV threshold is consistent with the results of a pilot 
program in which ISO-NE reduced the minimum size requirement to 
participate in its frequency regulation market to 100 kW and found that 
resources smaller than one MW were technically capable of providing the 
service. However, Tesla/SolarCity request that the Commission clarify 
that the 100 kW minimum size requirement applies not only to individual 
electric storage resources but also can be met through the aggregation 
of smaller electric storage resources.
---------------------------------------------------------------------------

    \304\ See, e.g., Avangrid Comments at 8; Energy Storage 
Association Comments at 23; Massachusetts State Entities Comments at 
16-17; NYISO Comments at 10; PJM Market Monitor Comments at 9; 
Tesla/SolarCity Comments at 17-18.
    \305\ See Minnesota Energy Storage Alliance Comments at 3-4.
    \306\ See Energy Storage Association Comments at 7, 23-24; 
Tesla/SolarCity Comments at 17-18.
    \307\ See NESCOE Comments at 12.
---------------------------------------------------------------------------

    260. Energy Storage Association asserts that electric storage 
resources less than 1 MW in size can provide the same services and the 
same flexibility,

[[Page 9617]]

reliability, and cost reduction benefits as larger electric storage 
resources.\308\ NYISO Indicated Transmission Owners do not oppose the 
NOPR proposal.\309\
---------------------------------------------------------------------------

    \308\ See Energy Storage Association Comments at 24.
    \309\ See NYISO Indicated Transmission Owners Comments at 7.
---------------------------------------------------------------------------

    261. Other commenters support the concept of a minimum size 
requirement but have reservations about the 100 kW value that the 
Commission proposed in the NOPR.\310\ Eagle Crest agrees that a minimum 
size requirement is appropriate but takes no position with respect to 
what that requirement should be. Relatedly, Public Interest 
Organizations and R Street Institute contend that lowering the minimum 
size requirement will reduce barriers to the participation of electric 
storage resources but state that the NOPR proposal does not address the 
arbitrariness of choosing a particular minimum size. R Street Institute 
argues that no economic rational justifies the RTOs/ISOs adopting 
different minimum size requirements. While R Street Institute states 
that the NOPR correctly identifies the need to balance the benefits of 
lowering minimum size requirements with the ability of market clearing 
software to model and dispatch smaller resources, it argues that it is 
unclear how the NOPR proposal balances these benefits and costs. While 
the National Hydropower Association notes that it is concerned with 
market participation limitations based on project size, it believes 
that the NOPR proposal is compatible with existing and future pumped-
hydro resources interconnected to the transmission system.
---------------------------------------------------------------------------

    \310\ See Eagle Crest Comments at 7; National Hydropower 
Association Comments at 9, n.9; Public Interest Organizations 
Comments at 18; R Street Institute Comments at 7.
---------------------------------------------------------------------------

    262. Other commenters oppose the NOPR proposal.\311\ CAISO explains 
that it requires resources to have a capacity of at least 500 kW to 
participate in its energy and ancillary service markets, while initial 
offer segments must be no less than 100 kW/kWh. While CAISO agrees with 
the Commission that its software could model or dispatch a resource 
with a capacity of 100 kW, CAISO is concerned that the 100 kW minimum 
size requirement would also apply to distributed energy resources and 
requiring CAISO to clear congestion on its grid with thousands of 
resources with capacities in the range of 100 kW will reduce the 
efficiency and performance of its market software. Therefore, CAISO 
asks the Commission to allow each RTO/ISO to set its minimum size 
requirement up to 500 kW for installed capacity, with a minimum offer 
requirement of up to 100 kW/kWh offered into the market and for the 
initial offer segment. CAISO states that a 500 kW minimum size 
requirement is consistent with the minimum size requirement that it 
applies to generators. CAISO further states that the Commission could 
direct each RTO/ISO to explain how electric storage resources smaller 
than 500 kW may participate in their markets (e.g., through aggregation 
models or as demand response resources).
---------------------------------------------------------------------------

    \311\ See CAISO Comments at 16-19; ISO-NE Comments at 23.
---------------------------------------------------------------------------

    263. ISO-NE argues that imposing a 100 kW minimum size requirement 
could force it to change the minimum size requirement for all resources 
in its markets due to its product-based market design. ISO-NE asks the 
Commission to permit ISO-NE to work with transmission organizations and 
utility distribution companies in the regions to set minimum size 
requirements. ISO-NE contends that it must assess whether such an 
outcome would increase the costs or time needed for implementation. 
ISO-NE asserts that the proposed 100 kW minimum size requirement might 
increase costs and the time needed for implementation for the region's 
transmission organizations and distribution utilities because smaller 
resources are more likely to be interconnected to the distribution 
system and these transmission organizations and distribution utilities 
would have to install metering and adopt accounting procedures to 
measure the consumption and output of these resources.
    264. AES Companies, EEI, MISO Transmission Owners, Pacific Gas & 
Electric, and SoCal Edison argue that the Commission should allow each 
RTO/ISO to establish its own minimum size requirements for electric 
storage resources based on its unique circumstances.\312\ EEI argues 
that it could allow so many electric storage resources to participate 
in the RTO/ISO markets that the RTOs/ISOs will be unable to evaluate 
these resources, distribution utilities will be unable to model these 
resources and implement infrastructure upgrades, and the implementation 
costs incurred to facilitate their participation will exceed the 
benefits of that participation. While AES Companies support the concept 
of a minimum size requirement, they contend that 100 kW is 
significantly below the minimum size requirement for many distribution 
utilities and may be challenging for some of the RTOs/ISOs to implement 
(given their diverse operating characteristics and supporting software 
systems). Likewise, MISO Transmission Owners state that 100 kW is very 
low, especially for distribution utilities. Pacific Gas & Electric 
contends that the Commission should allow each RTO/ISO to establish 
different minimum size requirements for the different services that 
electric storage resources can provide (e.g., energy or ancillary 
services) and the different participation models that they can use to 
participate in the RTO/ISO market. Pacific Gas & Electric asserts that 
the appropriate minimum size requirement(s) may be based on the 
opportunities for aggregation of electric storage resources.
---------------------------------------------------------------------------

    \312\ See EEI Comments at 13-14; AES Companies Comments at 7, 
28-29; MISO Transmission Owners Comments at 13-14; Pacific Gas & 
Electric Comments at 10-11; SoCal Edison Comments at 15-16.
---------------------------------------------------------------------------

    265. AES Companies, EEI, MISO Transmission Owners, and Pacific Gas 
& Electric contend that the minimum size requirement for an electric 
storage resource to participate in an RTO/ISO market should take into 
account the point at which electric storage resources will interconnect 
to the system (i.e., the transmission or distribution system) and how 
it will be operated relative to other generation interconnected to the 
distribution system.\313\ AES Companies assert that the Commission does 
not have the authority to set minimum size requirements for 
distribution utilities and the 100 kW proposed minimum size requirement 
conflicts with existing state tariffs and operating principles. Thus, 
AES Companies and MISO Transmission Owners ask the Commission to allow 
each distribution utility (with its retail regulators) and each RTO/ISO 
(with its stakeholders) to establish its own minimum size requirement 
for distribution-interconnected and behind-the-meter electric storage 
resources and transmission-interconnected electric storage resources, 
respectively.
---------------------------------------------------------------------------

    \313\ See AES Companies Comments at 7, 28-29; EEI Comments at 
14; MISO Transmission Owners Comments at 13; Pacific Gas & Electric 
Comments at 11.
---------------------------------------------------------------------------

    266. Alternatively, MISO Transmission Owners state that a one MW 
minimum size requirement is more practical and appropriate due to 
administrative and settlement burdens on the RTOs/ISOs, while a 500 kW 
minimum size requirement may be appropriate for supporting innovation 
in immature technologies and markets through pilot projects.\314\ In 
contrast, while acknowledging that smaller electric storage resources 
can be

[[Page 9618]]

aggregated to meet minimum size requirements, SoCal Edison argues that 
a one MW minimum size requirement may be too large because electric 
storage resources with a capacity of one MW or more that are 
interconnected to the distribution system could create operational 
challenges for distribution operators.\315\ Altametric recommends a 
minimum power output size of 500 kW from no charge to full charge with 
a minimum limit of 100 kWh.\316\ Xcel Energy Services contends that 
electric storage resources should have to meet the same minimum size 
requirements like other, larger resources.\317\
---------------------------------------------------------------------------

    \314\ See MISO Transmission Owners Comments at 13-14.
    \315\ See SoCal Edison Comments at 15.
    \316\ See Altametric Comments at 7.
    \317\ See Xcel Energy Services Comments at 23.
---------------------------------------------------------------------------

    267. A few commenters raise the potential impact of the NOPR 
proposal on the software that RTOs/ISOs use to clear their 
markets.\318\ MISO claims that a minimum size requirement that is too 
small could result in more very small electric storage resources 
participating in MISO's markets than its current operational and market 
systems and software may be capable of tracking, processing, and 
settling. Similarly, Pacific Gas & Electric and Xcel Energy Services 
suggest considering whether the market-clearing software is capable of 
managing the dispatch of many small resources when determining minimum 
size requirements. MISO warns that its market systems may require 
significant upgrades to accommodate the potentially large number of 
electric storage resources and the multiplicity of variables associated 
with their transactions. MISO also claims that its State Estimator 
(which it uses to track energy for real-time dispatch and performance 
measurement) may not have the ability to estimate the status of 100 kW 
resources. Minnesota Energy Storage Alliance states that, while it 
defers to the RTOs'/ISOs' comments on the software upgrades needed to 
implement the proposed minimum size requirement and the associated 
costs, it would like to see MISO modify its markets to allow for the 
participation of smaller resources.
---------------------------------------------------------------------------

    \318\ See Minnesota Energy Storage Alliance Comments at 4; MISO 
Comments at 8-9; Pacific Gas & Electric Comments at 11; Xcel Energy 
Services Comments at 23.
---------------------------------------------------------------------------

    268. MISO Transmission Owners claim that any new rule would 
effectively direct investment in software and/or infrastructure 
upgrades over other priorities that have been established based on 
customer need and that the Commission must balance prioritization of 
electric storage resource participation against other important system 
improvements and maintenance.\319\ MISO Transmission Owners assert that 
this concern is valid and timely because many distribution companies 
are implementing large-scale, advanced metering infrastructure 
deployment plans. Xcel Energy Services also argues that any 
administrative costs that result from the growth in the number of small 
resources participating in the RTO/ISO markets should be borne by those 
resources.\320\ EPRI suggests further study on two issues: (1) Whether 
RTO/ISO market-clearing software will be capable of identifying the 
optimal dispatch of resources within existing market timelines when 
there are more resources participating in the RTO/ISO markets and (2) 
whether small electric storage resources will be dispatched arbitrarily 
given that small resources that could reduce total production costs 
might not be dispatched, even though they would reduce production 
costs, because the market-clearing software has stopped looking for a 
better dispatch solution.\321\
---------------------------------------------------------------------------

    \319\ See MISO Transmission Owners Comments at 14.
    \320\ See Xcel Energy Services Comments at 23.
    \321\ See EPRI Comments at 26-27.
---------------------------------------------------------------------------

    269. Finally, Open Access Technology recommends that the Commission 
clarify the minimum size of a price-quantity pair that an electric 
storage resource can include in its offer because RTO/ISO market rules 
generally allow for an offer curve that consists of up to ten price-
quantity pairs (i.e., whether an electric storage resource can submit a 
price-quantity pair for less than 100 kW in its offer).\322\
---------------------------------------------------------------------------

    \322\ See Open Access Technology Comments at 3.
---------------------------------------------------------------------------

3. Commission Determination
    270. In this Final Rule, we adopt the NOPR proposal and add section 
35.28(g)(9)(i)(D) to the Commission's regulations to require each RTO/
ISO to revise its tariff to include a participation model for electric 
storage resources that establishes a minimum size requirement for 
participation in the RTO/ISO markets that does not exceed 100 kW. This 
minimum size requirement includes all minimum capacity requirements, 
minimum offer to sell requirements, and minimum bid to buy requirements 
for resources participating in these markets under the participation 
model for electric storage resources.
    271. Electric storage resources are generally smaller than 
traditional generation resources and are often in the 100 kW to 1 MW 
range.\323\ In many cases, existing minimum size requirements were 
created prior the emergence of new, smaller resources such as electric 
storage resources that are technically capable of participating in the 
RTO/ISO markets. We find that RTO/ISO market rules may create barriers 
to electric storage resource participation in those markets based on 
minimum size requirements that may have been designed for different 
types of resources.\324\ Therefore, as discussed below, we conclude 
that requiring the RTOs/ISOs to establish a minimum size requirement 
not to exceed 100 kW for the participation model for electric storage 
resources balances the benefits of increased competition with the 
potential need to update RTO/ISO market clearing software to 
effectively model and dispatch smaller resources.
---------------------------------------------------------------------------

