Participation of Distributed Energy Resource Aggregations in Markets Operated by Regional Transmission Organizations and Independent System Operators, 67094-67158 [2020-20973]
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Final rule.
DEPARTMENT OF ENERGY
ACTION:
Federal Energy Regulatory
Commission
SUMMARY:
18 CFR Part 35
[Docket No. RM18–9–000; Order No. 2222]
Participation of Distributed Energy
Resource Aggregations in Markets
Operated by Regional Transmission
Organizations and Independent
System Operators
Federal Energy Regulatory
Commission.
AGENCY:
FOR FURTHER INFORMATION CONTACT:
The Federal Energy
Regulatory Commission (Commission) is
amending its regulations to remove
barriers to the participation of
distributed energy resource aggregations
in the capacity, energy, and ancillary
service markets operated by Regional
Transmission Organizations and
Independent System Operators (RTO/
ISO).
DATES: This rule is effective December
21, 2020. Each RTO/ISO must file the
tariff changes needed to implement the
requirements of this final rule by
September 17, 2021.
David Kathan (Technical Information),
Office of Energy Policy and
Innovation, Federal Energy Regulatory
Commission, 888 First Street NE,
Washington, DC 20426, (202) 502–
6404
Karin Herzfeld (Legal Information),
Office of General Counsel—Energy
Markets, Federal Energy Regulatory
Commission, 888 First Street NE,
Washington, DC 20426, (202) 502–
8459
SUPPLEMENTARY INFORMATION:
Table of Contents
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Paragraph Nos.
I. Introduction ...............................................................................................................................................................................
II. Procedural History ...................................................................................................................................................................
III. Need for Reform ......................................................................................................................................................................
A. Comments .........................................................................................................................................................................
B. Commission Determination ..............................................................................................................................................
IV. Discussion ...............................................................................................................................................................................
A. Commission Jurisdiction ..................................................................................................................................................
1. Scope of Final Rule ...................................................................................................................................................
a. Comments ............................................................................................................................................................
b. Commission Determination ................................................................................................................................
2. Opt-Out .......................................................................................................................................................................
a. Comments ............................................................................................................................................................
b. Commission Determination ................................................................................................................................
3. Interconnection ..........................................................................................................................................................
a. Comments and Data Request Responses ...........................................................................................................
b. Commission Determination ................................................................................................................................
B. Definitions of Distributed Energy Resource and Distributed Energy Resource Aggregator .........................................
1. NOPR Proposal ...........................................................................................................................................................
2. Comments ...................................................................................................................................................................
3. Commission Determination .......................................................................................................................................
C. Eligibility To Participate in RTO/ISO Markets Through a Distributed Energy Resource Aggregator .........................
1. Participation Model ...................................................................................................................................................
a. NOPR Proposal ....................................................................................................................................................
b. Comments ............................................................................................................................................................
c. Commission Determination ................................................................................................................................
2. Types of Technologies ...............................................................................................................................................
a. NOPR Proposal ....................................................................................................................................................
b. Comments ............................................................................................................................................................
c. Commission Determination ................................................................................................................................
3. Double Counting of Services .....................................................................................................................................
a. NOPR Proposal ....................................................................................................................................................
b. Comments ............................................................................................................................................................
c. Commission Determination ................................................................................................................................
4. Minimum and Maximum Size of Aggregation .........................................................................................................
a. NOPR Proposal ....................................................................................................................................................
b. Comments ............................................................................................................................................................
c. Commission Determination ................................................................................................................................
5. Minimum and Maximum Capacity Requirements for Distributed Energy Resources Participating in an Aggregation ...........................................................................................................................................................................
a. NOPR Proposal ....................................................................................................................................................
b. Comments ............................................................................................................................................................
c. Commission Determination ................................................................................................................................
6. Single Resource Aggregation .....................................................................................................................................
a. NOPR Proposal ....................................................................................................................................................
b. Comments ............................................................................................................................................................
c. Commission Determination ................................................................................................................................
D. Locational Requirements ..................................................................................................................................................
a. NOPR Proposal ....................................................................................................................................................
b. Comments ............................................................................................................................................................
c. Commission Determination ................................................................................................................................
E. Distribution Factors and Bidding Parameters .................................................................................................................
a. NOPR Proposal ....................................................................................................................................................
b. Comments ............................................................................................................................................................
c. Commission Determination ................................................................................................................................
F. Information and Data Requirements ................................................................................................................................
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Paragraph Nos.
a. NOPR Proposal ....................................................................................................................................................
b. Comments ............................................................................................................................................................
c. Commission Determination ................................................................................................................................
G. Metering and Telemetry System Requirements ..............................................................................................................
a. NOPR Proposal ....................................................................................................................................................
b. Comments ............................................................................................................................................................
c. Commission Determination ................................................................................................................................
H. Coordination Between the RTO/ISO, Aggregator, and Distribution Utility .................................................................
1. Market Rules on Coordination ..................................................................................................................................
a. NOPR Proposal ....................................................................................................................................................
b. Comments ............................................................................................................................................................
c. Commission Determination ................................................................................................................................
2. Role of Distribution Utilities .....................................................................................................................................
a. NOPR Proposal ....................................................................................................................................................
b. Comments ............................................................................................................................................................
c. Commission Determination ................................................................................................................................
3. Ongoing Operational Coordination ...........................................................................................................................
a. NOPR Proposal ....................................................................................................................................................
b. Comments ............................................................................................................................................................
c. Commission Determination ................................................................................................................................
4. Role of Relevant Electric Retail Regulatory Authorities ..........................................................................................
a. NOPR Proposal ....................................................................................................................................................
b. Comments ............................................................................................................................................................
c. Commission Determination ................................................................................................................................
5. Coordination Frameworks .........................................................................................................................................
a. NOPR Proposal ....................................................................................................................................................
b. Comments ............................................................................................................................................................
c. Commission Determination ................................................................................................................................
I. Modifications to List of Resources in Aggregation ..........................................................................................................
a. NOPR Proposal ....................................................................................................................................................
b. Comments ............................................................................................................................................................
c. Commission Determination ................................................................................................................................
J. Market Participation Agreements ......................................................................................................................................
1. NOPR Proposal ...........................................................................................................................................................
2. Comments ...................................................................................................................................................................
3. Commission Determination .......................................................................................................................................
K. Compliance .......................................................................................................................................................................
1. Comments ...................................................................................................................................................................
2. Commission Determination .......................................................................................................................................
L. Issues Beyond the Scope of This Rulemaking ................................................................................................................
1. Comments ...................................................................................................................................................................
2. Commission Determination .......................................................................................................................................
V. Information Collection Statement ...........................................................................................................................................
A. Summary of this IC ..........................................................................................................................................................
B. Discussion .........................................................................................................................................................................
VI. Environmental Analysis .........................................................................................................................................................
VII. Regulatory Flexibility Act Certification ...............................................................................................................................
VIII. Document Availability .........................................................................................................................................................
IX. Effective Date and Congressional Notification .....................................................................................................................
Appendix A: Abbreviated Names of Commenters .....................................................................................................................
I. Introduction
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1. In this final rule, the Federal
Energy Regulatory Commission
(Commission) is adopting reforms to
remove barriers to the participation of
distributed energy resource 1
aggregations in the Regional
Transmission Organization (RTO) and
Independent System Operator (ISO)
markets (RTO/ISO markets).2 For the
1 We define a distributed energy resource as any
resource located on the distribution system, any
subsystem thereof or behind a customer meter.
These resources may include, but are not limited to,
electric storage resources, distributed generation,
demand response, energy efficiency, thermal
storage, and electric vehicles and their supply
equipment. See infra P 114.
2 For purposes of this final rule, we define RTO/
ISO markets as the capacity, energy, and ancillary
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reasons discussed below, we find that
existing RTO/ISO market rules are
unjust and unreasonable in light of
barriers that they present to the
participation of distributed energy
resource aggregations in the RTO/ISO
markets, which reduce competition and
services markets operated by the RTOs and ISOs.
We note that, in the Notice of Proposed Rulemaking
(NOPR) in this proceeding, the Commission used
‘‘organized wholesale electric markets’’ and
included that term in the proposed regulatory text.
See Electric Storage Participation in Markets
Operated by Regional Transmission Organizations
& Independent System Operators, Notice of
Proposed Rulemaking, 81 FR 86522, 157 FERC
¶ 61,121 (2016) (NOPR). We find that using ‘‘RTO/
ISO markets’’ is sufficient to describe the markets
at issue in this final rule and therefore will no
longer use ‘‘organized wholesale electric markets’’
here or include that term in the regulatory text.
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fail to ensure just and reasonable rates.
Therefore, pursuant to the
Commission’s authority under Federal
Power Act (FPA) section 206,3 the
Commission modifies § 35.28 4 of its
regulations to require each RTO/ISO to
revise its tariff to ensure that its market
rules facilitate the participation of
distributed energy resource
aggregations, as discussed further
below.
2. As the Commission explained in
the NOPR, barriers to the participation
of new technologies, such as many types
of distributed energy resources, in the
RTO/ISO markets can emerge when the
rules governing participation in those
3 16
4 18
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markets are designed for traditional
resources and in effect limit the services
that emerging technologies can
provide.5 For example, the Commission
noted in the NOPR that, as a general
matter, distributed energy resources
tend to be too small to meet the
minimum size requirements to
participate in the RTO/ISO markets on
a stand-alone basis, and may be unable
to meet certain qualification and
performance requirements because of
the operational constraints they may
have as small resources.6 The
Commission further stated that existing
participation models 7 for aggregated
resources, including distributed energy
resources, often require those resources
to participate in the RTO/ISO markets as
demand response, which limits their
operations and the services that they are
eligible to provide.8
3. Where such barriers exist, resources
that are technically capable of providing
some services on their own or through
aggregation are precluded from
competing with resources that are
already participating in the RTO/ISO
markets.9 These restrictions on
competition can reduce the efficiency of
the RTO/ISO markets, potentially
leading an RTO/ISO to dispatch more
expensive resources to meet its system
needs. By removing barriers to the
participation of distributed energy
resource aggregations in the RTO/ISO
markets, this final rule will enhance
competition and, in turn, help to ensure
that the RTO/ISO markets produce just
and reasonable rates.
4. Facilitating distributed energy
resource participation in RTO/ISO
5 See
NOPR, 157 FERC ¶ 61,121 at P 2.
id. PP 13, 105.
7 In addition to tariff provisions that apply to all
market participants, the RTOs/ISOs create tariff
provisions for specific types of resources when
those resources have unique physical and
operational characteristics or other attributes that
warrant distinctive treatment from other market
participants. The tariff provisions that are created
for a particular type of resource are what we refer
to in this final rule as a participation model.
8 NOPR, 157 FERC ¶ 61,121 at P 106. Demand
response means a reduction in the consumption of
electric energy by customers from their expected
consumption in response to an increase in the price
of electric energy or to incentive payments designed
to induce lower consumption of electric energy. 18
CFR 35.28(b)(4).
9 In Order No. 841, the Commission clarified that
‘‘technically capable’’ of providing a service means
meeting all of the technical, operational, and/or
performance requirements that are necessary to
reliably provide that service. Electric Storage
Participation in Markets Operated by Regional
Transmission Organizations & Independent System
Operators, Order No. 841, 83 FR 9580, 162 FERC
¶ 61,127, at P 78 (2018), order on reh’g, Order No.
841–A, 84 FR 23902, 167 FERC ¶ 61,154 (2019),
aff’d sub nom. Nat’l Ass’n of Regulatory Util.
Comm’rs v. FERC, 964 F.3d 1177 (D.C. Cir. 2020).
.
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6 See
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markets will provide a variety of
benefits to those markets. Integrating
these resources’ capabilities into RTO/
ISO planning and operations will help
the RTOs/ISOs account for the impacts
of these resources on installed capacity
requirements and day-ahead energy
demand, thereby reducing uncertainty
in load forecasts and reducing the risk
of over procurement of resources and
the associated costs.10 These resources
are able to locate where price signals
indicate that new capacity is most
needed, potentially helping to alleviate
congestion and congestion costs during
peak load conditions and to reduce
costs related to transmitting energy into
persistently high-priced load pockets.11
Indeed, in the NOPR, the Commission
noted certain valuable characteristics
that distributed energy resources can
offer, including their ability to co-locate
with load and provide associated
benefits. Additionally, their relatively
short development lead time allows
distributed energy resources to respond
rapidly to near-term generation or
transmission reliability-related
requirements, further improving their
ability to enhance reliability and reduce
system costs.
5. The rules that we adopt in this final
rule will help enable the participation of
distributed energy resources in the
RTO/ISO markets by providing a means
for these resources to, in the aggregate,
satisfy minimum size and performance
requirements that they may not meet on
a stand-alone basis.12 The Commission
in the NOPR noted that distributed
energy resource aggregations can help to
address the commercial and
transactional barriers to distributed
energy resource participation in the
RTO/ISO markets, such as sharing the
significant costs of participating in those
markets, including the costs of the
necessary metering, telemetry, and
communication equipment.13
6. To address barriers to the
participation of distributed energy
resource aggregations in the RTO/ISO
markets, we require each RTO/ISO to
revise its tariff to establish distributed
energy resource aggregators as a type of
market participant that can register
distributed energy resource aggregations
under one or more participation models
in the RTO/ISO tariff that accommodate
the physical and operational
characteristics of each distributed
energy resource aggregation.
7. Generally, we are adopting the
specific reforms proposed in the NOPR,
10 NOPR,
157 FERC ¶ 61,121 at P 129.
P 130.