    \323\ See NOPR at nn.146-147 (citing Sandia Report at 29, Figure 
19 (Positioning of Energy Storage Technologies); U.S. Department of 
Energy, Grid Energy Storage at 12 (Dec. 2013) (stating that most 
storage systems are in the 10 kW to 10 MW range, with the largest 
proportion of those resources in the 100 kW to 1 MW range)).
    \324\ See id. P 86.
---------------------------------------------------------------------------

    272. While some commenters argue that RTO/ISO modeling and dispatch 
software may be unable to accommodate a large number of smaller 
resources, the record shows that all RTOs/ISOs are already 
accommodating the participation of smaller resources in their markets. 
For example, the record shows that all RTOs/ISOs already have the 
modeling and dispatch software capabilities to accommodate the 
participation of resources that are as small as 100 kW. Specifically, 
both PJM and SPP have a minimum size requirement of 100 kW for all 
resources, and all of the RTOs/ISOs have at least one participation 
model that allows resources as small as 100 kW to participate in their 
markets.\325\ In response to ISO-NE's claim that its product-based 
market design does not permit such size requirements, we point to 
varying minimum size requirements for existing participation models in 
ISO-NE (e.g., 1 MW for generators and 100 kW for demand response).
---------------------------------------------------------------------------

    \325\ See CAISO Data Request Response at 10-11; ISO-NE Data 
Request Response at 13-14; MISO Data Request Response at 10; NYISO 
Data Request Response at 9; PJM Data Request Response at 10; SPP 
Data Request Response at 5.
---------------------------------------------------------------------------

    273. Further, we are not persuaded by commenters who argue that 
different minimum size requirements may be needed based on the service 
being provided, the location and concentration of electric storage 
resources, or where the electric storage resources are interconnected. 
Commenters have failed to demonstrate how minimum size requirements 
should be varied based on the manner in which electric storage 
resources are operated or based on the location of these resources. 
Additionally, in response to

[[Page 9619]]

commenters that suggest that the Commission does not have the authority 
to set minimum size requirements for distribution utilities, we clarify 
that we are not setting minimum size requirements for distribution 
utilities in this Final Rule. Rather, we are requiring each RTO/ISO to 
establish a minimum size requirement for resources participating in its 
markets. Therefore, we find that minimum size requirements do not need 
to be resource-specific or location-specific. We note that existing 
participation models in the RTOs/ISOs have standard minimum size 
requirements for all resources that elect to use them.
    274. Moreover, in response to concerns about potential impacts on 
the distribution systems and related costs, we note that numerous 100 
kW minimum size requirements already exist, and there are resources 
located on the distribution system that are already participating in 
the RTO/ISO markets. Establishing a standard minimum size requirement 
for resources using the participation model for electric storage 
resources may potentially result in more resources on the distribution 
systems participating in the RTO/ISO markets. However, it does not 
change the responsibilities of the RTOs/ISOs or the distribution 
utilities, and it does not change the ability of distribution utilities 
to allocate any costs that they incur in operating and maintaining 
their respective power systems.
    275. With respect to CAISO's and MISO's concern that they may need 
to upgrade their software to manage the potentially large number of 
resources using the participation model for electric storage resources 
under the proposed minimum size requirement, as discussed in the 
Compliance Requirements section,\326\ we find that we are providing the 
RTOs/ISOs with adequate time to develop the requisite tariff language 
and update their modeling and dispatch software to comply with this 
Final Rule and are factoring into the effective date of this Final Rule 
the burden of implementing the requirements herein. We are not 
persuaded that more than 365 days after the RTOs/ISOs submit their 
compliance filings will be necessary to implement the reforms in this 
Final Rule. We are also not concerned about the potential availability 
of software solutions as multiple RTOs/ISOs already provide a minimum 
size requirement of 100 kW for all resources and have not expressed 
similar concerns regarding the minimum size requirement. While 
establishing a minimum size requirement of 100 kW for the participation 
model for electric storage resources will result in some smaller 
resources entering the markets in the near term, we do not expect an 
immediate influx of these smaller resources or any resulting inability 
to model and dispatch them. However, we recognize this finding is based 
on the fact that there are currently fewer 100 kW resources than there 
may be in the future. Therefore, in the future, we will consider 
requests to increase the minimum size requirement to the extent an RTO/
ISO can show that it is experiencing difficulty calculating efficient 
market results and there is not a viable software solution for 
improving such calculations.
---------------------------------------------------------------------------

    \326\ See infra P 348.
---------------------------------------------------------------------------

    276. In response to Open Access Technology's request for 
clarification of the number of allowed price-quantity bid segments for 
a 100 kW resource using the participation model for electric storage 
resources, we reiterate our requirement that the minimum size 
requirement applies to all minimum capacity requirements, minimum offer 
to sell requirements, and minimum bid to buy requirements. We note 
that, under this requirement, an RTO/ISO could allow offer and/or bid 
quantities smaller than 100 kW, as CAISO indicates it does.\327\ An 
RTO/ISO could also allow minimum offer and/or bid quantities equal to 
100 kW, as PJM indicates it does.\328\ However, this requirement would 
not permit an RTO/ISO to require a resource using the electric storage 
resource participation model to submit offer and/or bid quantities 
larger than 100 kW.
---------------------------------------------------------------------------

    \327\ CAISO states the minimum participation requirement for 
electric storage resource energy bids is 10 kW. CAISO Data Request 
Response at 16.
    \328\ PJM states the 100 kW is both the minimum capacity 
requirement and also the minimum incremental offer amount. PJM Data 
Request Response at 10 (citing PJM Tariff, Attachment DD, section 
5.6).
---------------------------------------------------------------------------

H. Energy Used To Charge Electric Storage Resources

1. Price for Charging Energy
a. NOPR Proposal
    277. In the NOPR, the Commission stated that it has found that the 
sale of energy from the grid that is used to charge electric storage 
resources for later resale into the energy or ancillary service markets 
constitutes a sale for resale in interstate commerce.\329\ As such, the 
Commission stated that the just and reasonable rate for that wholesale 
sale of energy used to charge the electric storage resource is the RTO/
ISO market's wholesale price for energy or LMP. The Commission thus 
proposed to require each RTO/ISO to revise its tariff to specify that 
the sale of energy from the RTO/ISO markets to an electric storage 
resource that the resource then resells back to those markets must be 
at the wholesale LMP.
---------------------------------------------------------------------------

    \329\ See NOPR at P 100 (citing Norton Energy Storage, L.L.C., 
95 FERC ] 61,476, at 62,701-02 (2001) (Norton Energy Storage); PJM 
Interconnection, L.L.C., 132 FERC ] 61,203 (2010)).
---------------------------------------------------------------------------

b. Comments
    278. Many commenters support the NOPR proposal that the sale of 
energy from the RTO/ISO markets to an electric storage resource that 
the resource then resells back to those markets must be at the 
wholesale LMP.\330\ MISO notes that the proposed wholesale LMP 
requirement aligns with MISO's current market design for Stored Energy 
Resources and Demand Response Resources.\331\ National Hydropower 
Association agrees with the NOPR's characterization of charging and 
discharging as wholesale transactions,\332\ while NYISO Indicated 
Transmission Owners do not oppose the NOPR proposal.\333\
---------------------------------------------------------------------------

    \330\ See, e.g., AES Companies Comments at 6, 8; American 
Petroleum Institute Comments at 12; APPA/NRECA Comments at 41; 
California Energy Storage Alliance Comments at 8; EEI Comments at 
15; ELCON Comments at 6; ISO-NE Comments at 23-24; Mensah Comments 
at 2; NextEra Comments at 10; Ohio Commission Comments at 7; TAPS 
Comments at 28.
    \331\ See MISO Comments at 9.
    \332\ See National Hydropower Association Comments at 10.
    \333\ See NYISO Indicated Transmission Owners Comments at 7.
---------------------------------------------------------------------------

    279. A few commenters support the NOPR proposal in principle but 
condition their support.\334\ ISO-NE agrees with the general principle 
of paying LMP for charging energy that is later resold into the 
wholesale market; however, ISO-NE notes that implementing the NOPR 
proposal may be complicated and will depend on the participation of the 
region's transmission organizations and distribution utilities. While 
Alevo supports the NOPR proposal, it states that, because electric 
storage resources that are participating in ancillary service markets 
(such as the market for frequency regulation) are responding to the 
grid operator's needs, requiring them to settle energy to provide such 
services would be inappropriate and a barrier to their participation.
---------------------------------------------------------------------------

    \334\ See Alevo Comments at 10-11; ISO-NE Comments at 23-24.
---------------------------------------------------------------------------

    280. Other commenters assert that certain electric storage 
resources should not be permitted to purchase charging energy at LMP 
unless they meet certain

[[Page 9620]]

conditions.\335\ According to Avangrid, NRG, and Pacific Gas & 
Electric, a behind-the-meter electric storage resource should not be 
eligible to pay LMP for its charging energy unless it has implemented 
the metering, accounting, and data protocols necessary to distinguish 
its wholesale and retail activities. NRG contends that, otherwise, a 
behind-the-meter electric storage resource should pay the retail rate 
for its charging energy.
---------------------------------------------------------------------------

    \335\ See Avangrid Comments at 9; NRG Comments at 16-17; Pacific 
Gas & Electric Comments at 13.
---------------------------------------------------------------------------

    281. Similarly, Xcel Energy Services goes farther, contending that, 
given the practical impossibility of determining what charging energy 
will be used to provide wholesale services and what charging energy 
will be used to provide retail services, the default rate for 
distributed electric storage resources should be the retail rate.\336\ 
Xcel Energy Services further claims that, by paying the wholesale LMP, 
a distributed electric storage resource owner can bypass capacity and 
infrastructure costs, thus depriving the distribution utility of 
revenues to meet its obligation to serve.
---------------------------------------------------------------------------

    \336\ See Xcel Energy Services Comments at 13-14.
---------------------------------------------------------------------------

    282. APPA/NRECA, FirstLight, and TAPS argue that, instead of 
requiring RTOs/ISOs and distribution utilities to develop and 
administer elaborate metering and accounting schemes, which some argue 
may not be possible, storage resources must elect to participate in 
either wholesale or retail markets, but not in both.\337\ FirstLight 
adds that introducing the ability to toggle between retail and 
wholesale rates may create incentives to shift the liability of bad 
decisions in the wholesale market to the retail supplier by discharging 
to meet retail load.
---------------------------------------------------------------------------

    \337\ See APPA/NRECA Comments at 42; FirstLight Comments at 12; 
TAPS Comments at 28.
---------------------------------------------------------------------------

    283. Some commenters ask the Commission to clarify that the 
Commission's regulations will not require an electric storage resource 
that is participating in an RTO/ISO market to pay the wholesale LMP for 
the charging energy that it uses to provide wholesale services.\338\ 
For example, Energy Storage Association asks the Commission to clarify 
that RTOs/ISOs may not compel electric storage resources providing 
wholesale services to purchase their charging energy from wholesale 
markets because they may be able to charge from a co-located generator. 
Similarly, AES Companies state that electric storage resources should 
be permitted to purchase charging energy for providing wholesale 
services from the wholesale markets and from other sources, such as 
generators not registered in an RTO/ISO. AES Companies also assert that 
electric storage resources should be permitted to self-supply from 
other assets (such as co-located behind-the-meter solar). AES Companies 
argue that flexibility in procurement will provide a more competitive 
framework for electric storage devices, which would lower cost to 
consumers. MISO Transmission Owners contend that requiring electric 
storage resources to purchase the charging energy that they use to 
provide wholesale services would result in inequitable treatment 
because synchronous generators have the opportunity to buy fuels from 
many sources.
---------------------------------------------------------------------------

    \338\ See, e.g., AES Companies Comments at 7-9, 30; DER/Storage 
Developers Comments at 5; Energy Storage Association Comments at 7, 
20; MISO Transmission Owners Comments at 15; Stem Comments at 10-11.
---------------------------------------------------------------------------

    284. While Stem contends that all charging energy that an electric 
storage resource located in front of a retail meter is a sale for 
resale, it asserts that the only charging energy for a behind-the-meter 
electric storage resource that is a sale for resale is charging energy 
that it used to net inject energy back onto the grid.\339\ Stem argues 
that a behind-the-meter electric storage resource should not have to 
pay the wholesale rate for any of its charging energy because the 
resource may then have to pay twice for its charging energy if the 
local distribution utility does not ``net out'' that charging energy 
from the host customer's retail bill.
---------------------------------------------------------------------------

    \339\ See Stem Comments at 11.
---------------------------------------------------------------------------