12 See id. PP 105, 125.
13 Id. P 126.
11 Id.
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but with certain revisions based on the
record in this proceeding, including
input from the Commission technical
conference convened April 10–11, 2018,
responses to a post-technical conference
notice, and responses to the
Commission’s September 5, 2019 Data
Requests to RTOs/ISOs on policies and
procedures that affect the
interconnection of distributed energy
resources. In particular, certain
proposals in the NOPR have been
altered in this final rule to better
address the needs of different
stakeholders, facilitate solutions to
potential technical challenges, and to
reflect the substantial efforts that have
already been undertaken by some RTOs/
ISOs to incorporate distributed energy
resources into their markets, by
providing for greater regional flexibility
with respect to a number of proposed
requirements.
8. For each RTO/ISO, the tariff
provisions addressing distributed
energy resource aggregations must (1)
allow distributed energy resource
aggregations to participate directly in
RTO/ISO markets and establish
distributed energy resource aggregators
as a type of market participant; (2) allow
distributed energy resource aggregators
to register distributed energy resource
aggregations under one or more
participation models that accommodate
the physical and operational
characteristics of the distributed energy
resource aggregations; (3) establish a
minimum size requirement for
distributed energy resource aggregations
that does not exceed 100 kW; (4)
address locational requirements for
distributed energy resource
aggregations; (5) address distribution
factors and bidding parameters for
distributed energy resource
aggregations; (6) address information
and data requirements for distributed
energy resource aggregations; (7)
address metering and telemetry
requirements for distributed energy
resource aggregations; (8) address
coordination between the RTO/ISO, the
distributed energy resource aggregator,
the distribution utility, and the relevant
electric retail regulatory authorities; (9)
address modifications to the list of
resources in a distributed energy
resource aggregation; and (10) address
market participation agreements for
distributed energy resource aggregators.
Additionally, each RTO/ISO must
accept bids from a distributed energy
resource aggregator if its aggregation
includes distributed energy resources
that are customers of utilities that
distributed more than 4 million
megawatt-hours in the previous fiscal
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year. An RTO/ISO must not accept bids
from a distributed energy resource
aggregator if its aggregation includes
distributed energy resources that are
customers of utilities that distributed 4
million megawatt-hours or less in the
previous fiscal year, unless the relevant
electric retail regulatory authority
permits such customers to be bid into
RTO/ISO markets by a distributed
energy resource aggregator.
9. As discussed further below in
Section IV.K (Compliance), each RTO/
ISO must file the tariff changes needed
to implement the requirements of this
final rule within 270 days of the
publication date of this final rule in the
Federal Register.
II. Procedural History
10. This final rule arises out of the
same Commission inquiry that led to
Order No. 841,14 in which the
Commission amended its regulations
under the FPA to remove barriers to the
participation of electric storage
resources in RTO/ISO markets. The
Commission commenced that inquiry by
hosting a panel to discuss electric
storage resources at its November 19,
2015, open meeting. Subsequently, on
April 11, 2016, Commission staff issued
data requests to each of the six RTOs/
ISOs seeking information about the
rules in the RTO/ISO markets that affect
the participation of electric storage
resources. Concurrently, Commission
staff issued a request for comments,
seeking information from interested
persons on whether barriers exist to the
participation of electric storage
resources in the RTO/ISO markets that
may potentially lead to unjust and
unreasonable wholesale rates. In
addition to the responses from the
RTOs/ISOs, Commission staff received
44 comments. Many of the responses
and comments discussed types of
distributed energy resources and general
market participation issues beyond
concerns specific to electric storage
resources.15
11. On November 17, 2016, the
Commission issued the NOPR in that
proceeding. In addition to its proposed
reforms to facilitate the participation of
electric storage resources in RTO/ISO
markets, the Commission proposed to
amend its regulations under the FPA to
remove barriers in current RTO/ISO
market rules that may prevent new,
14 Order
No. 841, 162 FERC ¶ 61,127.
e.g., CAISO Response (AD16–20) at 2–3;
ISO–NE Response (AD16–20) at 6–7, 26–27; PJM
Response (AD16–20) at 20–21; Advanced Energy
Economy Comments (AD16–20) on RTO/ISO
Responses (AD16–20) at 16–18; RES Americas
Comments (AD16–20) on RTO/ISO Responses
(AD16–20) at 4–5.
15 See,
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smaller distributed energy resources
that are technically capable of
participating in the RTO/ISO markets
from doing so.16
12. The Commission received 109
comments on the NOPR from a diverse
set of stakeholders.17 On February 15,
2018, the Commission issued Order No.
841. In that final rule, the Commission
noted that more information was
necessary to inform its consideration of
its NOPR proposals regarding
facilitating the participation of
distributed energy resource aggregations
in RTO/ISO markets and stated that it
would continue to explore the proposed
distributed energy resource aggregation
reforms under Docket No. RM18–9–
000.18
13. The Commission also announced
that it would hold a technical
conference to gather additional
information regarding some distributed
energy resource aggregation issues. The
technical conference, which was held
on April 10–11, 2018, addressed five
issues related to this proceeding:
Locational requirements, state and local
regulator concerns, compensation for
multiple services, coordination of
distributed energy resource
aggregations, and ongoing operational
coordination.19 During the technical
conference, more than 50 individuals
and entities offered a broad range of
perspectives. The Commission issued a
notice inviting post-technical
conference comments and requesting
comments on a number of follow-up
questions related to each panel.20 The
Commission received 52 post-technical
conference comments from a diverse set
of stakeholders.
14. On September 5, 2019,
Commission staff issued data requests to
each of the six RTOs/ISOs seeking
information regarding their policies and
procedures that affect the
interconnection of distributed energy
resources. In addition to the responses
16 NOPR,
157 FERC ¶ 61,121 at PP 103, 124.
Appendix A for a list of entities that
submitted comments and the shortened names used
throughout this final rule to describe those entities.
18 Order No. 841, 162 FERC ¶ 61,127 at P 5. The
Commission incorporated by reference all
comments filed in response to the NOPR in Docket
No. RM16–23–000 into Docket No. RM18–9–000
and directed any further comments regarding the
proposed distributed energy resource aggregation
reforms should be filed henceforth in Docket No.
RM18–9–000.
19 See Supplemental Notice of Technical
Conference, Docket Nos. RM18–9–000 and AD18–
10–000 (Mar. 29, 2018), https://elibrary.ferc.gov/
idmws/common/opennat.asp?fileID=14856384.
20 See Notice Inviting Post-Technical Conference
Comments, Docket No. RM18–9–000 (Apr. 27,
2018), https://elibrary.ferc.gov/idmws/common/
OpenNat.asp?fileID=14 882250.
17 See
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from the RTOs/ISOs, Commission staff
received 11 reply comments.
15. Some RTOs/ISOs in recent years
have taken steps to facilitate the
participation of distributed energy
resource aggregations in their markets,
and the Commission has approved these
proposals. In June 2016 and January
2020, the Commission accepted
proposals to allow distributed energy
resource aggregations to participate in
certain RTO/ISO markets.21 In addition,
RTOs/ISOs have implemented some
participation models for distributed
energy resource aggregations to
participate in their markets, often as
demand response resources, with a few
exceptions.22
III. Need for Reform
16. In the NOPR, the Commission
stated that its proposal is a continuation
of efforts pursuant to its authority under
the FPA to ensure that the RTO/ISO
tariffs and market rules produce just and
reasonable rates, terms, and conditions
of service.23 Specifically, the
Commission noted that it had observed
that market rules designed for
traditional resources can create barriers
to entry for emerging technologies. The
Commission expressed its concern that
existing RTO/ISO tariffs impede the
participation of distributed energy
resources in the RTO/ISO markets by
providing limited opportunities for
distributed energy resource
aggregations.24
17. The Commission acknowledged in
the NOPR that distributed energy
resources can at times effectively
provide the capacity, energy, and
ancillary services that are purchased
and sold in the RTO/ISO markets.25
However, the Commission explained
that sometimes these resources can be
too small to participate in these markets
individually. The Commission also
noted that current RTO/ISO market
21 See Cal. Indep. Sys. Operator Corp., 155 FERC
¶ 61,229 (2016); N.Y. Indep. Sys. Operator, Inc., 170
FERC ¶ 61,033 (2020) (NYISO Aggregation Order).
22 E.g., CAISO Data Request Response (2019
RM18–9) at 6 (citing CAISO Tariff, Section 4.17);
ISO–NE Data Request Response (2019 RM18–9) at
17–18 (stating that distributed energy resources may
participate in wholesale markets as demand
resources or Settlement Only Resources).
23 NOPR, 157 FERC ¶ 61,121 at P 9 (citing
Integration of Variable Energy Resources, Order No.
764, 139 FERC ¶ 61,246, order on reh’g and
clarification, Order No. 764–A, 141 FERC ¶ 61,232
(2012), order on clarification and reh’g, Order No.
764–B, 144 FERC ¶ 61,222 (2013); Wholesale
Competition in Regions with Organized Electric
Markets, Order No. 719, 73 FR 64100 (Oct. 28,
2008), 125 FERC ¶ 61,071 (2008), order on reh’g,
Order No. 719–A, 74 FR 37776 (Jul. 29, 2009), 128
FERC ¶ 61,059 (2009), order on reh’g, Order No.
719–B, 129 FERC ¶ 61,252 (2009)).
24 Id. P 13.
25 See id.
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rules often limit the services that
distributed energy resources are eligible
to provide, in many cases only allowing
these resources to be used as demand
response or load-side resources when
they are located behind a customer
meter or by imposing prohibitively
expensive or otherwise burdensome
requirements.
18. The Commission preliminarily
found that the barriers to the
participation of distributed energy
resources through distributed energy
resource aggregations in the RTO/ISO
markets may, in some cases,
unnecessarily restrict competition,
which could lead to unjust and
unreasonable rates.26 The Commission
stated that effective wholesale
competition encourages entry and exit
and promotes innovation, incents the
efficient operation of resources, and
allocates risk appropriately between
consumers and producers. Thus, the
Commission stated that removing the
barriers to participation by distributed
energy resource aggregations will
enhance the competitiveness, and in
turn the efficiency, of RTO/ISO markets
and thereby help to ensure just and
reasonable and not unduly
discriminatory or preferential rates for
wholesale electric services.
A. Comments
19. Most commenters, including state
entities and RTOs/ISOs, support
requiring RTOs/ISOs to remove barriers
to the participation of distributed energy
resource aggregations in their markets,
subject to the Commission’s adopting
certain modifications to the NOPR
proposals and/or allowing for regional
flexibility in implementing reforms in
any eventual final rule.27 Among other
things, these commenters identify
improved competition and reliability as
benefits of the proposed reforms and
note that they provide a better way to
provide price signals to distributed
energy resources than current retail
programs,28 which may reduce the cost
of meeting power system needs.29
AWEA notes that participation in
wholesale markets allows distributed
26 See
id. P 14.
e.g., Advanced Energy Economy
Comments (RM16–23) at 31–32; Connecticut
Department of Energy Comments (RM16–23) at 4;
IPKeys/Motorola Comments (RM16–23) at 4;
Leadership Group Comments (RM16–23) at 2; MISO
Comments (RM16–23) at 2; Ohio Commission
Comments (RM16–23) at 2–3.
28 AWEA Comments (RM16–23) at 1–2; City of
New York Comments (RM16–23) at 3, 5, 7;
Maryland and New Jersey Commissions Comments
(RM16–23) at 2; Ohio Commission Comments
(RM16–23) at 2; Public Interest Organizations
Comments (RM16–23) at 5–6.
29 AWEA Comments (RM16–23) at 2.
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27 See,
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energy resources to receive real-time
information about system needs.30
Commenters also state that the removal
of barriers to, and integration of,
distributed energy resource aggregations
could spur innovation, and allow these
aggregations to serve important roles on
the grid.31 Several commenters
emphasize that a distributed energy
resource aggregation framework must
ensure that aggregated distributed
energy resources can provide all the
services that they are capable of
providing,32 while competing on a level
and technology-neutral playing field
with other resources.33 Some
commenters note that distributed energy
resources do not currently fit within
existing paradigms, which were
designed for, and favor, other
resources.34 Others state that for
distributed energy resources and
distributed energy resource aggregations
to fairly participate, they must meet the
same technical and commercial
requirements as other resources, and
pay equally for ancillary services and
use of the transmission system.35
20. Several commenters assert that
existing participation models
discriminate against distributed energy
resources. For instance, Public Interest
Organizations argue that distributed
energy resources in PJM are often forced
into participating as demand response,
or interconnecting as generation, which
are cost prohibitive.36 Stem asserts that
CAISO’s Non-Generator Resource and
Distributed Energy Resource Provider
models effectively prevent participation
of behind-the-meter resources in
CAISO.37 Advanced Energy Economy
contends that, despite the benefits that
aggregated distributed energy resources
30 Id.
31 California Energy Storage Alliance Comments
(RM16–23) at 4; Microgrid Resources Coalition
Comments (RM16–23) at 10; Union of Concerned
Scientists Comments (RM16–23) at 9, 15, 17 (noting
the lack of participation models for potential market
service providers like domestic electric water
heaters and distributed solar resources).
32 See, e.g., Advanced Energy Management
Comments (2018 RM18–9) at 3; Direct Energy
Comments (2018 RM18–9) at 5, 11–13; Energy
Storage Association Comments (2018 RM18–9) at 2;
Microsoft Comments (2018 RM18–9) at 16–17; NRG
Comments (2018 RM18–9) at 5–6.
33 Advanced Energy Economy Comments (2018
RM18–9) at 5; Advanced Energy Management
Comments (2018 RM18–9) at 3; Microsoft
Comments (2018 RM18–9) at 15–16; NRG
Comments (2018 RM18–9) at 3.
34 Fresh Energy/Sierra Club/Union of Concerned
Scientists Comments (RM16–23) at 1; Public
Interest Organizations Comments (RM16–23) at 5–
6.
35 PJM Market Monitor Comments (RM16–23) at
10–11; New York Utility Intervention Unit
Comments (RM16–23) at 3.
36 Public Interest Organizations Comments
(RM16–23) at 19.
37 Stem Comments (RM16–23) at 12, 16.
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provide,38 performance penalties for
deviation from the characteristics of
traditional generation effectively
preclude participation in the capacity
market.39
21. Some commenters state that
distributed energy resource aggregation
integration can be accomplished in a
reliable and cost-effective manner.40
Other commenters argue that allowing
distributed energy resource aggregations
to participate in wholesale markets will
create new opportunities and enhance
the reliability and resilience of the grid,
leading to benefits such as savings and
efficiency.41 Advanced Energy Buyers
suggest that allowing distributed energy
resources to participate in RTO/ISO
markets will also provide such
resources with additional revenue
streams, making them more economic
and candidates for greater investment,
and provide additional benefit to the
grid as a result of increased market
activity.42 Commenters also note that
the pairing of dispatchable resources
with non-dispatchable resources in an
aggregation could create a portfolio that
overall could be dispatchable to the
bulk power system.43 Other commenters
assert that, if distributed energy
resources are not able to participate in
wholesale markets, it could result in
system overbuild, inaccurate wholesale
price formation, and lack of visibility
into system conditions.44
22. Certain United States senators
express support for the proposed rule
which, they state, would help develop
frameworks for how renewables can
aggregate together to more effectively
participate in energy markets, and
provide useful guidance on how to
better integrate these resources with
existing energy providers. In addition,
38 Advanced Energy Economy states that the
benefits include the ability to provide a quick
response to system emergencies, which gives other
resources time to ramp up or procure fuel, the
ability of demand response to prevent blackouts
during times of peak demand, and the ability to be
dispatched granularly to provide support to specific
parts of the grid. Advanced Energy Economy
Comments (RM16–23) at 42–43.
39 Id. (arguing that PJM’s capacity performance
construct and ISO–NE’s pay-for-performance
construct both effectively require indefinite run
times to avoid performance penalties that can
amount to more than a year’s worth of capacity
revenue).
40 Advanced Energy Economy Comments (2018
RM18–9) at 5.
41 See, e.g., Advanced Energy Buyers Comments
(2018 RM18–9) at 3; CAISO Comments (2018
RM18–9) at 1; Direct Energy Comments (2018
RM18–9) at 11–13; NRG Comments (2018 RM18–9)
at 5–6; Tesla Comments (2018 RM18–9) at 3.
42 Advanced Energy Buyers Comments (2018
RM18–9) at 5.
43 NYISO Indicated Transmission Owners
Comments (2018 RM18–9) at 4.
44 Id.; Microsoft Comments (2018 RM18–9) at 13.
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these United States senators maintain
that the rulemaking comes at a critical
time for renewable energy because
renewables led the way in 2016 for new
additions onto the energy grid.45 These
United States senators, as well as
members of the United States House of
Representatives, urge the Commission to
adopt a final rule that provides all
distributed energy resources with the
opportunity to participate in RTO/ISO
markets, noting that the changes
proposed in the NOPR will help
improve the reliability and resilience of
the bulk power system by providing
operators with new local tools to
manage unanticipated events and
potentially lower costs for customers.
They state that renewable energy
provided 10% of electricity generation
in 2018 due to state and federal policies
as well as consumer interest in choosing
cost-competitive technologies.46
23. Mensah asserts that one of the
biggest limitations that needs to be
addressed is the ability of behind-themeter distributed energy resources to
inject onto the grid.47 Tesla requests the
Commission extend to distributed
energy resource aggregations the finding
in Order No. 841 that existing tariffs do
not recognize the operational
characteristics of electric storage
45 September 22, 2017 Letter to Chairman Neil
Chatterjee from United States Senators Sheldon
Whitehouse, Cory A. Booker, Edward J. Markey,
Ron Wyden, Elizabeth Warren and Bernard Sanders
(filed Sept. 25, 2017) (September 22 Letter); see also
May 23, 2018 Letter to Chairman Kevin McIntyre
from United States Senators Sheldon Whitehouse,
Edward J. Markey, Martin Heinrich, Jeanne
Shaheen, Richard Blumenthal, Margaret Wood
Hassan, Angus S. King, Jr., Dianne Feinstein,
Bernard Sanders, Catherine Cortez Masto, Jack
Reed, Ron Wyden, Jeff Merkley, Kamala D. Harris,
Cory A. Booker, and Brian Schatz (filed May 23,
2018) (discussing 2016 estimates from the Energy
Information Administration that distributed energy
resources accounted for about two percent of the
installed generation capacity in the United States).
In response to the September 22 Letter, Chairman
Chatterjee stated that the Commission has a role in
fostering resource neutral, non-discriminatory
policies with respect to the wholesale markets,
including removing barriers to the participation of
distributed energy resources in the wholesale
markets. Chairman’s Response to September 22
Letter (filed Oct. 5, 2017).
46 February 11, 2019 Letter to Chairman Neil
Chatterjee from United States Congress members
Peter Welch, Mike Levin, Mike Quigley, Paul D.
Tonko, Daniel W. Lipinski, Jerry McNerney, James
R. Langevin, Kathy Castor, Raul M. Grijalva, Mark
Pocan, Donald S. Beyer Jr., Matt Cartwright, Nanette
Diaz Barraga´n, Sean Casten, Jamie Raskin, James P.
McGovern, and Mike Doyle (filed Feb. 11, 2019);
February 11, 2019 Letter to Chairman Neil
Chatterjee from United States Senators Sheldon
Whitehouse, Edward J. Markey, Cory A. Booker,
Catherine Cortez Masto, Martin Heinrich, Brian
Schatz, Ron Wyden, Jeffrey A. Merkley, Kamala D.
Harris, Richard Blumenthal, Jack Reed, Angus S.
King, Jr., Tina Smith, Jacky Rosen, Margaret Wood
Hassan, Jeanne Shaheen, Dianne Feinstein, and
Bernard Sanders (filed Feb. 21, 2019).
47 Mensah Comments (RM16–23) at 3.
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resources and limit their participation
in the markets.48 Tesla urges the
Commission to require that RTO/ISO
tariffs allow distributed energy
resources, including those resources
physically located behind an end-use
customer meter, to employ their full
operational range by injecting energy
onto the grid in order to provide any
wholesale service through participation
in distributed energy resource
aggregations.49
24. Some commenters argue that the
Commission needs to provide general
guidance on distributed energy resource
aggregation, with straightforward rules,
clearly defined responsibilities, and
data-driven market signals.50 They
explain that distributed energy resource
aggregations must have transparent and
predictable parameters for participation
that are not overly restrictive and do not
contain undue administrative delay.51
Microsoft suggests that the Commission
provide ‘‘directional guidance’’ to
RTOs/ISOs to remove barriers.52
25. In contrast, EEI states that the
Commission should defer to regional
stakeholder processes and coordination
with state-jurisdictional entities to
formulate the detailed provisions
required to implement distributed
energy resource aggregation
participation in the wholesale market.53
APPA states that the evidence is thin to
show that there is a great demand for
distributed energy resource aggregation
programs or that such programs will
bring meaningful benefits to consumers
in the RTO/ISO regions.54
B. Commission Determination
26. For the reasons discussed below,
in this final rule, we affirm the
preliminary finding in the NOPR that
existing RTO/ISO market rules are
unjust and unreasonable because they
present barriers to the participation of
distributed energy resource aggregations
in the RTO/ISO markets, and such
barriers reduce competition and fail to
ensure just and reasonable rates.
Specifically, current RTO/ISO market
rules present barriers that prevent
certain distributed energy resources that
are technically capable of participating
in the RTO/ISO markets on their own or
through aggregation from doing so.55
48 Tesla
Comments (2018 RM18–9) at 7.
at 1, 7.
50 Advanced Energy Buyers Comments (2018
RM18–9) at 2; Advanced Energy Economy
Comments (2018 RM18–9) at 5.
51 Advanced Energy Buyers Comments (2018
RM18–9) at 5.
52 Microsoft Comments (2018 RM18–9) at 13.
53 EEI Comments (2018 RM18–9) at 3.
54 APPA Comments (2018 RM18–9) at 10.
55 See NOPR, 157 FERC ¶ 61,121 at P 124.
49 Id.
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67099
Permitting distributed energy resource
aggregations to participate in the RTO/
ISO markets may allow these resources,
in the aggregate, to meet certain
qualification and performance
requirements, particularly if the
operational characteristics of different
distributed energy resources in a
distributed energy resource aggregation
complement each other.56 The reforms
adopted in this final rule will remove
the barriers that qualification and
performance requirements currently
pose to the participation of distributed
energy resources in the RTO/ISO
markets.57
27. The reforms adopted in this final
rule are timely, as there has been
significant development of distributed
energy technologies and deployment of
distributed energy resources in recent
years. Moreover, this development has
generated discussions on the potential
for such resources—including new
distributed energy resources that are
smaller, interconnected at lower
voltages, and geographically
dispersed—to provide grid services
through participation in RTO/ISO
markets. Wider scale use of distributed
energy resources is enabled by increased
deployment of, and improvements in,
metering, telemetry, and
communication technologies.
Aggregations of new and existing
distributed energy resources can
provide new cost-effective sources of
energy and grid services and enhance
competition in wholesale markets as
new market participants.
28. Individual distributed energy
resources often do not meet the
minimum size requirements to
participate in the RTO/ISO markets
under existing participation models and
often cannot satisfy all the performance
requirements of the various
participation models due to their small
size. In order to participate in RTO/ISO
markets, distributed energy resources
tend to participate in RTO/ISO demand
response programs. While these demand
response programs have helped reduce
barriers to load curtailment resources,
they often limit the operations of some
56 See
id. P 125.
infra section IV.C.4 (Minimum and
Maximum Size of Aggregation) (agreeing with
commenters that a minimum size requirement not
to exceed 100 kW will help improve competition
in the RTO/ISO markets and avoid confusion about
appropriate minimum size requirements for
distributed energy resource aggregations under
existing or new participation models); Section
IV.C.6 (Single Resource Aggregation) (explaining
that a consistent minimum size requirement will
minimize barriers in the event that an individual
distributed energy resource ceases to participant in
RTO/ISO markets as a single qualifying distributed
energy resource aggregation).
57 See
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types of distributed energy resources,
such as electric storage or distributed
generation, as well as the services that
they are eligible to provide.58
29. We find that adopting the reforms
described below will enhance the
competitiveness, and in turn the
efficiency, of RTO/ISO markets and
thereby help to ensure just and
reasonable and not unduly
discriminatory or preferential rates for
wholesale electric services.59 Further,
the reforms required by this final rule
will help the RTOs/ISOs account for the
impacts of distributed energy resources
on installed capacity requirements and
day-ahead energy demand, thereby
reducing uncertainty in load forecasts
and the risk of over procurement of
resources and the associated costs, and
provide numerous other benefits.60
Accordingly, as discussed further
below, we adopt the NOPR proposal to
add § 35.28(g)(12)(i) to the
Commission’s regulations and require
each RTO/ISO to have tariff provisions
that allow distributed energy resource
aggregations to participate directly in
RTO/ISO markets.61 While we agree
with commenters that there are
operational, technological, and cost
implications that must be evaluated and
addressed, as explained below, we find
that the record in this proceeding
provides sufficient basis for taking
action to require the implementation of
the generic requirements discussed
herein.
30. To the extent that an RTO/ISO
proposes to comply with any or all of
the requirements in this final rule using
its currently effective requirements for
distributed energy resources, it must
demonstrate on compliance that its
existing approach meets the
requirements in this final rule.
58 For example, when participating through
demand response programs, distributed energy
resources generally can only operate to reduce
customer demand at the meter, and any injection/
generation cannot exceed customer demand.
Consequently, these resources are prevented from
injecting additional electricity into the grid to make
sales of electricity in RTO/ISO markets.
59 See infra Section IV.C.1 (Participation Model);
Section IV.C.2 (Types of Technologies); Section
IV.C.3 (Double Counting of Services); Section
IV.H.2 (Role of Distribution Utilities); Section IV.J
(Market Participation Agreements).
60 See infra Section IV.C.4 (Minimum and
Maximum Size of Aggregation); Section IV.D
(Locational Requirements).
61 In addition, we adopt the proposal to add
sections 35.28(b)(10) and (11) to the Commission’s
regulations incorporating the definitions for
distributed energy resource and distributed energy
resource aggregator.
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IV. Discussion
A. Commission Jurisdiction
1. Scope of Final Rule
31. In the NOPR, the Commission
stated that it was proposing reforms
pursuant to its legal authority under
section 206 of the FPA to ensure that the
RTO/ISO tariffs are just and reasonable
and not unduly discriminatory or
preferential.62
a. Comments
32. Several commenters assert that the
basis for the Commission’s jurisdiction
is straightforward because sales from
distributed energy resource aggregators
into wholesale markets are sales at
wholesale in interstate commerce.63
Other commenters question the
Commission’s authority to implement
the proposed reforms, seek clarification
of the NOPR’s scope, or ask the
Commission to respect existing federal,
state, and local jurisdictional
boundaries.64
33. Stem asserts that the Commission
should clarify that it has jurisdiction
over participation in the wholesale
markets and the associated transactions,
while relevant electric retail regulatory
authorities 65 have jurisdiction over the
physical dispatch and the resulting
electrical activity on the distribution
system.66 Connecticut State Entities
argue that, while the management of the
impacts of new generation on the
distribution system remains with the
states, the comprehensive and effective
integration of these emerging
technologies into the wholesale markets
rests with the Commission.67
34. Harvard Environmental Policy
Initiative argues that the Commission’s
proposal to assert jurisdiction over a
distributed energy resource aggregator’s
sale of sink-related services to RTOs/
ISOs would fall under the Commission’s
jurisdiction under the test applied by
62 NOPR,
157 FERC ¶ 61,121 at P 1.
e.g., Sunrun Comments (2018 RM18–9) at
3–4 (citing 16 U.S.C. 824(b)(1)); Connecticut State
Entities Comments (RM16–23) at 7; Stem Comments
(2018 RM18–9) at 3.