    285. In contrast, APPA/NRECA ask that the Commission require that 
electric storage resources pay wholesale LMP for all charging energy 
used to provide wholesale services.\340\ APPA/NRECA argue that, 
otherwise, electric storage resources could engage in arbitrage between 
the volatile wholesale markets and regulated retail markets, likely 
shifting costs to the distribution utility's other customers. 
Similarly, NYISO contends that all energy that an electric storage 
resource consumes at a wholesale rate must be sold back to the grid at 
a wholesale rate.\341\ Stem asks the Commission to clarify that all 
energy used to charge front-of-meter electric storage resource is a 
sale for resale and thus the resource must pay the wholesale LMP for 
energy withdrawn from the grid to charge the resource.\342\
---------------------------------------------------------------------------

    \340\ See APPA/NRECA Comments at 42.
    \341\ See NYISO Comments at 10-11.
    \342\ See Stem Comments at 10.
---------------------------------------------------------------------------

    286. Several commenters raise jurisdictional concerns with respect 
to the application of the NOPR proposal's requirement that the sale of 
energy from the RTO/ISO markets to an electric storage resource that 
the resource then resells back to those markets must be at the 
wholesale LMP to electric storage resources interconnected to the 
distribution system or located behind a retail customer's meter. 
Specifically, commenters argue that applying the NOPR proposal to such 
resources raises issues related to regulatory oversight and may 
interfere with the exclusive right of state regulators to set retail 
rates and terms of service.\343\ EEI asserts that electric storage 
resources should charge at the retail rate when seeking to participate 
in the retail markets and requests that the Commission indicate that 
charging at LMP rates does not confer exclusive jurisdiction over 
electric storage resources to the Commission. IRC requests that the 
Commission work with the states to address jurisdiction issues given 
that it may be unclear whether charging energy will be used to provide 
wholesale or retail services when it is being absorbed. MISO 
Transmission Owners recommend that any final rule recognize that state 
or localities have jurisdiction over rate setting and provide 
flexibility in the rates at which an electric storage resource that is 
interconnected to a distribution system may buy and sell electricity.
---------------------------------------------------------------------------

    \343\ See, e.g., AES Companies Comments at 7; EEI Comments at 
12, 15; IRC Comments at 2-3; MISO Transmission Owners Comments at 
15.
---------------------------------------------------------------------------

    287. MISO Transmission Owners further contend that electric storage 
resources located behind the meter should pay any retail rate 
applicable to them under state law for charging energy.\344\ Pacific 
Gas & Electric argues that the local regulatory authority must 
determine that an electric storage resource's consumption is not a 
retail transaction before that resource is eligible to pay LMP for that 
consumption.\345\ AES Companies argue that the Commission does not have 
authority to require behind-the-meter resources under state 
jurisdiction (outside of retail choice states) to pay LMP.\346\
---------------------------------------------------------------------------

    \344\ See MISO Transmission Owners Comments at 6, 14-15.
    \345\ See Pacific Gas & Electric Comments at 12.
    \346\ See AES Companies Comments at 6, 29.
---------------------------------------------------------------------------

    288. Microgrid Resources Coalition believes that LMP rates are the 
more economically efficient result for charging behind-the-meter 
resources but agrees that ``retail rates are legally appropriate.'' 
\347\ Specifically, Microgrid Resources Coalition contends that, in 
retail choice jurisdictions, large customers can typically arrange to 
pay LMP and a retail supplier could also

[[Page 9621]]

agree to pass through to the customer the economic consequences of a 
demand bid by the supplier on the customer's behalf. ELCON similarly 
states that an electric storage resource should be able to register as 
an energy service company in an applicable state and buy energy or 
capacity at the prevailing LMPs from an organized market and resell to 
direct access retail customers but that, without Commission regulation, 
concerns may arise regarding anti-competitive behavior and potential 
for double-recovery of costs.\348\
---------------------------------------------------------------------------

    \347\ See Microgrid Resources Coalition Comments at 13.
    \348\ See ELCON Comments at 7.
---------------------------------------------------------------------------

    289. Several commenters address specific components of gross load 
for electric storage resources.\349\ California Energy Storage 
Alliance, Energy Storage Association, and NextEra request that the 
Commission clarify that efficiency losses experienced between charging 
and discharging an electric storage resource should be settled at the 
wholesale LMP. In addition, California Energy Storage Alliance argues 
that loads that are unavoidable to the production or conversion of 
energy drawn from the grid or are integral to the optimal production or 
conversion of energy drawn from the grid represent efficiency losses 
and that these directly integrated loads should be counted as charging 
energy to provide wholesale services. Energy Storage Association and 
NextEra further state that some electric storage resources have thermal 
management components that are integral to, or internalized within, the 
storage medium and the sale of the energy that these systems use should 
be considered wholesale transactions and thus priced at LMP. EEI 
suggests the Commission should discuss the definition of charging 
energy at a technical conference to determine whether all ancillary 
loads of a battery installation should be considered wholesale or only 
the specific load associated with charging the battery.
---------------------------------------------------------------------------

    \349\ See California Energy Storage Alliance Comments at 8-9; 
EEI Comments at 12; Energy Storage Association Comments at 7, 19-20, 
n.30; NextEra Comments at 10-11.
---------------------------------------------------------------------------

    290. Other commenters disagree that electric storage resources 
should pay wholesale LMP for these energy uses.\350\ IRC requests that 
the Commission work with states to address the jurisdictional issues 
surrounding injection and charging functions (such as energy losses, 
thermal regulation, and station power) to avoid future litigation. 
California Commission states that the energy consumption of behind-the-
meter electric storage resources that will charge at a wholesale rate 
raises jurisdictional issues, particularly since station power is a 
retail service. Likewise, Six Cities and Xcel Energy Services assert 
that the sale of power purchased to operate generating facilities 
(i.e., station power) must be at retail rates. Six Cities argue that 
distribution utilities (subject to the oversight of their local 
regulatory authorities) should have the flexibility to identify 
measures needed to properly distinguish between station power and 
charging energy.
---------------------------------------------------------------------------

    \350\ See California Commission Comments at 5; IRC Comments at 
2-3 Six Cities Comments at 5 (citing PJM Interconnection, L.L.C., 94 
FERC ] 61,251, at 61,891 (2001)); Xcel Energy Services Comments at 
12.
---------------------------------------------------------------------------

    291. Several commenters are concerned about the NOPR proposal's 
potential financial impacts on distribution utilities.\351\ EEI and 
NYISO Indicated Transmission Owners argue that resources located on 
distribution systems must pay any applicable charges covered under 
state jurisdictional tariffs in order to adequately reflect their use 
of, and cost to, state-jurisdictional facilities. Likewise, MISO 
Transmission Owners ask the Commission to clarify how utilities and 
ratepayers will be compensated for allowing electric storage resources 
to use the distribution system to provide wholesale services. TAPS 
requests that the Commission clarify that distribution-interconnected 
electric storage resources should be subject to distribution utility 
tariffs and rates for delivery of energy between the RTO grid and their 
point of interconnection to the distribution system. Six Cities request 
confirmation that distribution utilities or their local regulatory 
authorities retain jurisdiction to determine how to manage the cost, 
reliability, operational, and interconnection impacts to the 
distribution system of any electric storage resource.\352\
---------------------------------------------------------------------------

    \351\ See EEI Comments at 12, 14, 15; MISO Transmission Owners 
Comments at 7, 17; NYISO Indicated Transmission Owners Comments at 
7-8; TAPS Comments at 29.
    \352\ See Six Cities Comments at 3-4.
---------------------------------------------------------------------------

    292. As a separate issue, Energy Storage Association and NextEra 
suggest that energy stored for re-delivery to the grid should not be 
subject to the transmission charges that apply to load.\353\ NextEra 
explains that electric storage resources participating in the RTO/ISO 
markets are dispatched by the RTO/ISO for a wholesale service and the 
withdrawal of energy from the transmission network under RTO/ISO 
control is part the wholesale service, particularly with respect to 
regulation service. Similarly, NRG asks the Commission to clarify that 
an electric storage resource will receive and pay the applicable nodal 
LMP, and not the zonal price, for its wholesale transactions.\354\ To 
the extent that the Commission finds that any transmission charges 
apply to electric storage resources, NextEra states that those charges 
should apply only to station power.
---------------------------------------------------------------------------

    \353\ See Energy Storage Association Comments at 7, 20; NextEra 
Comments at 11.
    \354\ See NRG Comments at 16.
---------------------------------------------------------------------------

    293. In contrast, Open Access Technology argues that, if the NOPR 
assumes that both consumption (when charging) and generation (when 
discharging) from an electric storage resource are measured at the 
wholesale pricing node upstream of the physical location of the storage 
resource in the distribution feeder, then the Commission should make 
this assumption explicit given the effect of distribution system losses 
on these measurements.\355\ American Petroleum Institute also contends 
that the price signals that distribution-interconnected resources 
receive for wholesale market participation should account for 
congestion, losses, and voltage considerations on the distribution 
system, which current market models do not take into account.\356\
---------------------------------------------------------------------------

    \355\ See Open Access Technology Comments at 3.
    \356\ See American Petroleum Institute Comments at 13.
---------------------------------------------------------------------------

c. Commission Determination
    294. In this Final Rule, we adopt the NOPR proposal and add section 
35.28(g)(9)(ii) to the Commission's regulations to require that the 
sale of electric energy from the RTO/ISO markets to an electric storage 
resource that the resource then resells back to those markets be at the 
wholesale LMP. The Commission is modifying this provision to apply 
regardless of whether the electric storage resource is using the 
participation model for electric storage resources or another 
participation model to participate in the RTO/ISO markets, as long as 
the resource meets the definition of an electric storage resource set 
forth in this Final Rule. The Commission has found that the sale of 
energy from the grid that is used to charge electric storage resources 
for later resale into the energy or ancillary service markets 
constitutes a sale for resale in interstate commerce.\357\ As

[[Page 9622]]

such, the just and reasonable rate for that wholesale sale of energy 
used to charge that electric storage resource is the RTO/ISO market's 
wholesale LMP, regardless of whether the electric storage resource uses 
the participation model for electric storage resources.
---------------------------------------------------------------------------

    \357\ See Norton Energy Storage, 95 FERC ] 61,476 at 62,701-02 
(citations omitted) (``[T]he use of compressed air as a medium for 
the storage of energy in an energy storage facility is a new 
technology. However, we find that a compressed air energy storage 
facility is analogous to a [pumped-hydro resource], in that 
compressed air is used in a conversion/storage cycle just as water 
is used in a [pumped-hydro resource] in the conversion/storage 
cycle. . . . [T]he Commission views the pumping energy not as being 
consumed, but rather as being converted and stored, as water in the 
upper reservoir, for later re-conversion . . . back to electric 
energy. It is this conversion/storage cycle that distinguishes 
energy storage facilities, whether [pumped-hydro resources] or 
compressed air energy storage facilities, from facilities that 
consume electricity (in the form of station power or otherwise). The 
fact that pumping energy or compression energy is not consumed means 
that the provision of such energy is not a sale for end use that 
this Commission cannot regulate. Rather, based on Norton's 
representations in its petition, we find that deliveries of 
compression energy to the Norton energy storage facility as part of 
energy exchange transactions employing the conversion/storage cycle 
are wholesale transactions subject to our exclusive authority under 
the FPA.''). See also PJM Interconnection, L.L.C., 132 FERC ] 61,203 
at 62,053 (``Like pumping energy and compression energy, the energy 
used to charge Energy Storage Resources will be stored for later 
delivery and not used for operating the electric equipment on the 
site of a generation facility or associated buildings as Station 
Power is used.'').
---------------------------------------------------------------------------