64 See, e.g., APPA/NRECA Comments (RM16–23)
at 18–20; MISO Transmission Owners Comments
(RM16–23) at 17–18; NESCOE Comments (RM16–
23) at 16; TAPS Comments (RM16–23) at 4–5; Xcel
Energy Services Comments (RM16–23) at 6–9, 23–
24.
65 The term ‘‘relevant electric retail regulatory
authority’’ means the entity that establishes the
retail electric prices and any retail competition
policies for customers, such as the city council for
a municipal utility, the governing board of a
cooperative utility, or the state public utility
commission. See Order No. 719, 125 FERC ¶ 61,071
at P 158.
66 Stem Comments (2018 RM18–9) at 3.
67 Connecticut State Entities Comments (RM16–
23) at 7.
63 See,
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the U.S. Supreme Court in FERC v.
Electric Power Supply Ass’n,68 and that
the Commission has authority under
FPA section 206 to require RTOs/ISOs
to enable the participation of distributed
energy resource aggregators.69 Harvard
Environmental Policy Initiative further
contends that a company’s distribution
system investments, even if motivated
by a Commission rule, are not evidence
that the Commission has overstepped its
legal authority, and that, even if a
change in state law were necessary to
allow consumers to participate, the
NOPR does not force states to do
anything and does not require states to
facilitate the development of distributed
energy resources.70
35. In contrast, some commenters
question the Commission’s authority to
impose the proposed reforms or seek
clarification of federal and state
jurisdictional boundaries.71 APPA/
NRECA interpret the NOPR to be
limited to reforms to the RTO/ISO tariff
rules governing RTO/ISO markets and
they urge the Commission not to expand
the scope of the NOPR beyond RTO/ISO
markets and to preserve state and local
authority over retail sales, generation
facilities, and local distribution
facilities.72 TAPS similarly asserts that
any final rule should be limited to (1)
the treatment by RTOs/ISOs of energy
and ancillary services from distributed
energy resources after those resources
have already been delivered to the
RTO’s/ISO’s markets; and (2) assuring
that any such participation of
distributed energy resource aggregations
in RTO/ISO markets is compatible with
the safe and reliable operation of the
distribution system, as well as relevant
electric retail regulatory authority and
distribution utility tariffs, rules, and
requirements.73 FirstEnergy argues that
any rules adopted by the Commission
must preserve state jurisdictional
authority over distribution-level
resources.74 Similarly, the Maryland
and New Jersey Commissions ask the
Commission to confirm that state
decisions on distribution system design,
resource interconnection access,
operations, and costs will not be viewed
68 Harvard Environmental Policy Initiative
Comments (RM16–23) at 3 (citing FERC v. Electric
Power Supply Ass’n, 136 S. Ct. 760, 776 (2016)
(EPSA)).
69 Id. at 4–5.
70 Id. at 9, 12.
71 See EEI Comments (RM16–23) at 25; Icetec
Comments (2018 RM18–9) at 1–2; Maryland and
New Jersey Commissions Comments (RM16–23) at
2–3; Massachusetts Commission Comments (RM16–
23) at 10; Stem Comments (2018 RM18–9) at 3.
72 APPA/NRECA Comments (RM16–23) at 18–20.
73 TAPS Comments (RM16–23) at 9.
74 FirstEnergy Comments (2019 RM18–9) at 5
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as a barrier to wholesale competition or
subject to Commission review.75 MISO
Transmission Owners assert that any
final rule must not disturb a state’s
jurisdiction over retail electricity sales
and retail distribution service, including
state regulation of retail rates, net
metering programs, and participation in
wholesale markets by resources located
behind a retail distribution service
meter.76
36. The Maryland and New Jersey
Commissions ask the Commission to
enunciate clear federal and state
jurisdictional lines pertaining to both
the distribution system and distributed
energy resources, whether in front of or
behind the meter.77 The Massachusetts
Commission and EEI ask the
Commission to clarify whether
distribution system-connected and
behind-the-meter distributed energy
resources that participate in wholesale
markets are Commission-jurisdictional
facilities.78 EEI notes that the
Commission has exclusive jurisdiction
over sales for resale under the FPA.79
The Harvard Environmental Policy
Initiative states that EEI confuses
Commission jurisdiction over energy
sales with state jurisdiction over
generation facilities and argues that
states will retain authority over the
resources themselves.80
37. Icetec asks the Commission either
to (1) clarify that retail customers
transmitting power from distributed
energy resources behind their retail
service point to their retail point of
interconnection are not considered
public utilities subject to Open Access
Transmission Tariff (OATT) and Open
Access Same-Time Information System
(OASIS) requirements, or (2) require
RTOs/ISOs to include a pro forma
request for waiver of those requirements
in distributed energy resource
participation agreements.81 The Harvard
Environmental Policy Initiative states
that the Commission should establish a
jurisdictional line that distinguishes
between sales by distributed energy
resource aggregators and sales by
individual distributed energy resources
by determining that an energy sale from
an individual distributed energy
resource is not a ‘‘wholesale sale in
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75 Maryland
and New Jersey Commissions
Comments (RM16–23) at 3.
76 MISO Transmission Owners Comments
(RM16–23) at 5–6.
77 Maryland and New Jersey Commissions
Comments (RM16–23) at 2.
78 Massachusetts Commission Comments (RM16–
23) at 11.
79 EEI Comments (RM16–23) at 23–24 (citing 16
U.S.C. 824o(a)(1)).
80 Harvard Environmental Policy Initiative
Comments (RM16–23) at 12.
81 Icetec Comments (2018 RM18–9) at 9.
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interstate commerce’’ but is instead
‘‘any other sale’’ under FPA section 201
and therefore not subject to Commission
regulation.82
b. Commission Determination
38. FPA section 201 authorizes the
Commission to regulate the
transmission of electric energy in
interstate commerce and the wholesale
sale of electric energy in interstate
commerce, as well as all facilities used
for such transmission or sale of electric
energy.83 FPA section 201 also defines
a public utility as a person who owns
or operates facilities subject to the
jurisdiction of the Commission.84 FPA
sections 205 85 and 206 86 provide the
Commission with jurisdiction over all
rates and charges made, demanded, or
received by any public utility for or in
connection with the transmission or sale
of electric energy subject to the
Commission’s jurisdiction. Those
sections also provide the Commission
with jurisdiction over all rules,
regulations, practices, or contracts
affecting jurisdictional rates, charges, or
classifications.
39. The Commission’s authority to
issue regulations pertaining to
distributed energy resource aggregations
stems from both the Commission’s
jurisdiction over the wholesale sales by
distributed energy resource aggregators
into RTO/ISO markets and from its
jurisdiction over practices affecting
wholesale rates.87
40. First, we find that the sales of
electric energy by distributed energy
resource aggregators for purposes of
participating in an RTO/ISO market are
wholesale sales subject to the
Commission’s jurisdiction. In Order No.
841, the Commission observed that an
electric storage resource that injects
electric energy back to the grid for
purposes of participating in an RTO/ISO
market engages in a sale of electric
energy at wholesale in interstate
commerce.88 Similarly, to the extent
that a distributed energy resource
aggregator’s transaction in RTO/ISO
markets entails the injection of electric
energy onto the grid and a sale of that
energy for resale in wholesale electric
82 Harvard Environmental Policy Initiative
Comments (RM16–23) at 13 (quoting 16 U.S.C.
824(b)(1)).
83 16 U.S.C. 824.
84 Id. 824(e).
85 Id. 824d.
86 Id. 824e.
87 See Nat’l Ass’n of Regulatory Util. Comm’rs v.
FERC, 964 F.3d at 1186 (‘‘FERC bears the
responsibility of regulating the wholesale market,
which encompasses ‘both wholesale rates and the
panoply of rules and practices affecting them.’ ’’)
(quoting EPSA, 136 S. Ct. at 773).
88 Order No. 841, 162 FERC ¶ 61,127 at P 30.
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67101
markets, we find that the Commission
has jurisdiction over such wholesale
sales.89
41. Second, we find that RTO/ISO
market rules governing sales in RTO/
ISO markets by distributed energy
resource aggregators from demand
resources (e.g., demand response and
energy efficiency) are practices affecting
wholesale rates. This finding aligns with
the decision of the U.S. Supreme Court
in EPSA, which interpreted the FPA as
providing the Commission with
jurisdiction over the participation in
RTO/ISO markets of demand response
resources: A type of non-traditional
resource that, by definition, is located
behind a customer meter and generally
is located on the distribution system.90
First, the Court found that the
Commission’s regulation of demand
response participation in wholesale
markets met the ‘‘affecting’’ standard in
FPA sections 205 and 206 ‘‘with room
to spare.’’ 91 Second, the Court found
that the Commission’s regulation of
demand response resources did not
regulate retail sales in violation of FPA
section 201(b).92 These holdings apply
equally to RTO/ISO market rules
governing sales in RTO/ISO markets by
distributed energy resource aggregators
from demand resources.
42. We clarify that, to the extent a
distributed energy resource aggregator
makes sales of electric energy into RTO/
ISO markets, it will be considered a
public utility subject to the
Commission’s jurisdiction.93 Such
distributed energy resource aggregators
must fulfill certain responsibilities set
forth in the FPA and the Commission’s
rules and regulations.94 If a distributed
89 See EnergyConnect, Inc., 130 FERC ¶ 61,031, at
P 29 (2010). We note that injections of electric
energy to the grid do not necessarily trigger the
Commission’s jurisdiction. See Sun Edison LLC,
129 FERC ¶ 61,146 (2009), reh’g granted on other
grounds, 131 FERC ¶ 61,213 (2010) (the
Commission’s jurisdiction would arise only when a
facility operating under a state net metering
program produces more power than it consumes
over the relevant netting period); MidAmerican
Energy Co., 94 FERC ¶ 61,340 (2001).
90 See Order No. 841–A, 167 FERC ¶ 61,154 at P
33 (citing EPSA, 136 S. Ct. 760; 18 CFR 35.28(b)(4)).
91 EPSA, 136 S. Ct. at 774 (referring to the
Commission’s jurisdiction under FPA sections 205
and 206 to regulate practices affecting jurisdictional
rates).
92 Id. at 784.
93 See EnergyConnect, Inc., 130 FERC ¶ 61,031 at
P 29 (finding an aggregator of retail customers to be
a public utility under FPA section 201(e) because
its agreements to make sales of balancing energy for
resale in RTO/ISO markets would constitute
jurisdictional facilities under FPA section 201(b)).
94 Examples of such responsibilities include filing
rates under FPA section 205 (potentially including
obtaining market-based rate authority); filing
Electric Quarterly Reports; submitting FPA sections
203 and 204 filings related to corporate mergers and
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energy resource aggregator (1) aggregates
only demand resources; or (2) aggregates
only customers in a net metering
program that are not net sellers, that
distributed energy resource aggregator
would not become a public utility.95
43. We further clarify that we are only
exercising jurisdiction in this final rule
over the sales by distributed energy
resource aggregators into the RTO/ISO
markets. Hence, an individual
distributed energy resource’s
participation in a distributed energy
resource aggregation would not cause
that individual resource to become
subject to requirements applicable to
Commission-jurisdictional public
utilities.
44. As the Commission stated in
Order Nos. 841 and 841–A, the
Commission recognizes a vital role for
state and local regulators with respect to
retail services and matters related to the
distribution system, including design,
operations, power quality, reliability,
and system costs.96 As in Order No. 841,
we reiterate that nothing in this final
rule preempts the right of states and
local authorities to regulate the safety
and reliability of the distribution system
and that all distributed energy resources
must comply with any applicable
interconnection and operating
requirements.97
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2. Opt-Out
45. In the NOPR, the Commission
proposed to require each RTO/ISO to
revise its tariff as necessary to
accommodate the participation of
distributed energy resource aggregations
in RTO/ISO markets.98 In the NOPR, the
Commission stated that, to the extent
existing rules or regulations explicitly
prohibit certain technologies from
participating in RTO/ISO markets, it did
not intend to overturn those rules or
regulations.99 However, the Commission
did not propose a mechanism by which
other activities; and fulfilling FPA section 301
accounting obligations and FPA section 305(b)
interlocking directorate obligations. See 16 U.S.C.
824b, 824c, 824d, 825, 825d(b).
95 See EnergyConnect, Inc., 130 FERC ¶ 61,031 at
P 30 (finding that ‘‘where an entity is only engaged
in the provision of demand response services, and
makes no sales of electric energy for resale, that
entity would not own or operate facilities that are
subject to the Commission’s jurisdiction and would
not be a public utility that is required to have a rate
on file with the Commission’’); Sun Edison LLC, 129
FERC ¶ 61,146 (the Commission’s jurisdiction
would arise only when a facility operating under a
state net metering program produces more power
than it consumes over the relevant netting period);
MidAmerican Energy Co., 94 FERC ¶ 61,340.
96 Order No. 841, 162 FERC ¶ 61,127 at P 36;
Order No. 841–A, 167 FERC ¶ 61,154 at P 42.