    295. In response to Alevo's concerns that the requirement may not 
be appropriate for electric storage resources that are participating in 
ancillary service markets, we reiterate that the sale of electric 
energy from the grid that is used to charge an electric storage 
resource for later resale into ancillary service markets constitutes a 
sale for resale in interstate commerce and therefore the just and 
reasonable rate is the wholesale LMP. Electric storage resources that 
are participating in RTO/ISO frequency regulation markets are already 
settled at wholesale LMP for their net energy at the end of a market 
interval, consistent with our requirements for charging energy here.
    296. Additionally, in response to NRG's concern, we clarify that an 
electric storage resource's wholesale energy purchases should take 
place at the applicable nodal LMP, and not the zonal price. Using the 
applicable nodal LMP will prevent any potential arbitrage between nodal 
and zonal prices and allows for consistent evaluation of a resource's 
impacts on the energy, congestion, and loss components of LMP when it 
is both receiving and injecting energy.
    297. We disagree with Energy Storage Association and NextEra that 
transmission charges that apply to load should not apply to electric 
storage resources. When an electric storage resource is charging to 
resell energy at a later time, then its behavior is similar to other 
load-serving entities, and we find that applicable transmission charges 
should apply. However, it may be possible for different transmission 
charges to apply to load resources located at a single node (such as 
pumped-hydro resources) that are paying a nodal price for energy and 
load resources that are located across multiple nodes (such as load-
serving entities) that are paying a zonal price for energy. Therefore, 
to the extent that load resources located at a single node pay 
different transmission charges than load resources located across 
multiple nodes, then we require each RTO/ISO to apply those 
transmission charges for single-node resources to electric storage 
resources that are located at a single pricing node, as long as, as 
discussed in the next paragraph, they are not being dispatched to 
provide an ancillary service by an RTO/ISO.
    298. In response to the concern that transmission charges should 
not apply when an electric storage resources is dispatched by an RTO/
ISO, we find that electric storage resources that are dispatched to 
consume electricity to provide a service in the RTO/ISO markets (such 
as frequency regulation or a downward ramping service) should not pay 
the same transmission charges as load during the provision of that 
service. We find that this would be consistent with the treatment 
afforded traditional generation resources that provide ancillary 
services, because they are not charged for their impacts on the 
transmission system when they reduce their output to provide a service 
such as frequency regulation down. Therefore, we find that electric 
storage resources should not be charged transmission charges when they 
are dispatched by an RTO/ISO to provide a service because (1) their 
physical impacts on the bulk power system are comparable to traditional 
generators providing the same service and (2) assessing transmission 
charges when they are dispatched to provide a service would create a 
disincentive for them to provide the service.
    299. In response to concerns about an electric storage resources 
being compelled to purchase all of its energy for future use from the 
RTO/ISO markets, we clarify that we impose no such requirement. Our 
finding regarding charging energy does not address payment of the 
retail rate for energy or charging a device off of co-located 
generation resources, as suggested by commenters. Also, while this 
finding requires each RTO/ISO to allow electric storage resources to be 
able to pay the wholesale LMP for their charging energy, it does not 
address whether they can pay some other rate, such as a retail rate or 
charging off of co-located generation. Finally, like other market 
participants that purchase energy from the RTO/ISO markets, an electric 
storage resource that pays the wholesale LMP for charging energy may 
enter into bilateral financial transactions to hedge the purchase of 
that energy.
    300. We disagree with commenters who argue that the requirement to 
pay LMP for charging energy should only apply to electric storage 
resources that are interconnected to the transmission system. As 
discussed above, this Final Rule applies to electric storage resources 
that are capable of receiving electric energy from the grid and storing 
it for later injection of electric energy back to the grid, 
irrespective of where the resource is interconnected. The sale of 
charging energy to an electric storage resource that the resource then 
resells into the RTO/ISO markets is a sale for resale in interstate 
commerce and thus subject to the Commission's jurisdiction.\358\
---------------------------------------------------------------------------

    \358\ See Norton Energy Storage, 95 FERC ] 61,476 at 62,701-02; 
see also PJM Interconnection, L.L.C., 132 FERC ] 61,203 at P 7.
---------------------------------------------------------------------------

    301. With respect to concerns about electric storage resources' use 
of the distribution system, we note that, in PJM Interconnection LLC, 
the Commission permitted a distribution utility to assess a wholesale 
distribution charge to an electric storage resource participating in 
the PJM markets.\359\ Consistent with this precedent, we find 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.
---------------------------------------------------------------------------

    \359\ See PJM Interconnection LLC, 149 FERC ] 61,185 at P 12 
(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.
---------------------------------------------------------------------------

    302. With respect to efficiency losses, consistent with Norton 
Energy Storage, we find that efficiency losses are charging energy and 
therefore not a component of station power load.\360\ Accordingly, the 
charging energy lost to conversion inefficiencies should also be 
settled at the wholesale LMP as long as those efficiency losses are an 
unavoidable component of the conversion, storage, and discharge process 
that is used to resell energy back to the RTO/ISO markets and are not a 
component of what an RTO/ISO

[[Page 9623]]

considers onsite load. With respect to directly integrated and other 
ancillary loads, we provide the RTOs/ISOs flexibility to determine 
whether they are a component of charging energy or a component of 
station power.
---------------------------------------------------------------------------

    \360\ See Norton Energy Storage, L.L.C., 95 FERC ] 61,476 at 
62,702 (stating that ``[t]he fact that pumping energy or compression 
energy is not consumed means that the provision of such energy is 
not a sale for end use that this Commission cannot regulate.'').
---------------------------------------------------------------------------

2. Metering and Accounting Practices for Charging Energy
a. NOPR Proposal
    303. In the NOPR, the Commission sought comment on whether metering 
and accounting practices designed to delineate between wholesale and 
retail activities would need to be established in the RTO/ISO tariffs 
to facilitate compliance with the proposed requirement that the sale of 
energy from the RTO/ISO markets to an electric storage resource that 
the resource then resells back to those markets must be at the 
wholesale LMP or whether it is possible to determine the end use for 
energy used to charge an electric storage resource under existing 
requirements.\361\
---------------------------------------------------------------------------

    \361\ See NOPR at P 102.
---------------------------------------------------------------------------

b. Comments
    304. As discussed above, commenters agree that electric storage 
resources providing retail services should not charge at the wholesale 
rate and discharge to serve a retail customer,\362\ and many commenters 
assert that metering and accounting practices designed to delineate 
between wholesale and retail activities are necessary to prevent such 
an outcome.\363\ Stem contends that the energy used to charge a behind-
the-meter electric storage resource is considered a sale for resale 
only up to the amount that is injected onto the grid for wholesale 
purposes, which requires each RTO/ISO to establish metering and 
accounting practices that separate wholesale from retail activity.\364\ 
Independent Energy Producers Association argues that the Commission 
must address how to distinguish and measure wholesale and retail 
activities to ensure transparency in both markets and to prevent 
double-counting.\365\ Electric Vehicle R&D Group asks the Commission to 
propose different methods for reconciliation of wholesale and retail 
activities for behind-the-meter electric storage resources, giving 
RTOs/ISOs options from which to choose.\366\
---------------------------------------------------------------------------

    \362\ See, e.g., California Municipals Comments at 4; FirstLight 
Comments at 12; PJM Market Monitor Comments at 9; SoCal Edison 
Comments at 9, 13; TAPS Comments at 30-31; Tesla/SolarCity Comments 
at 19.
    \363\ See, e.g., American Petroleum Institute Comments at 12-13; 
Mensah Comments at 2; MISO Comments at 19; Six Cities Comments at 4-
5; SoCal Edison Comments at 9, 13; Tesla/SolarCity Comments at 19.
    \364\ See Stem Comments at 10.
    \365\ See Independent Energy Producers Association Comments at 
7.
    \366\ See Electric Vehicle R&D Group Comments at 1-2.
---------------------------------------------------------------------------

    305. Some commenters encourage the Commission to provide 
flexibility to the RTOs/ISOs with respect to metering and accounting 
practices to distinguish wholesale and retail activities.\367\ Pacific 
Gas & Electric recommends that the Commission provide each RTO/ISO with 
flexibility to establish hardware and software requirements for 
telemetry and metering that account for its system characteristics, 
market rules, and utility tariffs. Six Cities contend that distribution 
utilities or their local regulatory authorities should retain their own 
metering standards and technical requirements for resources 
interconnecting to the distribution system and any flexibility that the 
Commission provides with respect to metering in the final rule should 
not compromise the accuracy of settlements or impose additional costs 
on the distribution system.
---------------------------------------------------------------------------

    \367\ See Pacific Gas & Electric Comments at 13; Six Cities 
Comments at 3.
---------------------------------------------------------------------------

    306. Minnesota Energy Storage Alliance contends that the Commission 
should not adopt explicit metering arrangements but instead should set 
forth requirements that metering solutions must meet to adequately 
delineate between wholesale and retail activities and allow the 
industry to develop those solutions at the lowest cost possible.\368\ 
Minnesota Energy Storage Alliance states that it is necessary to 
establish adequate accounting process to track and verify costs 
associated with operating an electric storage resource that can 
delineate between wholesale and retail transactions. AES Companies 
argue that any criterion for accounting methodologies and data 
collection criterion for electric storage resources, including 
recognition of state jurisdiction, should be documented in the RTO/ISO 
business practice manuals rather than the tariff, so timely changes can 
occur as technology and regulation evolve.\369\
---------------------------------------------------------------------------

    \368\ See Minnesota Energy Storage Alliance Comments at 5-6.
    \369\ See AES Companies Comments at 30-31.
---------------------------------------------------------------------------

    307. Many commenters are concerned, however, that requiring the 
establishment of metering and accounting practices designed to 
delineate between wholesale and retail activities raises jurisdictional 
issues.\370\ CAISO argues that the Commission should permit RTOs/ISOs 
to develop the rules governing these practices in collaboration with 
their stakeholders to help prevent cross-jurisdictional disputes. MISO 
states that it is unclear to what extent MISO's current tariff and 
processes can make jurisdictional distinctions between wholesale and 
retail activities and that new rules are therefore necessary.
---------------------------------------------------------------------------

    \370\ See CAISO Comments at 20; MISO Comments at 19; PJM 
Comments at 7, 13-15.
---------------------------------------------------------------------------

    308. PJM believes that it is important for the Commission, working 
with the states, to provide guidance in the final rule on issues 
including, but not limited to, the rate treatment for energy used to 
charge behind-the-meter electric storage resources and for front-of-the 
meter electric storage resources that occasionally serve retail load 
through a separate connection to a retail customer and the ability of 
RTOs/ISOs to develop requirements associated with metering, visibility, 
and dispatchability of distributed electric storage resources. With 
respect to the issue of how to account for the energy used to charge an 
electric storage resource that is located in front of the retail meter 
but occasionally provides retail services, PJM recommends that the RTO/
ISO track what energy is used for retail services (i.e., any net load), 
like RTOs/ISOs do today for station power. With respect to the issue of 
how to account for energy used to charge a behind-the-meter electric 
storage resource, PJM argues that RTOs/ISOs and their stakeholders 
should not be put in the position of resolving purely legal and 
regulatory issues.
    309. Massachusetts State Entities question whether the NOPR 
appropriately addresses states' concerns regarding the ability of 
behind-the-meter storage resources to charge at a wholesale rate and 
discharge to serve a retail customer to avoid paying a retail 
rate.\371\ Massachusetts State Entities and NARUC ask the Commission to 
clarify the appropriate metering and accounting practices that can be 
used to delineate between wholesale and retail uses.\372\ Massachusetts 
State Entities argue that the Commission should clarify whether an 
electric storage resource providing both wholesale and retail services 
must have separate metering both upstream and downstream of the 
resource. Open Access Technology similarly requests that the Commission 
clarify whether a storage resource in charging mode is expected to be 
separately metered and settled from the load of the premises in

[[Page 9624]]

which it is located.\373\ Relatedly, Organization of MISO States 
contends that, because state statutes may prohibit retail customers 
from purchasing energy directly from the wholesale market, a 
distribution-interconnected electric storage resource must have a 
separate meter to participate in the wholesale market, unless a single 
meter is explicitly allowed by the relevant electric retail regulatory 
authority.\374\
---------------------------------------------------------------------------

    \371\ See Massachusetts State Entities Comments at 10.
    \372\ See Massachusetts State Entities Comments at 9-10; NARUC 
Comments at 7.
    \373\ See Open Access Technology Comments at 2.
    \374\ See Organization of MISO States Comments at 3-4.
---------------------------------------------------------------------------

    310. A few commenters emphasize the importance of distribution 
utilities to the successful implementation of any metering and 
accounting practices.\375\ ISO-NE states that it has no way to ensure 
compliance with a requirement that behind-the-meter sales for resale 
are metered and reported to ISO-NE for settlement without the 
cooperation of each distribution utility. Mensah argues that metering 
and accounting practices should be coordinated with the local 
distribution utility to avoid any duplicate metering requirements and 
to ensure proper accounting is performed based on the collection, 
availability, and sharing of metered data points at different intervals 
with all parties.
---------------------------------------------------------------------------

    \375\ See ISO-NE Comments at 27; Mensah Comments at 2.
---------------------------------------------------------------------------

    311. Some commenters are concerned that there may not be a feasible 
or practical way to delineate between wholesale and retail activities, 
especially when there are multiple devices and retail load behind the 
same meter.\376\ MISO Transmission Owners argue that, when an electric 
storage resource is located behind a retail customer's electric meter, 
it may be impractical, prohibitively expensive, or even impossible to 
distinguish between use of the resource (i.e., charging and 
discharging) and the customer's other electric loads. FirstLight claims 
that an RTO/ISO cannot in practice distinguish between charging energy 
that will be used to provide a wholesale service and charging energy 
that will be used to provide a retail service, especially given that an 
electric storage resource may charge at different times and use its 
capacity to provide different services. Avangrid claims that, even if 
behind-the-meter retail load, distributed energy resources (including 
energy storage), and generation are separately metered, ownership and 
reconciliation of the data to produce results suitable for retail 
billing and wholesale settlement in a timely manner may be 
impractically complex and likely subject to both state and federal 
regulation.
---------------------------------------------------------------------------

    \376\ See, e.g., Avangrid Comments at 15; FirstLight Comments at 
9-12; MISO Transmission Owners Comments at 15-16; NARUC Comments at 
7, n.18; TAPS Comments at 28.
---------------------------------------------------------------------------

    312. Likewise, TAPS contends that for distribution-interconnected 
electric storage resources, even revenue-quality metering, might be 
insufficient to distinguish between the wholesale and retail activities 
of an electric storage resource behind the same meter as distributed 
generation and/or load.\377\ TAPS further states that any accounting 
practices would have to track two separate energy level balances, one 
for wholesale activities and one for retail activities. According to 
TAPS, in each interval, discharge from the retail balance must be 
limited to the retail customer's consumption in that interval (or 
perhaps sales to the distribution utility) and discharge from the 
wholesale balance must be reconciled with sales to the RTO. Given these 
complexities, TAPS recommends that electric storage resources should 
not be able to provide services at both wholesale and retail.
---------------------------------------------------------------------------

    \377\ See TAPS Comments at 31-32.
---------------------------------------------------------------------------

    313. SoCal Edison asserts that current net metering configurations 
and accounting practices cannot separate which generation is used by 
the customer and which is offered for wholesale use and that it is 
insufficient to have a policy that prevents mixing wholesale and retail 
with instruction to RTOs/ISOs to develop the provisions as 
necessary.\378\ Pacific Gas & Electric agrees that the needed metering 
and accounting requirements do not exist today, stating that RTOs/ISOs 
will have to develop such requirements with their local regulatory 
authorities.\379\
---------------------------------------------------------------------------

    \378\ See SoCal Edison Comments at 13.
    \379\ See Pacific Gas & Electric Comments at 13.
---------------------------------------------------------------------------

    314. According to AES Companies, whether existing metering and 
accounting practices will allow an RTO/ISO to distinguish between 
wholesale and retail transactions depends on the RTO/ISO, the electric 
storage technology in question, and the state jurisdiction.\380\ AES 
Companies contend that there are often state-mandated accounting 
procedures that involve more than the individual electric storage 
resource that render it impossible to separate parasitic load/charging 
(station power/state-of-charge management) when behind-the-meter and 
distribution-interconnected electric storage resources are selling 
excess capacity into the wholesale ancillary services markets. AES 
Companies add that, for older electric storage resources or those that 
are already in service, the operating software may not provide a 
sufficient level of detail to distinguish between wholesale and retail 
transactions.
---------------------------------------------------------------------------

    \380\ See AES Companies Comments at 30.
---------------------------------------------------------------------------

    315. In contrast, several commenters suggest that metering and 
accounting practices can be developed to discern between wholesale and 
retail activities.\381\ Tesla/SolarCity recommend that the Commission 
specify that behind-the-meter resources participating in wholesale 
markets have appropriate metering that RTOs/ISOs can use for settlement 
purpose to distinguish between wholesale energy uses and retail energy 
uses. Tesla/SolarCity point to CAISO's Metering Generation Output for 
Proxy Demand Resources as a good example that relies on direct metering 
and not synthetic baselines to distinguish between wholesale and retail 
applications for behind-the-meter energy storage resources.
---------------------------------------------------------------------------

    \381\ See, e.g., Energy Storage Association Comments at 22; 
Mensah Comments at 2; Minnesota Energy Storage Alliance Comments at 
5-6; Tesla/SolarCity Comments at 19-20.
---------------------------------------------------------------------------

    316. CAISO explains its existing metering and accounting practices 
can distinguish between wholesale and retail activities.\382\ CAISO 
notes that a behind-the-meter resource participating through its Non-
Generator Resource model must separately meter its output and 
consumption and report that meter data to CAISO for settlement 
purposes, which is settled at the wholesale rate. CAISO adds that this 
meter data can be used to adjust the end-use customer meter data to 
ensure that it reflects only the end-use load. In contrast, CAISO notes 
that a behind-the-meter resource participating under CAISO's Proxy 
Demand Resource model only settles with CAISO for intervals in which it 
has submitted a bid and received a schedule or dispatch instruction to 
discharge energy to reduce load as a demand response resource, such 
that its energy consumption for charging is a portion of the end-use 
retail load.
---------------------------------------------------------------------------

    \382\ See CAISO Comments at 20-21.
---------------------------------------------------------------------------

    317. ISO-NE argues that the Commission should require individual 
customers or resources that are directly settled in the wholesale 
market either as a load or a generator (or both as in the case of 
electric storage resource) to directly install revenue-quality interval 
metering; otherwise, it will be unclear what energy the rest of the 
customers or resources in that meter domain (i.e., defined areas of a 
transmission or distribution owner's network for purposes of load 
measurement) have consumed.\383\ For behind-the-meter resources, ISO-NE 
argues that submetering must be in place so that the distribution 
utility can report

[[Page 9625]]

information to ISO-NE for settlement purposes and can itself determine 
net retail consumption for billing purposes. According to ISO-NE, the 
distribution utility must develop the necessary accounting practices 
and ensure that the appropriate metering is installed, tested, and 
routinely read to ensure that behind-the-meter electric storage 
resources are not charged at both the wholesale and retail rate for 
their charging energy and are not paid at both the wholesale and retail 
rate for discharging. ISO-NE emphasizes that the Commission should not 
adopt requirements that could result in a material potential for double 
charging or double paying electric storage resources and should 
acknowledge that affected distribution utilities must have the 
necessary infrastructure, standards, and practices to support wholesale 
settlements of behind-the-meter electric storage resources before it 
can address these concerns.
---------------------------------------------------------------------------

    \383\ See ISO-NE Comments at 24-27, 29.
---------------------------------------------------------------------------

    318. ISO-NE contends that an alternative approach to direct 
metering is allowing a customer with an electric storage resource or 
other distributed energy resource to participate directly in the 
wholesale market and be charged or credited at wholesale prices for its 
entire net load as measured from its retail delivery point. ISO-NE 
argues that the advantage of this approach is that only one meter, 
located at the customer's delivery point, is needed to measure net 
consumption; no sub-metering would be required. However, ISO-NE notes 
that, if this approach resulted in greater participation of distributed 
electric storage resources, it could require advanced metering 
infrastructure and software to manage settlement.
    319. Other commenters state that direct metering is necessary to 
allow an RTO/ISO to distinguish between wholesale and retail 
services.\384\ Although perhaps inadequate for distribution-
interconnected electric storage resources, TAPS contends that revenue-
quality metering will be needed. Maryland and New Jersey Commissions 
state that it is important to install specialized metering devices and 
telemetry to distinguish the intended uses of energy used to charge a 
behind-the-meter electric storage resource, which will help to ensure 
that these resources do not receive inappropriate compensation or avoid 
paying retail rates. PJM Market Monitor recommends that generation and 
storage facilities that seek to buy or sell at wholesale LMP locate in 
front of the retail meter and require them to have their own meters and 
telemetry that would link them to the RTO/ISO.
---------------------------------------------------------------------------

    \384\ See Maryland and New Jersey Commissions Comments at 4; PJM 
Market Monitor Comments at 9; TAPS Comments at 30-31.
---------------------------------------------------------------------------

    320. Some commenters comment on technical aspects of developing 
metering and accounting practices to distinguish between wholesale and 
retail activities.\385\ IRC and ISO-NE contend that rules are needed to 
address circumstances in which the use of stored energy is unclear at 
the time of charging. Stem asks the Commission to affirm that metering 
and accounting practices established by the RTO/ISO for behind-the-
meter electric storage resources that inject energy onto the grid would 
be for the sole purpose of proper settlement of wholesale sale of 
energy to electric storage resources without implications for a host 
customer's retail bill.
---------------------------------------------------------------------------

    \385\ See IRC Comments at 3; ISO-NE Comments at 27; Stem 
Comments at 10.
---------------------------------------------------------------------------

    321. Duke Energy believes that the Commission should encourage 
RTOs/ISOs to develop measurement and verification requirements to 
examine a resource's performance against its scheduled output.\386\ 
FirstLight suggests that the RTO/ISO may be able to correct problems 
after-the-fact with telemetered state of charge for each storage asset 
location.\387\ Finally, Minnesota Energy Storage Alliance asks the 
Commission to contemplate the appropriateness of adapting the Uniform 
System of Accounts to handle costs associated with charging electricity 
used for retail services when those resources are also providing 
wholesale services, which the Commission declined to do under a SoCal 
Edison request for clarification under Order No. 784.\388\
---------------------------------------------------------------------------

    \386\ See Duke Energy Comments at 4.
    \387\ See FirstLight Comments at 12.
    \388\ See Minnesota Energy Storage Alliance Comments at 6.
---------------------------------------------------------------------------

c. Commission Determination
    322. Upon consideration of the comments, and to help implement the 
new requirement in section 35.28(g)(9)(ii) of the Commission's 
regulations, we require each RTO/ISO to implement metering and 
accounting practices as needed to address the complexities of 
implementing the requirement that the sale of electric energy from the 
RTO/ISO markets to an electric storage resource that the resource then 
resells back to those markets be at the wholesale LMP. To help 
accomplish this, we require each RTO/ISO to directly meter electric 
storage resources, so all the energy entering and exiting the resources 
is measured by that meter. However, we recognize some electric storage 
resources (such as those located on a distribution system or behind a 
customer meter) may be subject to other metering requirements that 
could be used in lieu of a direct metering requirement by an RTO/ISO. 
Therefore, the Commission will consider, in the individual RTO/ISO 
compliance filings, alternative proposals that may not entail direct 
metering but nonetheless address the complexities of implementing the 
requirement that the sale of electric energy from the RTO/ISO markets 
to a resource using the participation model for electric storage 
resources that the resource then resells back to those markets be at 
the wholesale LMP.
    323. We are not persuaded by commenters who argue that developing 
metering practices that distinguish between wholesale and retail 
activity is impractically complex. CAISO provides two examples of how 
it has achieved market rules that accurately account for wholesale and 
retail activities by using direct metering. Additionally, retail 
metering infrastructure, which is subject to state jurisdiction, may be 
able to work in concert with the RTO/ISO requirements to lower the 
overall metering costs for electric storage resources. Therefore, we 
provide each RTO/ISO with the flexibility to propose in its compliance 
filing other reasonable metering solutions that may help reduce costs 
for developers.
    324. Developing new accounting practices for electric storage 
resources in response to this requirement will be complex, but we 
nonetheless find that they are feasible to develop. We recognize that 
it may be beneficial for each RTO/ISO to coordinate accounting 
requirements in cooperation with the distribution utilities and 
relevant electric retail regulatory authorities in its footprint to 
help identify workable accounting solutions for distribution-
interconnected or behind-the-meter electric storage resources to 
participate in the RTO/ISO markets. While the data obtained from 
directly metering a resource may be adequate to establish the necessary 
accounting practices, there may also be other reasonable approaches to 
address these concerns depending on local retail regulatory 
requirements, such as allowing the customer to be a direct wholesale 
market participant as suggested by ISO-NE. We also find that metering 
and accounting rules may need to differ based on whether the resource 
is located on the transmission system, the distribution system, or 
behind the meter. These unique considerations underscore the need to 
provide the RTOs/ISOs flexibility to comply with this requirement.