97 See Order No. 841–A, 167 FERC ¶ 61,154 at P
46.
98 NOPR, 157 FERC ¶ 61,121 at P 124.
99 Id. P 133.
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relevant electric retail regulatory
authorities could authorize or prohibit
the participation of distributed energy
resources or distributed energy resource
aggregators in RTO/ISO markets. The
Commission also explained that,
because the individual resources in
distributed energy resource aggregations
likely will fall under the purview of
multiple organizations (e.g., the RTO/
ISO, state regulatory commissions,
relevant distribution utilities, and local
regulatory authorities), the proposed
market participation agreements 100 for
distributed energy resource aggregators
must require that the aggregator attest
that its distributed energy resource
aggregation is compliant with the tariffs
and operating procedures of the
distribution utilities and the rules and
regulations of any other relevant
regulatory authority.101 The
Commission stated that this may
include any laws or regulations of the
relevant electric retail regulatory
authority that do not permit demand
response resources to participate in
RTO/ISO markets as the Commission
considered in Order No. 719.102
46. After the technical conference, the
Commission sought comments on
whether states could require distributed
energy resources to choose to participate
in either an RTO/ISO market or retail
compensation program, but not allow
participation in both.103 The
Commission also sought comments on
the benefits and drawbacks of such an
approach.
a. Comments
47. As described above,104 numerous
commenters question the Commission’s
authority to require RTOs/ISOs to
accommodate the participation of
distributed energy resource aggregations
in RTO/ISO markets. They believe that,
to mitigate their jurisdictional concerns,
relevant electric retail regulatory
authorities and/or distribution utilities
must be allowed to either authorize or
prohibit the participation of distributed
energy resources and/or distributed
energy resource aggregators in the RTO/
ISO markets (i.e., to opt in or opt out,
respectively).105 Thus, they specifically
100 See Section IV.J (Market Participation
Agreements) below for more discussion of market
participation agreements.
101 NOPR, 157 FERC ¶ 61,121 at P 157.
102 Id. P 157 n.238 (citing Order No. 719, 125
FERC ¶ 61,071 at P 154).
103 Notice Inviting Post-Technical Conference
Comments at 6.
104 See supra Section IV.A.1 (Scope of Final
Rule).
105 See, e.g., APPA/NRECA Comments (RM16–23)
at 21–22; DTE Electric/Consumers Energy
Comments (RM16–23) at 7; MISO Transmission
Owners Comments (RM16–23) at 6; NARUC
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request that the Commission adopt an
opt-out/opt-in provision similar to that
established in Order No. 719 to allow
relevant electric retail regulatory
authorities to decide whether
distributed energy resources may
participate in aggregations in RTO/ISO
markets.106
48. Some of these commenters
contend that the Commission would be
exceeding its statutory authority if the
final rule does not include an optout.107 They argue that the Commission
may determine how distributed energy
resources participate in RTO/ISO
markets, but whether they participate is
the exclusive province of the states.108
APPA points to the existing opt-out for
demand response resources established
in Order No. 719 to argue that the
applicability of relevant electric retail
regulatory authority should not turn on
the wholesale participation model
selected by the aggregator.109 APPA
asserts that the authority of relevant
electric retail regulators over the terms
and conditions of interconnection to the
distribution system includes the
authority to limit the manner in which
a distributed energy resource uses the
distribution system.110 APPA argues
that an opt-out is consistent with the
NOPR’s proposal that market
participation agreements include an
attestation that an aggregation is
compliant with distribution utility
tariffs and the rules and regulations of
any other relevant regulatory authority.
APPA further argues that an opt-out
conforms with the requirement in Order
No. 841 that an electric storage resource
must be ‘‘contractually permitted’’ to
inject electric energy back onto the grid
(e.g., per the interconnection agreement
between an electric storage resource that
is interconnected on a distribution
system or behind the meter and the
distribution utility to which it is
Comments (RM16–23) at 4–5; TAPS Comments
(RM16–23) at 10, 16–17.
106 See, e.g., AES Companies Comments (RM16–
23) at 31; Kansas Commission Comments (2018
RM18–9) at 4; NRECA Comments (2018 RM18–9) at
6–7, 27–28; Organization of MISO States Comments
(RM16–23) at 4–5; Southern Companies Comments
(2018 RM18–9) at 3–4 (citing Order No. 719, 125
FERC ¶ 61,071; Order No. 719–A, 128 FERC
¶ 61,059); see discussion of opt-out/opt-in infra PP
59, 64.
107 Kansas Commission Comments (2018 RM18–
9) at 3; NARUC Comments (2018 RM18–9) at 2–3;
see APPA Comments (2018 RM18–9) at 15.
108 Kansas Commission Comments (2018 RM18–
9) at 2–3; NARUC Comments (2018 RM18–9) at 2–
3.
109 APPA Comments (2018 RM18–9) at 17–18.
110 Id. at 15–16 (noting that CAISO’s Distributed
Energy Resource Provider program requires
compliance with applicable distribution utility
tariffs and operating procedures, as well as
applicable requirements of the relevant electric
retail regulatory authority).
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interconnected).111 Xcel Energy Services
argues that, to the extent distributed
energy resource participation in RTO/
ISO markets does occur, the applicable
state has the authority to establish the
parameters of the participation model,
not the RTO/ISO.112 Xcel Energy
Services asserts that the Commission
should not usurp the states’ authority to
address inappropriate arbitrage between
retail and wholesale consumption.113
49. Multiple United States senators
urge the Commission to preserve the
authority of state and local authorities
over distribution utilities with respect to
distributed energy resource aggregators.
They express concern that the final rule
could have a negative effect on state and
local authorities’ ability to regulate
retail and distribution service. They
argue that, if the Commission authorizes
the aggregation of distributed energy
resources by entities other than the local
distribution utility without
authorization by the appropriate state or
local regulator, the Commission would
break precedent and expand
Commission regulation into areas that
are jurisdictional to state and localities
under the FPA. They maintain that the
relevant electric retail regulatory
authority is best positioned to decide
whether to authorize third-party
distributed energy resource aggregators
to transact with retail customers.114
50. Those commenters advocating for
an opt-out also generally express
concerns about the cost, and operational
and reliability impacts, of distributed
energy resource aggregations on
distribution utilities and the
distribution system.115 With regard to
111 Id. at 16 (citing NOPR, 157 FERC ¶ 61,121 at
P 157; Order No. 841, 162 FERC ¶ 61,127 at P 33).
112 Xcel Energy Services Comments (RM16–23) at
23–24.
113 Id. at 24.
114 May 7, 2019 Letter to Chairman Neil
Chatterjee from United States Senators John
Hoeven, Kevin Cramer, John Barrasso, John
Boozman, Lisa Murkowski, Michael B. Enzi, Joni K.
Ernst, Roger F. Wicker, Shelley Moore Capito,
Chuck Grassley, M. Michael Rounds, Steve Daines,
John Thune, Thom Tillis, Mike Crapo, Cindy HydeSmith, Roy Blunt, James E. Risch, James Lankford,
Deb Fischer, James M. Inhofe, and Bill Cassidy. In
response to this letter, the Chairman noted that he
asked state regulators participating at the April
2018 technical conference to discuss whether and
why they view as important in the context of this
rulemaking the type of flexibility that the
Commission has provided to relevant electric retail
regulatory authorities with respect to participation
of demand response resources in wholesale electric
markets. The Chairman also stated that he
recognizes the important role of state and local
regulators with respect to reliability and resilience,
particularly with respect to the distribution system.
Chairman’s Response to May 7, 2019 Letter (filed
June 4, 2019).
115 See, e.g., Vice Chairman Place Comments
(2018 RM18–9) at 2–3; EEI Comments (2018 RM18–
9) at 19–20; Eversource Comments (2018 RM18–9)
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cost impacts, some commenters suggest
that costs borne by small utilities and
their customer bases may outweigh the
benefits of distributed energy resource
aggregation participation in RTO/ISO
markets, and that small to mediumsized distribution utilities may not have
the resources needed to coordinate with
distributed energy resource aggregators
and RTOs/ISOs.116 In addition, NRECA
argues that opt-out/opt-in provisions
would lessen the compliance burden on
smaller entities and would be consistent
with the deference to relevant electric
retail regulatory authorities included in
IEEE 1547.117 NRECA also raises
concerns that distributed energy
resource aggregators may ‘‘cherry-pick’’
the more lucrative resources in a
system, undermining reliability and the
ability of utilities to develop and invest
in their own integrated distributed
energy resources portfolio.118
Organization of MISO States suggests
that even a temporary opt-out would
allow for safe and reliable
implementation with minimal
disruption to the distribution system.119
51. Some commenters argue that, to
relieve smaller entities of cost and
coordination burdens, the Commission
should at a minimum establish an
express opt-in requirement for small
distribution utilities similar to the one
the Commission adopted in Order No.
at 12–13; NRECA Comments (2018 RM18–9) at 7–
10, 12; see also AMP Comments (2019 RM18–9) at
1.
116 APPA Comments (2018 RM18–9) at 7
(asserting that rate design challenges can be
particularly acute for small to medium-sized
distribution utilities), 9–10 (asserting that
monitoring and responding to system impacts
associated with distributed energy resource
aggregation activity could be particularly difficult
for small and medium-sized utilities); APPA/
NRECA Comments (RM16–23) at 39 (asserting that
the costs of installing new meters or new
communication technology to capture wholesale
market transactions would burden smaller
distribution utilities in particular); NRECA
Comments (2018 RM18–9) at 14 (asserting that
smaller distribution cooperatives may not have staff
or resources needed to conduct ongoing operational
coordination with RTOs/ISOs and distributed
energy resource aggregators), 26 (asserting that the
considerable amount of funding required to
potentially benefit a small number of customers
imposes too large of a burden on small utilities);
TAPS Comments (RM16–23) at 15–16 (asserting
that, particularly for a small utility, the costs of
ongoing coordination, metering, settlements, and
rate-unbundling needed to support sales to RTO/
ISO markets by distributed energy resources may far
exceed the potential efficiency benefits from their
participation in RTO/ISO markets).
117 NRECA Comments (2018 RM18–9) at 27–28.
IEEE–1547 is a standard of the Institute of Electrical
and Electronics Engineers (IEEE) that provides a set
of criteria and requirements for the interconnection
of distributed energy resources.
118 Id. at 22–23.
119 Organization of MISO States Comments (2018
RM18–9) at 5–6.
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67103
719.120 NRECA asserts that the
distributed energy resource aggregation
proposals would be costly for small
cooperatives in rural, remote
communities.121 NRECA and TAPS
recommend that the Commission
require express permission from the
relevant electric retail regulatory
authority before the RTO/ISO may
accept bids from distributed energy
resource aggregations located on the
system of a utility that distributes 4
million MWh or less, employing the
same size threshold as the small utility
opt-in allowed in Order No. 719–A.122
52. In contrast, other commenters
caution against adopting the Order No.
719 construct.123 Many of those
commenters argue that an opt-out is not
necessary because the Commission has
exclusive jurisdiction over sales from
distributed energy resource aggregators
into RTO/ISO markets.124 Moreover,
several commenters argue that the
responsibility for integrating emerging
technologies into RTO/ISO markets rests
with the Commission (while the states
are responsible for managing the
impacts on the distribution system) and
that the Order No. 719 opt-out provision
has effectively prevented the
development of demand response in the
Midwest and led to higher wholesale
rates.125 In addition, some commenters
argue that providing states with an optout would be inconsistent with the
Commission’s denial of such an opt-out
120 APPA Comments (2018 RM18–9) at 19–20;
TAPS Comments (RM16–23) at 16; TAPS
Comments (2018 RM18–9) at 19–21.
121 NRECA Comments (2019 RM18–9) at 4–5.
122 Id.; TAPS Comments (RM16–23) at 16–17;
TAPS Comments (2018 RM18–9) at 19 & n.27.
123 See, e.g., Advanced Energy Buyers Comments
(2018 RM18–9) at 6; Advanced Energy Management
Comments (2018 RM18–9) at 7–8, 10–11; Icetec
Comments (2018 RM18–9) at 10–11; SEIA
Comments (2018 RM18–9) at 8; Stem Comments
(2018 RM18–9) at 4–6.
124 See, e.g., Advanced Energy Economy
Comments (2018 RM18–9) at 18; Energy Storage
Association Comments (2018 RM18–9) at 5; Icetec
Comments (2018 RM18–9) at 11; Stem Comments
(2018 RM18–9) at 4–5 (arguing that the FPA does
not permit a state to use its jurisdiction over
generation or local distribution facilities to prevent
distributed energy resources or distributed energy
resource aggregators from accessing Commissionjurisdictional markets); Sunrun Comments (2018
RM18–9) at 3–4 (arguing that whether wholesale
sales originate from facilities on the transmission
system, the distribution system, or behind the meter
is immaterial to the Commission’s jurisdiction and
that FPA section 201(b) distinguishes between
authority to regulate transactions and authority to
regulate facilities).
125 Advanced Energy Economy Comments
(RM16–23) at 44–45; Connecticut State Entities
Comments (RM16–23) at 7; Organization of MISO
States Comments (RM16–23) at 5 n.3 (noting
concerns of Illinois Commission).