[[Page 9626]]

    325. We are not persuaded by APPA/NRECA's and TAPS' suggestion that 
electric storage resources must choose to participate in either 
wholesale or retail markets due to the complexity of the metering and 
accounting practices. It is possible for electric storage resources 
that are selling retail services also to be technically capable of 
providing wholesale services, and it would adversely affect competition 
in the RTO/ISO markets if these technically capable resources were 
excluded from participation.
    326. With respect to Stem's concerns regarding double payment for 
the same charging energy, we find that resources using the 
participation model for electric storage resources should not be 
required to pay both the wholesale and retail price for the same 
charging energy because it would create market inefficiencies due to 
the double payment. Therefore, we require each RTO/ISO to prevent 
resources using the participation model for electric storage resources 
from paying twice for the same charging energy. To the extent that the 
host distribution utility is unable--due to a lack of the necessary 
metering infrastructure and accounting practices--or unwilling to net 
out any energy purchases associated with a resource using the 
participation model for electric storage resources' wholesale charging 
activities from the host customer's retail bill, the RTO/ISO would be 
prevented from charging that resource using the participation model for 
electric storage resources electric wholesale rates for the charging 
energy for which it is already paying retail rates.
    327. We decline Stem's request to clarify that metering and 
accounting practices established by the RTO/ISO for behind-the-meter 
electric storage resources that inject energy onto the grid would be 
for the sole purpose of proper settlement of wholesale sale of energy 
to electric storage resources without implications for a host 
customer's retail bill. We also decline Stem's request that metering 
and accounting practices established by the RTOs/ISOs be for the sole 
purpose of proper settlement of wholesale sale of energy. We recognize 
that each RTO/ISO may need to coordinate these metering and accounting 
practices with the distribution utilities and relevant electric retail 
regulatory authorities. Therefore, we will not place limitations on the 
extent to which the hardware being used to collect information or the 
information itself can be shared as this may help reduce costs for the 
electric storage resources and burdens on RTOs/ISOs, distribution 
utilities, or relevant electric retail regulatory authorities.
    328. With respect to Minnesota Energy Storage Alliance's request to 
modify the Uniform System of Accounts, we are not persuaded that it is 
necessary to address costs associated with charging energy used for 
retail-level services when those resources are also participating in 
the RTO/ISO markets. Account 555.1 Power Purchased for Storage 
Operations, which was created in Order No. 784,\389\ already allows for 
the reporting of power purchased and stored for resale and any services 
provided by an electric storage resource, whether wholesale or retail, 
would be considered a resale.\390\ Accordingly, to the extent that a 
given electric storage resource subject to the Uniform System of 
Accounts is approved by relevant authorities to provide both retail and 
wholesale services, the cost of the charging energy used for providing 
both retail and wholesale services can already be accommodated by 
Account 555.1.
---------------------------------------------------------------------------

    \389\ Third-Party Provision of Ancillary Services; Accounting 
and Financial Reporting for New Electric Storage Technologies, Order 
No. 784, FERC Stats. & Regs. ] 31,349 (2013), order on 
clarification, Order No. 784-A, 146 FERC ] 61,114 (2014).
    \390\ See 18 CFR Pt. 101.
---------------------------------------------------------------------------

I. Issues Outside the Scope of This Final Rule

1. Comments
    329. Some commenters raise issues that were not addressed in the 
NOPR. Many raised issues with respect to compensation or cost recovery 
under a Policy Statement that the Commission issued in January 
2017.\391\ Other commenters raised issues with respect to expanding the 
scope of the rule to apply to resources outside of the RTOs/ISOs; \392\ 
whether to revise RTO/ISO interconnection procedures for electric 
storage resources; \393\ price formation or additional services the 
Commission should require the RTOs/ISOs to develop; \394\ market-based 
rates; \395\ co-optimization models; \396\ how the RTO/ISO dispute 
resolution processes apply to electric storage resources and other new 
market entrants; \397\ whether to incorporate electric storage 
resources into transmission planning; \398\ whether the RTOs/ISOs 
should modify their unit commitment or settlement periods \399\ and 
other settlement rules; \400\ RTO/ISO governance issues; \401\ removing 
barriers to other types of resources; \402\ varying compensation based 
on resource characteristics; \403\ requiring the RTOs/ISOs to 
compensate resources for providing certain non-market services that 
they are not compensated for providing today; \404\ addressing issues 
in specific RTO/ISO markets; \405\ modifications to existing energy 
management systems communications infrastructure; \406\ whether to 
allow shaping of capacity and energy offers to reflect a resource's 
capabilities; \407\ the submission of multiple bid stacks; \408\ and 
bids for dispatchable load coupled with offers for generation at a 
later time.\409\
---------------------------------------------------------------------------

    \391\ See Utilization of Electric Storage Resources for Multiple 
Services When Receiving Cost-Based Rate Recovery, 158 FERC ] 61,051 
(2017). See, e.g., APPA/NRECA Comments at 4-5; EPSA/PJM Power 
Providers Comments at 13-16; 10; FirstLight Comments at 1-2, 4-5; 
Pacific Gas & Electric Comments at 14.
    \392\ See, e.g., AWEA Comments at 6; SEIA Comments at 13-15.
    \393\ See, e.g., AWEA Comments at 8; Organization of MISO States 
Comments at 2-3; Power Applications Comments at 8.
    \394\ See, e.g., Brookfield Renewable Comments at 2-4; NRG 
Comments at 19; NYISO Indicated Transmission Owners Comments at 4-5; 
Organization of MISO States Comments at 3; Tesla/SolarCity Comments 
at 8-10.
    \395\ See AWEA Comments at 6.
    \396\ See Mosaic Power Comments at 4.
    \397\ See SEIA Comments at 8-10.
    \398\ See National Hydropower Association Comments at 5-6.
    \399\ See, e.g., AWEA Comments at 7; NextEra Comments at 7-8; 
Research Scientists Comments, Att. 2 at 280, Att. 12 at 290.
    \400\ See Guannan He Comments at 1-4.
    \401\ See E4TheFuture Comments, Att. at 2.
    \402\ See AWEA Comments at 4-5.
    \403\ See Energy Storage Association Comments at 19, 27-28.
    \404\ See, e.g., Advanced Energy Economy Comments at 29-31; AES 
Companies Comments at 16; National Hydropower Association Comments 
at 7-8; San Diego Water Comments at 3-4.
    \405\ See Advanced Microgrid Solutions Comments at 11-13; 
Advanced Rail Energy Storage Comments at 4-7; Advanced Energy 
Management Comments at 31-33.
    \406\ See Power Applications Comments at 8.
    \407\ See Fluidic Comments at 4-5.
    \408\ See California Energy Storage Alliance Comments at 12-13.
    \409\ See Eagle Crest Comments at 6.
---------------------------------------------------------------------------

    330. Commenters also raise issues related to the reform of existing 
wholesale services to change their technical requirements and product 
definitions; \410\ exploring whether the RTOs/ISOs are appropriately 
valuing market services (such as frequency regulation service); \411\ 
and requiring a reverse demand response or load increase product.\412\
---------------------------------------------------------------------------

    \410\ See Alevo Comments at 8-10; Energy Storage Association 
Comments at 9; NextEra Comments at 6-9; R Street Institute Comments 
at 5.
    \411\ See, e.g., Brookfield Renewable Comments at 2-4; National 
Hydropower Association Comments at 7-8; NYPA Comments at 4-5; San 
Diego Water Comments at 3-4.
    \412\ See National Hydropower Association Comments at 11.

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[[Page 9627]]

2. Commission Determination
    331. We find that 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. Compliance Requirements

A. NOPR Proposal

    332. In the NOPR, the Commission proposed to require each RTO/ISO 
to submit a compliance filing to demonstrate that it satisfies the 
proposed requirements set forth in the Final Rule within six months of 
the date the Final Rule in this proceeding is published in the Federal 
Register.\413\ The Commission stated that, while it believed that six 
months would be sufficient for each RTO/ISO to develop and submit its 
compliance filing, it recognized that implementation of the reforms 
proposed therein 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.
---------------------------------------------------------------------------

    \413\ NOPR at P 159.
---------------------------------------------------------------------------

    333. In the NOPR, the Commission sought comment from the RTOs/ISOs 
on the changes that would be required to implement the proposed 
participation model for electric storage resources and the associated 
costs as well as how those costs could be minimized.\414\ The 
Commission sought comment on the time and resources that would be 
necessary for the RTOs/ISOs to incorporate these bidding parameters, 
including the optional bidding parameters, into their modeling and 
dispatch software.\415\ The Commission sought comment on the proposed 
deadline for each RTO/ISO to submit its compliance filing, as well as 
the proposed deadline for each RTO's/ISO's implementation of the 
proposed reforms to become effective.\416\ Specifically, the Commission 
sought comment on whether the proposed compliance and implementation 
timeline would allow sufficient time for each RTO/ISO to implement 
changes to its technological systems and business processes in response 
to a Final Rule. The Commission also sought comment on whether the 
RTOs/ISOs would require more or less time to implement certain reforms 
versus others.
---------------------------------------------------------------------------

    \414\ See id. P 32.
    \415\ See id. P 71.
    \416\ See id. P 160.
---------------------------------------------------------------------------

    334. The Commission stated that, to the extent that any RTO/ISO 
believes that it already complies with any of the requirements adopted 
in a Final Rule in this proceeding, the RTO/ISO would be required to 
demonstrate how it complies in the filing due within six months of the 
date any Final Rule in this proceeding is published in the Federal 
Register.\417\ The Commission also stated that the proposed 
implementation deadline would apply only to the extent that an RTO/ISO 
does not already comply with the reforms proposed in this NOPR.
---------------------------------------------------------------------------

    \417\ See id. P 161.
---------------------------------------------------------------------------

B. Comments

    335. A few commenters support the timeline proposed in the 
NOPR.\418\ For example, Energy Storage Association and NRG support the 
Commission's proposed implementation timeline. Public Interest 
Organizations also support finalizing the proposed rules as scheduled 
but adds that, if more time is needed, the Commission should allow the 
RTOs/ISOs more time to develop their compliance filings.
---------------------------------------------------------------------------

    \418\ See Energy Storage Association Comments at 26-27; NRG 
Comments at 21-22; Public Interest Organizations Comments at n.14
---------------------------------------------------------------------------

    336. Other commenters, such as the RTOs/ISOs, generally express 
concerns about the feasibility of the Commission's proposed 
timelines.\419\ NYISO argues that the proposed filing deadline of six 
months after a final rule and another six months for implementation do 
not appear to be feasible. Based on the comprehensive review of 
electric storage resource participation that NYISO is conducting in its 
own region, it asserts that the compliance deadline should not be 
before the end of 2018 and implementation should not be required until 
the end of 2021. MISO requests that the Commission give it time to 
understand the system impacts of various integration options, noting, 
for example, that changing the minimum size to 100 kW could tax systems 
beyond current capabilities. SPP points out that the proposed 
participation model for electric storage resources will require 
extensive changes to software, the tariff, and market protocols.
---------------------------------------------------------------------------

    \419\ ISO-NE Comments at 21; MISO Comments at 10; NYISO Comments 
at 21; PJM Comments at 17 (citing PJM Interconnection, L.L.C., Order 
No. 825 Compliance Filing, Docket No. ER17-775-000, at 2 (Jan. 11, 
2017)); SPP Comments at 5. PJM states that it will propose an 
effective date for implementing hourly offers by March 6, 2017, 
which it expects to be sometime around November 1, 2017. PJM 
Comments at n.23 (citing PJM Interconnection, L.L.C., 158 FERC ] 
61,133, at P 126 (2017).
---------------------------------------------------------------------------

    337. PJM and ISO-NE state that the timeline depends upon the 
magnitude of the required changes. PJM states that it can implement the 
necessary system changes in approximately 12 months at a cost of under 
$1 million if (1) the final rule is limited to changes in PJM's real-
time energy market and to offers to sell energy and (2) if PJM does not 
need to manage electric storage resources' state of charge. However, 
PJM asserts that, if more extensive system changes are necessary to 
comply, the cost could be significantly higher and will likely take 
more time to implement. PJM also states that, given the timing of PJM's 
upcoming implementations of 5-minute settlements and hourly offers, it 
could not realistically begin working on the necessary system changes 
until at least early 2018. ISO-NE states that the changes contemplated 
in the NOPR are substantial but that the time and resources needed to 
comply with the final rule depend on the specific final provisions. 
ISO-NE argues that, if the Commission accepts ISO-NE's suggestions to 
(1) only require implementation of state of charge in real time as an 
information communication requirement (for example, via telemetered 
information), (2) not require implementation of the proposed voluntary 
bidding parameters, and (3) require participants to manage their own 
bidding parameters (except when reliability needs dictate otherwise), 
then the implementation effort will be substantially shorter and 
easier.
    338. Some commenters also point out that, in order to comply with 
the rule, the RTOs/ISOs will need to change more than just their market 
rules. For example, AES Companies, Energy Storage Association, and EPRI 
note that the RTOs/ISOs will need to make changes to their 
software.\420\ AES Companies also note that RTOs/ISOs will have to 
adjust their business practice manuals to comply.
---------------------------------------------------------------------------

    \420\ AES Companies Comments at 5, 14-15; Energy Storage 
Association Comments at n.8, 26-27; EPRI Comments 2-3.
---------------------------------------------------------------------------

    339. Multiple commenters argue that the Commission should take a 
phased approach to its proposed compliance and implementation 
timelines.\421\ For example, NextEra suggests that the Commission 
finalize proposed reforms related to both the electric storage resource 
and distributed energy resource aggregation resources, while extending 
the distributed energy resource aggregation requirements to

[[Page 9628]]

allow further time to work through issues. NextEra states that the 
Commission could stage compliance deadlines with electric storage 
resource tariff revisions being submitted within six months of a final 
rule and aggregation tariff revisions being due 12 months after a final 
rule. NextEra asserts that, if the Commission determines additional 
consideration needs to be given to the aggregation-related issues, the 
Commission should finalize the storage related revisions now.
---------------------------------------------------------------------------

    \421\ See FirstLight Comments at 14; MISO Comments at 11; 
NextEra Comments at 4-6.
---------------------------------------------------------------------------

    340. MISO suggests that the Commission allow RTOs/ISOs to integrate 
electric storage resources using a phased approach. MISO explains that 
electric storage resources can be accommodated in the short term 
through the RTO's/ISO's existing system or with relatively manageable 
modifications but argues that, in the long-term, the further 
integration of electric storage resources should be pursued through 
joint study of an RTO's/ISO's market design and system enhancements. 
FirstLight also argues that, because the proposal includes changes to 
RTO/ISO bidding, dispatch, pricing and settlement software, the 
Commission should allow each RTO/ISO to address the phasing of market 
development and implementation efforts related to any final rule.
    341. Several other commenters argue that the Commission should 
allow the RTOs/ISOs to develop their own implementation schedules.\422\ 
CAISO, IRC, NYISO Indicated Transmission Owners, and PJM argue that the 
Commission should permit each affected RTO/ISO to propose an 
implementation schedule for various aspects of the final rule. CAISO 
states that it does not oppose the Commission setting a compliance and 
implementation timeframe but suggests that a better approach would be 
to direct the RTO/ISOs to establish independent timelines in their 
compliance filings. PJM states that allowing RTOs/ISOs to propose 
implementation schedules is preferable to the Commission setting firm 
deadlines that may lead to requests for waivers. IRC recommends that 
the final rule should require each RTO/ISO to file an implementation 
plan and schedule with the Commission within 180 days. IRC states that 
the implementation plan and schedule should be subject to notice and 
comment and not necessarily limited to 12 months.
---------------------------------------------------------------------------

    \422\ See CAISO Comments at 53; IRC Comments at 11-12; NYISO 
Indicated Transmission Owners Comments at 20; PJM Comments at 30.
---------------------------------------------------------------------------

    342. NYISO Indicated Transmission Owners state that the Commission 
should not set unrealistic goals for the participation of distributed 
energy resource aggregations in wholesale markets before the grid has 
the needed technological capabilities.\423\ Therefore, NYISO Indicated 
Transmission Owners oppose the Commission's proposal to make the 
compliance filing due in six months with full implementation 12 months 
thereafter. Instead, NYISO Indicated Transmission Owners request that 
each RTO/ISO be allowed to utilize the stakeholder process to establish 
a timeline for implementation.
---------------------------------------------------------------------------

    \423\ See NYISO Indicated Transmission Owners Comments at 20.
---------------------------------------------------------------------------

    343. Xcel Energy Services also expresses concerns that the 
implementation timeline is too aggressive, stating that that Commission 
should further evaluate whether the technological capability exists to 
fully implement the NOPR requirements and, if not, what timeline is 
needed to ensure that such functionality can be developed.\424\ Xcel 
Energy Services contends that the requirements of the NOPR and the 
implementation timeline must be tailored to fit within achievable 
technological capabilities. Xcel Energy Services states that the RTOs/
ISOs and their stakeholders should be permitted to propose alternate 
implementation timelines that allow higher priority regional projects 
to move forward before the software updates needed under the NOPR.
---------------------------------------------------------------------------

    \424\ See Xcel Energy Services Comments at 16-17.
---------------------------------------------------------------------------

    344. In contrast to other commenters, Advanced Microgrid Solutions 
argues that the proposed compliance and implementation timeline will 
take 18 months and therefore not promptly end unduly discriminatory 
rules and practices and will impose on-going burdens on the storage 
industry.\425\ Advanced Microgrid Solutions argues that compliance 
plans should be filed within 90 days and specify the earliest possible 
implementation date for each compliance action.
---------------------------------------------------------------------------

    \425\ See Advanced Microgrid Solutions Comments at 13.
---------------------------------------------------------------------------

    345. Multiple entities discuss the proposed bidding parameters, 
including state of charge, in relation to the proposed timeline for 
compliance.\426\ MISO states that managing state of charge would 
require costly investments and upgrades, noting that in some cases it 
may not be technically feasible for large volumes of electric storage 
resources. CAISO states that it will require at least 24 months to 
design and incorporate bidding parameters that account for all physical 
operating parameters (such as state of charge) into its modeling and 
dispatch software, which would require stakeholder discussions, market 
design work, and implementation testing. CAISO further explains that 
this directive would be inconsistent with how CAISO models other 
resources in its markets and asks that the Commission direct RTOs/ISOs 
to account for the physical operating constraints of resource in their 
market modeling and dispatch software and require them to explain how 
they do so.
---------------------------------------------------------------------------

    \426\ See AES Companies Comments at 23; CAISO Comments at 12; 
EPRI Comments at 12; MISO Comments at 10; Tesla/SolarCity Comments 
at 15.
---------------------------------------------------------------------------

    346. AES Companies similarly explain that time, resources, and 
capital costs can be minimized if all energy storage resources managed 
their own state of charge. EPRI notes that, assuming that the 
Commission does not require the RTOs/ISOs to manage state-of-charge of 
electric storage resources (which some already do), there would only be 
minimal changes to the bidding interface, market clearing, or 
settlement software. EPRI states that the large change absent RTOs/ISOs 
having to manage state of charge will be allowing electric storage 
resources to offer as an injector and withdrawer of energy in the same 
market interval but for the market clearing software to only allow 
acceptance of one or the other. Tesla/SolarCity state that bidding 
parameters should reflect storage resources state of charge and be 
included in the unit commitment and economic dispatch optimization 
algorithms of each RTO/ISO. Tesla/SolarCity believe that storage 
resources should manage their own state of charge or have the choice 
between relying on RTO/ISO estimates or self-managing. In contrast to 
other commenters, Tesla/SolarCity assert that the time and resources 
necessary to incorporate these bidding parameters into the dispatch 
software should be minimal and are justified given the increased 
efficiency of markets and operations.
    347. NEPOOL raises regional issues.\427\ NEPOOL encourages the 
Commission to ensure that any final rule includes sufficient 
flexibility to allow the region to implement the requirements while 
also achieving the other regional priorities in ISO-NE's Work Plan for 
2017-2018. Specifically, NEPOOL urges that the final rule take into 
account market rules that are currently being implemented in the region 
to eliminate barriers to the entry of electric storage resources into 
wholesale markets.
---------------------------------------------------------------------------

    \427\ See NEPOOL Comments at 5.
---------------------------------------------------------------------------

C. Commission Determination

    348. Upon consideration of the comments, we find that it is 
reasonable

[[Page 9629]]

to provide the RTOs/ISOs 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 the RTOs/ISOs. We find 
that shorter timeframes proposed by commenters such as Advanced 
Microgrid Solutions would not provide the RTO/ISOs with sufficient time 
to implement the required reforms. Taking into account that the 
Commission is not implementing the distributed energy resource 
aggregation reforms at this time, we 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. We will continue to allow each RTO/ISO a further 365 
days from that date to implement the tariff provisions.
    349. We find that, given the modifications and clarifications to 
the NOPR we make in this Final Rule and the record in this proceeding 
in support of the reforms we finalize here, our implementation schedule 
is reasonable. Commenters highlight that managing state of charge will 
complicate or delay implementation, and we note that we are not 
requiring the RTOs/ISOs to manage state of charge. Further, some 
commenters also provide feedback on the implementation of the entire 
NOPR and indicate that implementing only the storage components would 
expedite compliance and implementation. We are not establishing any 
requirements for distributed energy resource aggregations as part of 
this Final Rule. Given the additional time we are providing for each 
RTO/ISO to file proposed tariff revisions to comply with this Final 
Rule, we believe that the compliance and implementation schedule that 
we establish in this Final Rule is appropriate. As a consequence, we 
are not persuaded that more than 365 days after the RTOs/ISOs are 
required to submit their proposed tariff revisions will be necessary to 
implement the reforms in this Final Rule; therefore, we decline to 
adopt commenters' other proposed recommendations, such as allowing the 
RTO/ISOs to develop their own implementation schedules. We disagree 
with Xcel Energy Services' argument that the Commission needs to 
further evaluate whether the technological capability exists to fully 
implement the NOPR requirements, especially as we are not finalizing in 
this Final Rule the distributed energy resource aggregation reforms 
proposed in the NOPR.
    350. Additionally, we note that many of the RTOs/ISOs already have 
rules in place to enable the participation of electric storage 
resources in their markets. To the extent that an RTO/ISO proposes to 
comply with certain requirements of this Final Rule using existing 
market rules, it must demonstrate on compliance how its existing market 
rules meet the requirements of this Final Rule. We expect that the 
additional time that we are providing for the RTOs/ISOs to make their 
compliance filings, along with the ability of the RTOs/ISOs to use 
existing tariff provisions to demonstrate compliance with aspects of 
the Final Rule, will mean that the RTOs/ISOs can meet the deadlines 
that we are establishing here. Finally, we also note that, throughout 
this Final Rule, we are allowing regional flexibility to the extent 
possible. We believe that this flexibility will assist the RTOs/ISOs in 
meeting the compliance and implementation deadlines.

VI. Information Collection Statement

    351. The collection of information 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.\428\ 
OMB's regulations,\429\ in turn, require approval of certain 
information collection requirements imposed by agency rules. Upon 
approval of a collection(s) of information, OMB will assign an OMB 
control number and an expiration date. 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.
---------------------------------------------------------------------------

    \428\ See 44 U.S.C. 3507(d).
    \429\ 5 CFR pt. 1320.
---------------------------------------------------------------------------

    Public Reporting Burden: In this Final Rule, we are not adopting 
any of the proposed reforms in the NOPR related to distributed energy 
resource aggregations and are modifying some of the requirements 
related to the participation model for electric storage resources. 
Thus, we are revising the estimated public reporting burden and cost 
from the NOPR \430\ based on these changes. The estimated burden and 
cost for the requirements contained in this Final Rule follow.
---------------------------------------------------------------------------

    \430\ The burden estimates for the NOPR in Docket No. RM16-23-
000 were submitted to OMB under FERC-516 (OMB Control No. 1902-0096, 
in ICR 201611-1902-005). There is another unrelated item affecting 
FERC-516 which will also be pending OMB review. Because only one 
item per OMB Control No. can be pending OMB review at a time, the 
reporting requirements in this Final Rule in RM16-23-000 will be 
submitted to OMB under a new collection number, FERC-516H.
    \431\ The estimated hourly cost (salary plus benefits) provided 
in this section is based on the salary figures for May 2016 posted 
by the Bureau of Labor Statistics (BLS) for the Utilities sector (at 
https://www.bls.gov/oes/current/naics2_22.htm) and benefits 
information for September 2017 (issued 12/15/2017, at https://www.bls.gov/news.release/ecec.nr0.htm). The hourly estimates for 
salary plus benefits are: (a) Legal (code 23-0000), $143.68; (b) 
Computer and mathematical (code 15-0000), $60.70; (c) Computer and 
information systems manager (code 11-3021), $100.68; (d) Information 
security analyst (code 15-1122), $66.34; (e) Auditing and accounting 
(code 13-2011), $53.00; (f) Information and record clerk (code 43-
4199), $39.14; (g) Electrical Engineer (code 17-2071), $68.12; (h) 
Economist (code 19-3011), $77.96; and (i) Management (code 11-0000), 
$81.52. The average hourly cost (salary plus benefits), weighting 
all of these skill sets evenly, is $76.79. The Commission rounds it 
to $77 per hour.
    \432\ The one-time tariff filing is due within 270 days of the 
publication date of the Final Rule in the Federal Register.
    \433\ Respondent entities are either RTOs or ISOs.

                                       FERC-516H, as Implemented in the Final Rule in Docket No. RM16-23-000 \431\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Annual number                                              Total annual burden
                                          Number of     of responses    Total number    Average burden (hours)    hours and total annual     Cost per
                                         respondents   per respondent   of responses     and cost per response             cost           respondent ($)
                                                  (1)             (2)     (1) x (2) =  (4).....................  (3) x (4) = (5)........       (5) / (1)
                                                                                  (3)
--------------------------------------------------------------------------------------------------------------------------------------------------------
One-Time Tariff Filing \432\.........         \433\ 6               1               6  1,500 hrs; $115,500.....  9,000 hrs; $693,000....        $115,500
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Title: FERC-516H, Electric Rate Schedules and Tariff Filings (in 
Final Rule in Docket Nos. RM16-23-000 and AD16-20-000).
    Action: Proposed information collection.
    OMB Control No.: To be determined.
    Respondents for This Rulemaking: RTOs and ISOs.
    Frequency of Information: One-time.