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from electric storage participation in
Order No. 841.126
53. With respect to the Commission’s
authority, some commenters assert that
only the Commission has jurisdiction to
determine eligibility for wholesale
market participation 127 and that
limiting or conditioning wholesale
market participation through retail
tariffs 128 or distribution interconnection
agreements 129 would interfere with that
jurisdiction. Advanced Energy
Management asserts that because selling
injections of electric energy in
wholesale markets is governed under
the FPA and distributed energy
resources are not always behind the
meter, there should not be a blanket optout available to relevant electric retail
regulatory authorities.130
54. However, some commenters
recognize that states do have the right to
implement retail tariffs that disqualify a
resource from participating in the state
program if the resource elects to
participate in RTO/ISO markets.131
Several commenters caution that, if the
Commission does consider an opt-out, it
must be narrowly tailored.132 Harvard
Environmental Policy Initiative points
to the Commission’s proposed
coordination provisions to demonstrate
that the Commission will not preempt
state authority over distribution system
planning or create new authority for the
Commission to allow distributed energy
resources to connect to a distribution
126 E.g., Advanced Energy Management
Comments (2018 RM18–9) at 7–8 (citing Order No.
841, 162 FERC ¶ 61,127 at P 35).
127 Advanced Energy Economy Comments (2018
RM18–9) at 18 (citing Advanced Energy Econ., 161
FERC ¶ 61,245 (2017) (AEE Declaratory Order),
reh’g denied, 163 FERC ¶ 61,030 (2018) (AEE
Rehearing Order); Order No. 841, 162 FERC
¶ 61,127 at P 35); Advanced Energy Management
Comments (2018 RM18–9) at 18; Icetec Comments
(2018 RM18–9) at 11, 16.
128 Advanced Energy Economy Comments (2018
RM18–9) at 18.
129 Icetec Comments (2018 RM18–9) at 11; see
Stem Comments (2018 RM18–9) at 15.
130 Advanced Energy Management Comments
(RM16–23) at 7. Advanced Energy Management
states that there should be no restriction on where
distributed energy resource aggregators can recruit
customers to participate in the wholesale market.
Advanced Energy Management Comments (2018
RM18–9) at 11.
131 See Advanced Energy Management Comments
(2018 RM18–9) at 11; Stem Comments (2018 RM18–
9) at 11; Sunrun Comments (2018 RM18–9) at 8.
132 See Advanced Energy Economy Comments
(2018 RM18–9) at 21; Public Interest Organizations
Comments (2018 RM18–9) at 8–10 (suggesting a
Commission waiver process with a notice and
comment period); Stem Comments (2018 RM18–9)
at 6 (suggesting, as one basis to restrict distributed
energy resource participation, the demonstration of
a reliability violation that cannot be resolved
through effective distribution system management).
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system without a utility’s approval or
knowledge.133
55. In response to concerns about the
impact of distributed energy resource
aggregations on the distribution system,
several commenters argue that
distributed energy resource aggregation
participation in RTO/ISO markets does
not introduce additional reliability or
cost concerns beyond those that are
addressed through the interconnection
process.134 In contrast with commenters
that suggest that distributed energy
resource aggregations introduce
reliability or cost concerns, Advanced
Energy Economy argues that an opt-out
would limit RTO/ISO visibility into
distributed energy resource operations,
thereby preventing RTO/ISO operators
from using them to maintain reliability
and improve resilience, and would limit
an RTO’s/ISO’s ability to efficiently
optimize all of the resources available in
its region, risking increased costs to
consumers.135
b. Commission Determination
56. We decline to include a
mechanism for all relevant electric retail
regulatory authorities to prohibit all
distributed energy resources from
participating in the RTO/ISO markets
through distributed energy resource
aggregations (i.e., to opt out). However,
we modify the NOPR proposal in
recognition of the potential indirect
costs borne by smaller utilities due to
this final rule. More specifically, and as
discussed further below, we add
§ 35.28(g)(12)(iv) to the Commission’s
regulations to provide that RTOs/ISOs
may not accept bids from distributed
energy resource aggregators aggregating
customers of small utilities 136 unless
the relevant electric retail regulatory
authority allows such customers of
small utilities to participate in
distributed energy resource aggregations
(i.e., to opt in).
57. We disagree with the suggestion
that the Commission is legally required
to grant an opt-out that enables all
relevant electric retail regulatory
authorities to prohibit all distributed
energy resources from participating in
the RTO/ISO markets through
133 Harvard Environmental Policy Initiative
Comments (RM16–23) at 12.
134 See, e.g., Advanced Energy Economy
Comments (2018 RM18–9) at 17–18; Advanced
Energy Management Comments (2018 RM18–9) at
9–10; Stem Comments (2018 RM18–9) at 9, 15;
Sunrun Comments (2018 RM18–9) at 6; see also
New Jersey Board Comments (2018 RM18–9) at 4.
135 Advanced Energy Economy Comments (2018
RM18–9) at 15–16.
136 As discussed below, we will consider small
utilities to be those with a total electric output for
the preceding fiscal year not exceeding 4 million
MWh.
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distributed energy resource
aggregations. The Commission has
exclusive jurisdiction over the
wholesale markets and the criteria for
participation in those markets,
including the wholesale market rules for
participation of resources connected at
or below distribution-level voltages.137
As the Commission previously has
found, establishing the criteria for
participation in RTO/ISO markets,
including with respect to resources
located on the distribution system or
behind the meter, is essential to the
Commission’s ability to fulfill its
statutory responsibility to ensure that
wholesale rates are just and
reasonable.138
58. This final rule addresses rules for
participation in RTO/ISO markets by
distributed energy resource aggregators.
Like the Commission’s rules governing
demand response and electric storage
resource participation in RTO/ISO
markets, this final rule ‘‘addresses—and
addresses only—transactions occurring
on the wholesale market.’’ 139 Thus, we
continue to find that the FPA and
relevant precedent does not legally
compel the Commission to adopt a
relevant electric retail regulatory
authority opt-out with respect to
participation in RTO/ISO markets by all
resources interconnected on a
distribution system or located behind a
retail meter.140 As the United States
Court of Appeals for the District of
Columbia Circuit (D.C. Circuit) recently
explained, the Commission has
jurisdiction to decide which entities
may participate in wholesale markets,
which means that a relevant electric
137 Order No. 841–A, 167 FERC ¶ 61,154 at P 38;
Order No. 841, 162 FERC ¶ 61,127 at P 35 (citing
EPSA, 136 S. Ct. 760; AEE Declaratory Order, 161
FERC ¶ 61,245 at PP 59–60; see also Nat’l Ass’n of
Regulatory Util. Comm’rs, 964 F.3d at 1187 (‘‘FERC
has the exclusive authority to determine who may
participate in the wholesale markets.’’); Nat’l Ass’n
of Regulatory Util. Comm’rs v. FERC, 475 F.3d
1277, 1280–82 (D.C. Cir. 2007); Transmission
Access Policy Study Grp. v. FERC, 225 F.3d 667,
696 (D.C. Cir. 2000).
138 Order No. 841–A, 167 FERC ¶ 61,154 at P 31;
see also id. P 38 (citing AEE Rehearing Order, 163
FERC ¶ 61,030 at P 36). The Supreme Court also has
recognized that the Commission extensively
regulates the structure and rules of wholesale
auctions, in order to ensure that they produce just
and reasonable results. See Hughes v. Talen Energy
Mktg., LLC, 136 S. Ct. 1288, 1293–94 (2016)
(Hughes); EPSA, 136 S. Ct. at 769.
139 EPSA, 136 S. Ct. at 776; see also Nat’l Ass’n
of Regulatory Util. Comm’rs, 964 F.3d at 1186, 1189
(finding that ‘‘Order No. 841 solely targets the
manner in which an [electric storage resource] may
participate in wholesale markets’’ and that Order
Nos. 841 and 841–A ‘‘do nothing more than regulate
matters concerning federal transactions’’); Order
No. 841–A, 167 FERC ¶ 61,154 at P 44.
140 Order No. 841–A, 167 FERC ¶ 61,154 at P 32;
see also AEE Declaratory Order, 161 FERC ¶ 61,245
at P 62 (citing EPSA, 136 S. Ct. at 776).
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retail regulatory authority cannot
broadly prohibit the participation in
RTO/ISO markets of all distributed
energy resources or of all distributed
energy resource aggregators as doing so
would interfere with the Commission’s
statutory obligation to ensure that
wholesale electricity markets produce
just and reasonable rates.141
59. As commenters point out, the
Commission in Order No. 719 granted
relevant electric retail regulatory
authorities an opt-out from allowing
retail customers to participate directly
in wholesale markets through
aggregations of demand response
resources.142 As noted above, the
Commission was not obligated to
provide such an opt-out, but rather did
so as an exercise of its discretion.143
Consistent with that previous exercise
of the Commission’s discretion, we
clarify that this final rule does not affect
the ability of relevant electric retail
regulatory authorities to prohibit retail
customers’ demand response from being
bid into RTO/ISO markets by
aggregators.144
60. However, unlike aggregators of
demand response, distributed energy
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141 See
Nat’l Ass’n of Regulatory Util. Comm’rs,
964 F.3d at 1187 (‘‘[B]ecause FERC has the
exclusive authority to determine who may
participate in the wholesale markets, the
Supremacy Clause . . . requires that [s]tates not
interfere. . . . FERC’s statement in Order No. 841–
A that [s]tates may not block RTO/ISO market
participation ‘through conditions on the receipt of
retail service,’ or impose any ‘condition[ ] aimed
directly at the RTO/ISO markets, even if contained
in the terms of retail service,’ is simply a
restatement of the well-established principles of
federal preemption.’’) (quoting Order No. 841–A,
167 FERC ¶ 61,154 at P 41) (finding that states
cannot intrude on the Commission’s jurisdiction by
prohibiting all consumers from selling into the
wholesale market) (citing AEE Rehearing Order, 163
FERC ¶ 61,030 at P 37; AEE Declaratory Order, 161
FERC ¶ 61,245 at P 61); see also Hughes, 136 S. Ct.
at 1298 (‘‘States may not seek to achieve ends,
however legitimate, through regulatory means that
intrude on FERC’s authority over interstate
wholesale rates . . . .’’); Oneok, Inc. v. Learjet, Inc.,
575 U.S. 373, 386 (2015) (finding that the proper
test for determining whether a state action is
preempted is ‘‘whether the challenged measures are
’aimed directly at interstate purchasers and
wholesalers for resale’ or not’’) (quoting N. Natural
Gas Co. v. State Corp. Comm’n of Kan., 372 U.S.
84, 94 (1963)); Nat’l Ass’n of Regulatory Util.
Comm’rs, 964 F.3d at 1187 (similar).
142 Order No. 719, 125 FERC ¶ 61,071 at PP 154–
55.
143 See EPSA, 136 S. Ct. at 779 (describing the
opt-out as a ‘‘notable solicitude toward the States,’’
in recognition of ‘‘the linkage between wholesale
and retail markets and the States’ role in overseeing
retail sales’’); Nat’l Ass’n of Regulatory Util.
Comm’rs, 964 F.3d at 1190 (‘‘Local Utility
Petitioners correctly acknowledge that EPSA did
not condition its holdings on the existence of an
opt-out.’’).
144 See 18 CFR 35.28(g)(1)(iii). Similarly, we
recognize Kentucky’s existing right to exclude
energy efficiency resources from wholesale market
participation. AEE Declaratory Order, 161 FERC
¶ 61,245 at P 66.
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resource aggregators are capable of
engaging in sales for resale of electricity
and those distributed energy resource
aggregators making such sales in the
RTO/ISO markets are public utilities
subject to the Commission’s
jurisdiction.145 We recognize that the
participation of distributed energy
resource aggregators in RTO/ISO
markets necessarily has effects on the
distribution system,146 and, as in Order
No. 841, we have considered those
effects in evaluating whether to exercise
our discretion to grant an opt-out. Upon
such consideration, we find that the
benefits of allowing distributed energy
resource aggregators broader access to
the wholesale market outweigh the
policy considerations in favor of an optout. Specifically, we find that the
reliability, transparency, and marketrelated benefits of removing barriers to
the participation of distributed energy
resource aggregators in RTO/ISO
markets are significant. Considering
those benefits,147 we are not persuaded
that concerns about potential effects on
the distribution system justify adopting
an opt-out that could substantially limit
145 See Nat’l Ass’n of Regulatory Util. Comm’rs,
964 F.3d at 1190 (citing Order No. 841–A, 167 FERC
¶ 61,154 at PP 51–52 (distinguishing [electric
storage resource] participation in wholesale sales
from demand response resources participating in
wholesale bids)).
146 See Order No. 841–A, 167 FERC ¶ 61,154 at P
56 (citing EPSA, 136 S. Ct. at 776).
147 See, e.g., supra PP 4 (explaining that
integrating distributed energy resources’
capabilities into RTO/ISO planning and operations
will help the RTOs/ISOs account for the impacts of
these resources on installed capacity requirements
and day-ahead energy demand, thereby reducing
uncertainty in load forecasts and reducing the risk
of over procurement of resources), 27 (stating that
distributed energy resource aggregations can
provide new grid services and enhance competition
in wholesale markets as new market participants),
29 (finding that the reforms in this final rule will
enhance the competitiveness, and in turn the
efficiency, of RTO/ISO markets); see, e.g., infra PP
114 (explaining that the revised definition of
distributed energy resource adopted in this final
rule is technology-neutral, thereby ensuring that
any resource that is technically capable of
providing wholesale services through aggregation is
eligible to do so, which enhances competition in
the RTO/ISO markets), 142 (stating that requiring
RTOs/ISOs to allow heterogeneous aggregations
will further enhance competition in RTO/ISO
markets by ensuring that complementary resources,
including those with different physical and
operational characteristics, can meet qualification
and performance requirements), 160, 163
(discussing how the final rule enhances
competition and improves reliability by requiring
RTOs/ISOs to allow participation of distributed
energy resources in both wholesale and retail or
multiple wholesale programs), 173 (finding that
requiring RTOs/ISOs to establish a minimum size
requirement not to exceed 100 kW will remove a
barrier to distributed energy resource aggregations,
improve competition in RTO/ISO markets, avoid
confusion about appropriate requirements, and help
ensure just and reasonable rates), 205 (discussing
the benefits of single-node and multi-node
aggregations).
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that participation.148 As discussed
below, there are several ways that
relevant electric retail regulatory
authorities may address any such
concerns without broadly prohibiting
the participation of distributed energy
resources or distributed energy resource
aggregators in RTO/ISO markets.
Therefore, we do not find it appropriate
and thus decline to exercise discretion
to adopt a broad opt-out with respect to
distributed energy resource aggregations
in this final rule.
61. We continue to recognize the
important role that state and local
authorities play with respect to
distributed energy resources and their
potential aggregation. This final rule
does not curtail that authority. As in
Order No. 841, the reforms adopted in
this final rule do not preclude or limit
state or local regulation of: Retail rates;
distribution system planning,
distribution system operations, or
distribution system reliability;
distributed energy resource facility
siting; and interconnection of resources
to the distribution system that are not
subject to Commission jurisdiction, as
discussed further below.149 In addition,
and again as recognized in Order No.
841, under a relevant electric retail
regulatory authority’s jurisdiction over
its retail programs, such a regulatory
authority is able to condition a
distributed energy resource’s
participation in a retail distributed
energy resource program on that
resource not also participating in the
RTO/ISO markets.150 This should allow
148 The list of benefits catalogued in the preceding
footnote includes many of the same benefits that the
D.C. Circuit pointed to when explaining why the
Commission’s decision not to provide an opt-out in
Order No. 841 was not an unreasoned departure
from Order No. 719. See Nat’l Ass’n of Regulatory
Util. Comm’rs, 964 F.3d at 1190 (explaining that the
Commission’s decision to forgo an opt-out was
‘‘neither unexplained nor unsupported’’ and
pointing to the Commission’s consideration of the
benefits of enabling broad participation of electric
storage resources, including on ‘‘competition,’’
‘‘prices,’’ and the ‘‘diversity’’ of resource types that
can participate in RTO/ISO markets).
149 See Nat’l Ass’n of Regulatory Util. Comm’rs,
964 F.3d at 1188 (noting that the similar decision
in ‘‘Order No. 841 does not ‘usurp[ ] state power’ ’’
and pointing to the fact that ‘‘States retain their
authority to impose safety and reliability
requirements without interference from FERC, and
[electric storage resources] must still obtain all
requisite permits, agreements, and other
documentation necessary to participate in federal
wholesale markets’’) (quoting EPSA, 136 S. Ct. at
777).
150 See Nat’l Ass’n of Regulatory Util. Comm’rs,
964 F.3d at 1188 (‘‘States retain their authority to
prohibit local [electric storage resources] from
participating in the interstate and intrastate markets
simultaneously, meaning [s]tates can force local
[electric storage resources] to choose which market
they wish to participate in.’’); Order No. 841–A, 167
FERC ¶ 61,154 at P 41 (acknowledging that states
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a retail regulatory authority to address
any specific concerns.
62. As to commenters’ concerns
regarding cost impacts on the
distribution system, we note that, in
Order No. 841, with respect to concerns
about electric storage resources’ use of
the distribution system, the Commission
observed that, in PJM Interconnection
L.L.C., the Commission permitted a
distribution utility to assess a wholesale
distribution charge to an electric storage
resource participating in the PJM
markets. Consistent with this precedent,
the Commission found that it may be
appropriate, on a case-by-case basis, for
distribution utilities to assess a charge
on electric storage resources similar to
those assessed to the market participant
in that proceeding.151 Consistent with
that conclusion, we find that it may also
be appropriate, on a case-by-case basis,
for distribution utilities to assess a
wholesale distribution charge on
distributed energy resource aggregators
participating in RTO/ISO markets.
63. Moreover, we recognize that,
where appropriate, the Commission
previously has taken steps to address a
potential burden imposed by a
Commission final rule on smaller
entities. For instance, the Commission
has distinguished small utilities whose
total electric output for the preceding
fiscal year did not exceed 4 million
MWh 152 for purposes of granting
waivers from Order No. 889’s 153
have the authority to include conditions in their
own retail distributed energy resource or retail
electric storage resource programs that prohibit any
participating resources from also selling into RTO/
ISO markets because, in that scenario, the owner of
a resource has a choice between participating in the
retail market or wholesale market); see also
Arkansas Commission Comments (2019 RM18–9) at
2–4.
151 Order No. 841, 162 FERC ¶ 61,127 at P 296
(citing PJM Interconnection L.L.C., 149 FERC
¶ 61,185, at P 12 (2014) (wholesale distribution
charge that ComEd will assess to Energy Vault is a
weighted average carrying charge that is applied on
a case-by-case basis, depending on the distribution
facilities expected to be used in providing
wholesale distribution service), order on reh’g, 151
FERC ¶ 61,231, at PP 16–18 (2015)).
152 The 4 million MWh cutoff stems from the
Small Business Size Standards component of the
North American Industry Classification System,
which previously defined a small utility as one that,
including its affiliates, is primarily engaged in the
generation, transmission, or distribution of electric
energy for sale, and whose total electric output for
the preceding fiscal year did not exceed 4 million
MWh. 13 CFR 121.201 (2013) (Sector 22, Utilities,
North American Industry Classification System
(NAICS)). Currently, the number of employees is
the basis used to measure whether electric power
generation, transmission, and distribution
industries are small businesses. 13 CFR 121.201
(2020) (Sector 22, Utilities, NAICS).
153 Open Access Same-Time Information System
& Standards of Conduct, Order No. 889, FERC Stats.
& Regs. ¶ 31,035 (1996) (cross-referenced at 75
FERC ¶ 61,078), clarified, 76 FERC ¶ 61,009 (1996),
order on reh’g, Order No. 889–A, FERC Stats. &
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standards of conduct for transmission
providers 154 and determining whether a
specific cooperative should be
considered a non-public utility outside
the scope of a refund obligation
involving the California energy crisis.155
In Order No. 719–A, the Commission
provided an opt-in for small utilities,
which requires the relevant electric
retail regulatory authority to give
affirmative permission for the demand
response of customers of utilities that
distributed 4 million MWh or less in the
previous fiscal year to be bid into RTO/
ISO markets by an aggregator of those
retail customers.156
64. Notwithstanding our finding that
the benefits of this final rule outweigh
the policy considerations in favor of a
broad opt-out, we acknowledge that this
final rule may place a potentially greater
burden on smaller utility systems.157
Recognizing this potentially greater
burden on small utility systems, we will
exercise our discretion to include in this
final rule an opt-in mechanism for small
utilities similar to that provided in
Order No. 719–A. Specifically, we
determine that customers of utilities
that distributed 4 million MWh or less
in the previous fiscal year may not
participate in distributed energy
resource aggregations unless the
relevant electric retail regulatory
authority affirmatively allows such
customers to participate in distributed
energy resource aggregations.
65. We therefore direct each RTO/ISO
to amend its market rules as necessary
to (1) accept bids from a distributed
energy resource aggregator if its
aggregation includes distributed energy
resources that are customers of utilities
that distributed more than 4 million
MWh in the previous fiscal year, and (2)
not accept bids from distributed energy
resource aggregators if its aggregation
includes distributed energy resources
that are customers of utilities that
distributed 4 million MWh or less in the
previous fiscal year, unless the relevant
electric retail regulatory authority
permits such customers to be bid into
RTO/ISO markets by a distributed
Regs. ¶ 31,049 (cross-referenced at 78 FERC
¶ 61,221), reh’g denied, Order No. 889–B, 81 FERC
¶ 61,253 (1997), aff’d in relevant part sub nom.
Transmission Access Policy Study Grp. v. FERC,
225 F.3d 667 (D.C. Cir. 2000).
154 See Wolverine Power Supply Coop., 127 FERC
¶ 61,159, at P 15 (2009).
155 See San Diego Gas & Elec. Co. v. Sellers of
Energy & Ancillary Servs. in Mkts. Operated by the
CAISO, 125 FERC ¶ 61,297, at P 24 (2008).
156 Order No. 719–A, 128 FERC ¶ 61,059 at PP 51,
59–60.
157 See supra P 50 (citing APPA Comments (2018
RM18–9) at 7, 9–10; APPA/NRECA Comments
(RM16–23) at 39; NRECA Comments (2018 RM18–
9) at 14, 26–28; TAPS Comments (RM16–23) at 15–
16).
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energy resource aggregator. We
conclude that this opt-in mechanism
appropriately balances the benefits that
distributed energy resource aggregation
can provide to RTO/ISO markets with a
recognition of the burdens that such
aggregation may create for small utilities
in particular. Accordingly, we find that
adopting this mechanism helps to
ensure that any ‘‘negative effects’’ of this
final rule are ‘‘outweighed by the
benefits,’’ 158 listed above,159 that it
provides to RTO/ISO markets.
66. On compliance, we require each
RTO/ISO to explain how it will
implement this small utility opt-in. We
note that an RTO/ISO may choose to
implement this requirement in a similar
manner as it currently implements the
small utility opt-in provision under
Order No. 719–A.
67. Although the Small Business
Administration (SBA) no longer defines
small utilities based on total electric
output for the preceding fiscal year of 4
million MWh or less,160 we use this
standard for purposes of this final rule,
as it is consistent with the
Commission’s use of this standard for
the opt-in adopted in Order No. 719–
A,161 and is supported by commenters
asking the Commission to include an
opt-in as part of this rule.162
3. Interconnection
68. The NOPR did not propose any
changes to RTO/ISO policies and
procedures for the interconnection of
distributed energy resources. However,
the Commission stated that comments
demonstrated that current RTO/ISO
market rules often limit the services that
distributed energy resources are eligible
to provide, including by imposing
prohibitively expensive or otherwise
burdensome interconnection
requirements.163 The Commission also
recognized that RTO/ISO demand
response models often prohibit
distributed energy resources from
injecting power back onto the grid in
158 Nat’l Ass’n of Regulatory Util. Comm’rs, 964
F.3d at 1190.
159 See supra n.147.
160 The SBA now defines small utilities based on
the number of employees. 13 CFR 121.201
(establishing a threshold of 1,000 employees for
electric power distribution utilities).
161 Order No. 719–A, 128 FERC ¶ 61,059 at PP 51,
59–60.
162 NRECA Comments (2019 RM18–9) at 4–5;
TAPS Comments (RM16–23) at 16–17; TAPS
Comments (2018 RM18–9) at 19 & n.27.
163 See NOPR, 157 FERC ¶ 61,121 at P 13 & n.30
(citing Energy Storage Association’s comment that
interconnection processes can pose prohibitively
high transaction costs for the small project sizes
that characterize behind-the-meter storage, which
creates undue burdens on behind-the-meter storage
participation in most RTOs/ISOs).
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part because they are not studied in the
interconnection process.164
69. On September 5, 2019,
Commission staff issued data requests to
each of the six RTOs/ISOs seeking
information regarding their policies and
procedures that affect the
interconnection of distributed energy
resources. The RTOs/ISOs filed their
responses in October 2019, and several
commenters subsequently submitted
reply comments.
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a. Comments and Data Request
Responses
70. Several commenters state that any
final rule should make clear that the
interconnection of resources on a statejurisdictional distribution system
remains the responsibility of the
distribution utilities and the states.165
The Maryland and New Jersey
Commissions seek confirmation that
state jurisdiction would remain
unchanged as to the siting and costs
associated with interconnecting
resources to the distribution system, and
would apply to all resources, including
distributed energy resources, having or
seeking interconnection or access to the
wholesale market.166 The Maryland and
New Jersey Commissions request that
the Commission confirm that, in the
context of interconnection requests for
wholesale market access, states will
continue to have discretion to review
distribution utility company tariffs to
justify how costs are allocated or how
the resources and their proposed
interconnection locations benefit
ultimate ratepayers.167 The
Massachusetts Commission makes
similar arguments.168
71. In order to avoid uncertainty and
litigation, Duke Energy and EEI ask for
additional clarity with respect to stateversus-Commission jurisdiction
affecting interconnection, distribution
planning, and investments to enable
distributed energy resource
aggregation.169 TAPS asks that any final
rule make clear that, absent proper
164 See id. P 15 & n.32 (citing PJM’s response that
demand-side resources are not studied by PJM
through the generation interconnection process and
are not allowed to inject energy beyond the
customer’s meter and onto the distribution or
transmission system).
165 See, e.g., IRC Comments (RM16–23) at 9–10;
Massachusetts Municipal Electric Comments
(RM16–23) at 4; Massachusetts State Entities
Comments (2019 RM18–9) at 11; NESCOE
Comments (RM16–23) at 16; TAPS Comments
(RM16–23) at 15.
166 Maryland and New Jersey Commissions
Comments (RM16–23) at 2–3.
167 Id. at 3.
168 Massachusetts Commission Comments
(RM16–23) at 11.
169 Duke Energy Comments (RM16–23) at 4; EEI
Comments (RM16–23) at 25.