[[Page 9630]]

    Necessity of Information: The Commission implements this Final Rule 
to eliminate barriers to electric storage resource participation in the 
RTO/ISO markets.
    Internal Review: The Commission has reviewed the changes and has 
determined that such changes are necessary. These requirements conform 
to the Commission's need for efficient information collection, 
communication, and management within the energy industry. The 
Commission has specific, objective support for the burden estimates 
associated with the information collection requirements.
    352. Interested persons may obtain information on the reporting 
requirements by contacting the following: Federal Energy Regulatory 
Commission, 888 First Street NE, Washington, DC 20426 [Attention: Ellen 
Brown, Office of the Executive Director] Email: [email protected]; 
Phone: (202) 502-8663; fax: (202) 273-0873.
    353. Comments concerning the collection of information and the 
associated burden estimate(s) may also be sent to: Office of 
Information and Regulatory Affairs, Office of Management and Budget, 
725 17th Street NW, Washington, DC 20503 [Attention: Desk Officer for 
the Federal Energy Regulatory Commission].
    354. Due to security concerns, comments should be sent 
electronically to the following email address: 
[email protected]. Comments submitted to OMB should refer to 
FERC-516H and OMB Control No. To be determined.

VII. Environmental Analysis

    355. 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.\434\ We 
conclude that neither an Environmental Assessment nor an Environmental 
Impact Statement is required for this Final Rule under section 
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.\435\
---------------------------------------------------------------------------

    \434\ Regulations Implementing the National Environmental Policy 
Act of 1969, Order No. 486, 52 FR 47,897 (Dec. 17, 1987), FERC 
Stats. & Regs., Regulations Preambles 1986-1990 ] 30,783 (1987).
    \435\ 18 CFR 380.4(a)(15).
---------------------------------------------------------------------------

VIII. Regulatory Flexibility Act Certification

    356. The Regulatory Flexibility Act of 1980 (RFA) \436\ 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 Small Business Administration's (SBA) Office of Size Standards 
develops the numerical definition of a small business.\437\ The small 
business size standards are provided in 13 CFR 121.201.
---------------------------------------------------------------------------

    \436\ 5 U.S.C. 601-12.
    \437\ 13 CFR 121.101.
---------------------------------------------------------------------------

    357. 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.\438\ Because 
each RTO/ISO has more than 500 employees, none are considered small 
entities.
---------------------------------------------------------------------------

    \438\ 13 CFR 121.201 (Sector 22, Utilities).
---------------------------------------------------------------------------

    358. 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.'' \439\
---------------------------------------------------------------------------

    \439\ 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 
Small Business Administration'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).
---------------------------------------------------------------------------

    359. The estimated cost related to this Final Rule includes: (a) 
Preparing and making a one-time tariff filing ($115,500 per entity, as 
detailed in the Information Collection section above), and (b) updating 
the economic dispatch software. Revisions to the economic dispatch 
software are due to be implemented within 365 days after the due date 
of the tariff filing. We estimate the one-time software work will take 
1,500 hours with an approximate cost of $114,000 per entity.\440\ 
Therefore the total estimated one-time cost for the tariff filing and 
software work is $229,500 per entity (or $115,500 + $114,000); the 
total estimated one-time industry cost is $1,377,000.
---------------------------------------------------------------------------

    \440\ Based on the BLS data, the hourly estimates (for wages 
plus benefits) related to updating the software are: (a) Computer 
and mathematical (code 15-0000), $60.70; (b) Computer and 
information systems manager (code 11-3021), $100.68; (c) Information 
security analyst (code 15-1122), $66.34; (d) Electrical Engineer 
(code 17-2071), $68.12; (e) Economist (code 19-3011), $77.96; and 
(f) Management (code 11-0000), $81.52. We estimate these skill sets 
are equally involved in updating the software. The hourly average is 
$75.89, so we will round to $76 per hour.
    We estimate a total of 1,500 hours per entity to develop and 
implement the software changes, so the related cost is estimated to 
be $114,000 per entity ($76/hour x 1,500 hours). The one-time 
industry-wide cost is $684,000.
---------------------------------------------------------------------------

    360. 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.

IX. Document Availability

    361. In addition to publishing the full text of this document in 
the Federal 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 (https://www.ferc.gov) and 
in the Commission's Public Reference Room during normal business hours 
(8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street NE, Room 2A, 
Washington, DC 20426.
    362. From the Commission'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 of this document, excluding the last three digits, in 
the docket number field.
    363. User assistance is available for eLibrary and the Commission's 
website during normal business hours from the Commission's Online 
Support at (202) 502-6652 (toll free at 1-866-208-3676) or email at 
[email protected], or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at 
[email protected].

X. Effective Date and Congressional Notification

    364. This Final Rule will become effective on June 4, 2018. The 
Commission has determined, with the concurrence of the Administrator of 
the Office of Information and Regulatory Affairs, Office of Management 
and Budget, that this rule is not a ``major rule'' as defined in 
section 351 of the Small Business Regulatory Enforcement Fairness Act 
of 1996. This Final Rule is being submitted to the Senate, House, and 
Government Accountability Office.

[[Page 9631]]

List of Subjects in 18 CFR Part 35

    Electric power rates, Electric utilities.

    By the Commission.

    Issued: February 15, 2018.
Nathaniel J. Davis, Sr.,
Deputy Secretary.

Regulatory Text

    In consideration of the foregoing, the Commission amends part 35 
Chapter 1, Title 18 of the 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 paragraph (b)(9) and revising paragraph 
(g)(9) to read as follows:


Sec.  35.28   Non-discriminatory open access transmission tariff.

* * * * *
    (b) * * *
    (9) Electric storage resource as used in this section means a 
resource capable of receiving electric energy from the grid and storing 
it for later injection of electric energy back to the grid.
* * * * *
    (g) * * *
* * * * *
    (9) Electric storage resources.
    (i) Each Commission-approved independent system operator and 
regional transmission organization must have tariff provisions 
providing a participation model for electric storage resources that:
    (A) Ensures that a resource using the participation model for 
electric storage resources in an independent system operator or 
regional transmission organization market is eligible to provide all 
capacity, energy, and ancillary services that it is technically capable 
of providing;
    (B) Ensures that a resource using the participation model for 
electric storage resources can be dispatched and can set the wholesale 
market clearing price as both a wholesale seller and wholesale buyer 
consistent with rules that govern the conditions under which a resource 
can set the wholesale price;
    (C) Accounts for the physical and operational characteristics of 
electric storage resources through bidding parameters or other means; 
and
    (D) Establishes a minimum size requirement for resources using the 
participation model for electric storage resources that does not exceed 
100 kW.
    (ii) The sale of electric energy from an independent system 
operator or regional transmission organization market to an electric 
storage resource that the resource then resells back to that market 
must be at the wholesale locational marginal price.

    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 the 
commenters that are used in this Final Rule.

------------------------------------------------------------------------
              Abbreviation                    Commenter (full name)
------------------------------------------------------------------------
Advanced Energy Economy................  Advanced Energy Economy.
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.
APPA/NRECA.............................  American Public Power
                                          Association and National Rural
                                          Electric Cooperative
                                          Association.
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 Alliance.....  California Energy Storage
                                          Alliance.
California Municipals..................  California Municipal Utilities
                                          Association (incorporated by
                                          reference APPA/NRECA's
                                          comments).
Center for Biological Diversity........  Center for Biological
                                          Diversity.
City of New York.......................  City of New York.
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
                                          (incorporated by reference
                                          NESCOE comments).
Delaware Commission....................  Delaware Public Service
                                          Commission.
DER/Storage Developers.................  DER and Storage Developers.
Dominion...............................  Dominion Resources Services,
                                          Inc. (supports EEI's
                                          comments).
DTE Electric/Consumers Energy..........  DTE Electric Company and
                                          Consumers Energy Company.
Duke Energy............................  Duke Energy Corporation
                                          (supports EEI's comments).
E4TheFuture............................  E4TheFuture.
Eagle Crest............................  Eagle Crest Energy Company.
EEI....................................  Edison Electric Institute.
Efficient Holdings.....................  Efficient Holdings, LLC.
ELCON..................................  Electricity Consumers Resource
                                          Council.
Electric Vehicle R&D Group.............  EV R&D Group, University of
                                          Delaware.
Energy Storage Association.............  Energy Storage Association.
EPRI...................................  Electric Power Research
                                          Institute.
EPSA/PJM Power Providers...............  Electric Power Supply
                                          Association and PJM Power
                                          Providers Group.

[[Page 9632]]

 
Exelon.................................  Exelon Corporation.
FirstLight.............................  FirstLight Power Resources,
                                          Inc.
Fluidic................................  Fluidic Energy.
Fresh Energy/Sierra Club/Union of        Fresh Energy, the Sierra Club,
 Concerned Scientists.                    and the Union of Concerned
                                          Scientists.
Genbright..............................  Genbright LLC.
GridWise...............................  GridWise Alliance (supports
                                          some of Advanced Energy
                                          Economy's and EEI's comments).
Guannan He.............................  Guannan He.
Harvard Environmental Policy Institute.  Harvard Environmental Policy
                                          Institute.
Imperial Irrigation District...........  Imperial Irrigation District.
Independent Energy Producers             Independent Energy Producers
 Association.                             Association.
Institute for Policy Integrity.........  Institute for Policy Integrity.
IPKeys/Motorola........................  IPKeys Technologies and
                                          Motorola Solutions.
IRC....................................  ISO-RTO Council.
ISO-NE.................................  ISO New England Inc.
Kathy Seal.............................  Kathy Seal.
Liza White.............................  Liza C White.
Lyla Fadali............................  Lyla Fadali.
Magnum.................................  Magnum CAES, LLC (supports some
                                          of APPA/NRECA's and National
                                          Hydropower Association's
                                          comments).
Maryland and New Jersey Commissions....  Maryland Public Service
                                          Commission and New Jersey
                                          Board of Public Utilities.
Massachusetts State Entities...........  Massachusetts Department of
                                          Public Utilities and
                                          Massachusetts Department of
                                          Energy Resources.
Massachusetts Municipal Electric.......  Massachusetts Municipal
                                          Wholesale Electric Company.
Matthew d'Alessio......................  Matthew d'Alessio.
Mensah.................................  AF Mensah Inc.
Microgrid Resources Coalition..........  Microgrid Resources Coalition.
Minnesota Energy Storage Alliance......  Minnesota Energy Storage
                                          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 Association........  National Hydropower
                                          Association.
NEPOOL.................................  New England Power Pool.
NERC...................................  North American Electric
                                          Reliability Corporation.
NESCOE.................................  New England States Committee on
                                          Electricity.
New York State Entities................  New York Public Service
                                          Commission and New York State
                                          Energy Research and
                                          Development Authority.
New York Utility Intervention Unit.....  Utility Intervention Unit of
                                          the New York State Department
                                          of State.
NextEra................................  NextEra Energy Resources, LLC.
NRG....................................  NRG Energy, Inc.
NYISO..................................  New York Independent System
                                          Operator, Inc.
NYISO Indicated Transmission Owners....  Central Hudson Gas & Electric
                                          Corporation, Consolidated
                                          Edison Company of New York,
                                          Inc., National Grid, New York
                                          Power Authority, Orange and
                                          Rockland Utilities, Inc., and
                                          Power Supply Long Island.
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.
Power Applications.....................  Power Applications and Research
                                          Systems, Inc.
Protect Sudbury........................  Protect Sudbury.
Public Interest Organizations..........  Public Interest Organizations.
R Street Institute.....................  R Street Institute.
Research Scientists....................  Drs. Audun Botterud, Apurba
                                          Sakti, and Francis O'Sullivan.
Robert Borlick.........................  Robert L. Borlick.
San Diego Water........................  San Diego County Water
                                          Authority.
Schulte Associates.....................  Schulte Associates LLC.
SEIA...................................  Solar Energy Industries
                                          Association.
Silicon Valley Leadership Group........  Silicon Valley Leadership
                                          Group.
Six Cities.............................  Cities of Anaheim, Azusa,
                                          Banning, Colton, Pasadena, and
                                          Riverside, California.
SoCal Edison...........................  Southern California Edison
                                          Company.
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.

[[Page 9633]]

 
Tesla/SolarCity........................  Tesla, Inc. and SolarCity
                                          Corporation.
Trans Bay..............................  Trans Bay Cable LLC.
Union of Concerned Scientists..........  Union of Concerned Scientists.
US Senators............................  Senator Cory A. Booker, Senator
                                          Edward J. Markey, Senator
                                          Bernard Sanders, Senator
                                          Elizabeth Warren, Senator
                                          Sheldon Whitehouse, and
                                          Senator Ron Wyden.
Xcel Energy Services...................  Xcel Energy Services Inc.
------------------------------------------------------------------------

[FR Doc. 2018-03708 Filed 3-5-18; 8:45 am]
 BILLING CODE 6717-01-P