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application of a Commissionjurisdictional Generator Interconnection
Agreement, the Commission does not
seek to alter or preempt local and state
rules governing interconnection to the
distribution system.170 Furthermore,
TAPS asserts that, given the limited
circumstances in which the Commission
has the authority to require
interconnection to, or deliveries over,
distribution facilities, the NOPR
appropriately does not attempt to
establish new rules or requirements
governing the details of interconnection
of distributed energy resources.171
72. As to their own interconnection
procedures and experience with
distributed energy resources, ISO–NE,
NYISO, and PJM’s data request
responses reference Order Nos. 2003
and 2006 and indicate that they apply
the jurisdictional test for dual-use
facilities established in those orders.172
As explained in more detail below,
Order Nos. 2003 and 2006 established
what some RTOs/ISOs have labeled the
‘‘first use’’ test, under which the first
interconnection to a distribution facility
for the purpose of making wholesale
sales is not subject to Commission
jurisdiction, but triggers jurisdiction for
any subsequent wholesale
interconnection requests to the same
distribution facility.173 MISO explains
that no distributed energy resources
have requested to interconnect to
distribution facilities subject to the
MISO tariff but indicates that it would
apply the jurisdictional test in Order
Nos. 2003 and 2006 in processing
subsequent interconnection requests to
such facilities.174 SPP states that it
170 TAPS
Comments (RM16–23) at 15.
at 5–9.
172 ISO–NE Data Request Response (2019 RM18–
9) at 3–4, 9–10; NYISO Data Request Response
(2019 RM18–9) at 1–2; PJM Data Request Response
(2019 RM18–9) at 2, 5.
173 Standardization of Generator Interconnection
Agreements & Procedures, Order No. 2003, 104
FERC ¶ 61,103, at P 804 (2003), order on reh’g,
Order No. 2003–A, 106 FERC ¶ 61,220, order on
reh’g, Order No. 2003–B, 109 FERC ¶ 61,287 (2004),
order on reh’g, Order No. 2003–C, 111 FERC
¶ 61,401 (2005), aff’d sub nom. Nat’l Ass’n of
Regulatory Util. Comm’rs v. FERC, 475 F.3d 1277
(D.C. Cir. 2007), cert. denied, 552 U.S. 1230 (2008);
Standardization of Small Generator Interconnection
Agreements and Procedures, Order No. 2006, 111
FERC ¶ 61,220, order on reh’g, Order No. 2006–A,
113 FERC ¶ 61,195 (2005), order granting
clarification, Order No. 2006–B, 116 FERC ¶ 61,046
(2006), corrected, 71 FR 53,965 (Sept. 13, 2006); see
also Reform of Generator Interconnection
Procedures and Agreements, Order No. 845, 163
FERC ¶ 61,043 (2018), errata notice, 167 FERC
¶ 61,123, order on reh’g, Order No. 845–A, 166
FERC ¶ 61,137 (2019), errata notice, 167 FERC
¶ 61,124, order on reh’g, Order No. 845–B, 168
FERC ¶ 61,092 (2019). We note that Order No. 845
did not make any changes to the ‘‘first use’’ test for
distribution interconnection at issue here.
174 See MISO Data Request Response (2019
RM18–9) at 6–7 (‘‘If the [distributed energy
171 Id.
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67107
would consider an interconnection to be
Commission jurisdictional only if the
relevant distribution facilities were
under SPP’s functional control, and
SPP’s data request response appears to
indicate that, even after the first
wholesale use, such distribution
facilities would not be subject to its
tariff.175 CAISO states that, if a
distributed energy resource plans to
participate in CAISO’s markets, the
interconnection is Commission
jurisdictional pursuant to the utility
distribution company’s Wholesale
Distribution Access Tariff.176
73. In response to CAISO’s data
request response, SoCal Edison clarifies
that every SoCal Edison distribution
facility with which a new resource seeks
interconnection pursuant to the
Wholesale Distribution Access Tariff is
already subject to an OATT for purposes
of making wholesale sales.177 Pacific
Gas & Electric states that the
Commission-jurisdictional Wholesale
Distribution Access Tariff is not only
the primary, but also should be the
exclusive, means of interconnecting
certain distributed energy resources that
wish to export energy for purposes of
participating in the wholesale
markets.178 It states that this is
important because California’s Rule 21,
a state-jurisdictional tariff, does not
currently provide a methodology to
separate wholesale from retail use and
resource] interconnection customer intends to
connect the [distributed energy resource] unit to
facilities listed on [MISO’s list of transmission
facilities transferred to its functional control] or a
distribution facility that provides Wholesale
Distribution Service, then the Interconnection
Customer is required to follow the Generator
Interconnection Procedures (Attachment X) of
MISO Tariff. If [the distributed energy resource] is
not interconnecting to such facilities, then the
interconnection customer is required to follow the
interconnection rules of the Host Distribution
Provider.’’).
175 See SPP Data Request Response (2019 RM18–
9) at 2–3, 6 (‘‘Such distribution facilities are not
subject to the Tariff in this situation. The Tariff
would not apply to non-jurisdictional facilities;
however, there might be an obligation for the utility
to coordinate with SPP regarding potential impacts
to the SPP Transmission System.’’).
176 CAISO Data Request Response (2019 RM18–9)
at 2–4 (explaining that ‘‘each CAISO transmission
owner that is [Commission] jurisdictional and
operates distribution facilities has a Wholesale
Distribution Access Tariff with the express purpose
of enabling [distributed energy resources] to
interconnect to the distribution grid and still
participate in the CAISO wholesale markets’’).
177 SoCal Edison Comments (2019 RM18–9) at 2.
178 Pacific Gas & Electric Comments (2019 RM18–
9) at 4. It states, however, that some wholesale
market-participating distributed energy resources
interconnect today under California’s Rule 21, a
state-jurisdictional tariff. For instance, it asserts that
Rule 21 applies to Qualifying Facilities (QF) that
make net surplus sales under California’s net
metering program, which are considered qualifying
sales under the Public Utilities Regulatory Policy
Act (PURPA).
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thus could allow bypass of retail rates
for behind-the-meter distributed energy
resources that both consume and export
electricity for both retail and wholesale
purposes.179
74. Pacific Gas & Electric notes that
CAISO’s existing Demand Response
Provider participation model allows
existing retail loads interconnected
under state-approved tariffs to
participate in wholesale markets as nonexporting Proxy Demand Response
resources without the risk of bypassing
retail rates.180 Pacific Gas & Electric
explains that it and CAISO can avoid
the risk of retail bypass by requiring any
individual distributed energy resources
in a distributed energy resource
aggregation that had previously
interconnected as non-exporting
resources under California’s Rule 21 and
that now wish to export electricity to
participate in wholesale markets to seek
a new interconnection pursuant to, or to
convert their existing interconnection to
an agreement under, the Wholesale
Distribution Access Tariff. Pacific Gas &
Electric states that this framework
complies with the Commission’s
implementation of the jurisdictional
boundaries set forth in federal law.181
75. AMP asserts that some of the
RTO/ISO responses erroneously state
that a distribution facility becomes
Commission jurisdictional when a
wholesale sale occurs over that
distribution facility. AMP asserts that it
is the wholesale transaction, not the
distribution line itself, that is subject to
the Commission’s jurisdiction.182 AMP
also notes that RTO/ISO processes
should refer to local jurisdiction and
interconnection processes in addition to
state processes because decision making
is often done at the local level pursuant
to local jurisdictional authority separate
and distinct from state regulatory
authority.
76. Several commenters request that
the Commission revise its
interconnection policy as it applies to
distributed energy resources.183
Advanced Energy Economy states that
the Commission could work with
relevant electric retail regulatory
authorities and distribution utilities to
address interconnection requirements
through standard interconnection tariffs
in those states where distributed energy
resources are not classified as QFs
179 Id.
at 5.
at 6.
181 Id. at app. A.
182 AMP Comments (2019 RM18–9) at 2.
183 See, e.g., Advanced Energy Economy
Comments (2018 RM18–9) at 19–21; Eversource
Comments (2018 RM18–9) at 9–10; Icetec
Comments (2018 RM18–9) at 2–3, 11.
180 Id.
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under PURPA 184 and for which no
retail tariff exists.185
77. Eversource argues that, because
the participation of distributed energy
resources in RTO/ISO markets could
convert a previously state-jurisdictional
distribution facility into a Commissionjurisdictional distribution facility and
potentially necessitate hundreds or
thousands of interconnection agreement
filings, the Commission should revisit
the interconnection agreement filing
criteria for distributed energy resources
and develop a process that fairly
balances the administrative burden on
parties with respect for Commission and
state jurisdictional lines.186 Icetec
requests that the Commission reinforce
the traditional bright line between
Commission and state jurisdiction at the
transmission–distribution boundary by
confirming that relevant electric retail
regulatory authorities have sole
jurisdiction over the interconnection of
resources to the distribution system,
while ensuring that that jurisdiction
may not be used to discriminatorily
restrict or condition distributed energy
resource participation in RTO/ISO
markets.187
78. Advanced Energy Management
requests that the Commission recognize
the clear distinction between the
distribution interconnection process
and the wholesale market registration
process.188 Advanced Energy
Management states that the Commission
has authority over the criteria for
wholesale market registration and
participation, and that state and local
regulators have authority over the
criteria for a non-discriminatory
distribution interconnection process
that ensures that interconnecting
distributed energy resources that wish
to participate in the wholesale market
do not create distribution reliability
issues.189 According to Advanced
Energy Management, if a distributed
energy resource imposes costs on the
grid when it interconnects, regardless of
reason, those costs can be recovered as
184 16
U.S.C. 796(17)–(18), 824a–3.
Energy Economy Comments (2018
RM18–9) at 20–21 (asserting that resources in such
states have no clear path to interconnection to the
distribution system and a limited ability to
participate in any wholesale distributed energy
resource aggregation program).
186 Eversource Comments (2018 RM18–9) at 9–10.
187 Icetec Comments (2018 RM18–9) at 2–3, 11.
188 Advanced Energy Management Comments
(2018 RM18–9) at 18; Advanced Energy
Management Comments (2019 RM18–9) at 3.
189 Advanced Energy Management Comments
(2018 RM18–9) at 18–19; Advanced Energy
Management Comments (2019 RM18–9) at 3.
185 Advanced
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interconnection costs under the
authority of state regulators.190
79. Stem recommends that the
Commission initiate a process to revise
distribution utilities’ interconnection
tariffs (e.g., the Wholesale Distribution
Access Tariffs in California) so that (1)
individual distributed energy resources,
participating through an aggregator, are
not required to do more than satisfy the
local interconnection requirements in
order to offer residual capability
through the RTO/ISO markets, and (2)
the tariffs accommodate the potential for
coordinated dispatch of a distributed
energy resource aggregation such as
including limitations on aggregated
behavior due to distribution system
constraints, which would be
communicated to the RTO/ISO as a
reduced size resource during
registration as a market participant.191
Microgrid Resource Coalition similarly
asserts that a responsive distributed
energy resource needs to specify its
expected modes of operation during the
interconnection process by establishing
its physical capabilities subject to any
residual distribution system constraints,
which will establish the limits of its
ability to provide services to the grid.192
80. Public Interest Organizations
argue that some RTO/ISO tariffs present
significant barriers to distributed energy
resource interconnection, particularly
those that require individual distributed
energy resources to complete a
wholesale interconnection process.193
Therefore, Public Interest Organizations
propose that distributed energy resource
interconnection be solely under retail
jurisdiction, and that RTO/ISO purview
over distributed energy resource
aggregations be limited to market rules,
and where cause is shown, for
transmission system impacts.194
81. Some commenters contend that
PJM’s interconnection processes impose
significant transaction costs on
distributed energy resources.195 Icetec
asserts that every distributed energy
resource that wishes to participate in
PJM markets, no matter how small, must
go through PJM’s interconnection
queue; that an individual residential
owner must file an OATT with the
Commission registering the 120 volt
wiring in its house as a transmission
190 Advanced Energy Management Comments
(2018 RM18–9) at 10.
191 Stem Comments (2018 RM18–9) at 9–10, 15–
16.
192 Microgrid Resources Coalition Comments
(2018 RM18–9) at 12.
193 Public Interest Organizations Comments (2019
RM18–9) at 3.
194 Id. at 3–4.
195 Icetec Comments (2018 RM18–9) at 7–9; UofD/
Mensah Comments (2019 RM18–9) at 2–5.
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provider before a third party can apply
to interconnect distributed energy
resources located behind a residential
meter; and that PJM refers most
distribution-connected projects to
distribution utilities for further study,
even if the resource is already
interconnected and injecting power
under a distribution interconnection
tariff.196 Icetec claims that, in contrast,
distribution utilities may operate
distributed energy resources attached to
their systems without going through
RTO/ISO interconnection, which creates
partially discriminatory market access
by placing merchant distributed energy
resource developers at a significant
disadvantage relative to incumbent
utilities.197 Icetec requests that the
Commission require RTOs/ISOs to
accept a distributed energy resource as
deliverable to the wholesale
transmission system, with further
studies limited to the transmission
system, when it is properly connected to
the distribution system under an
arrangement approved by the relevant
electric retail regulatory authority.198
Icetec also asks the Commission to both
allow distributed energy resources that
deliver to the transmission system at a
bus that is primarily load-serving to
participate in wholesale markets
without further transmission studies
and to direct RTOs/ISOs to file tariff
revisions setting procedures and
timelines for interconnection studies
carried out by distribution utilities for
interconnection of distributed energy
resources intending to participate in
RTO/ISO markets.199
82. UofD/Mensah similarly contend
that PJM’s existing processes are unjust
and unreasonable in light of barriers
that they present to small resources that
interconnect under state or local
jurisdiction.200 According to UofD/
Mensah, PJM imposes a more
burdensome market participation
process on resources that interconnect
under state or local jurisdiction than on
resources that interconnect under
Commission jurisdiction.201
Specifically, they contend that PJM’s
Small Generator Interconnection
Procedures use screens based only on
the local distribution system rather than
studies to assess safety and reliability,
require PJM to provide interconnection
customers that pass the screens an
Interconnection Service Agreement
Comments (2018 RM18–9) at 7–8.
at 8.
198 Id. at 8–9.
199 Id. at 9.
200 UofD/Mensah Comments (2019 RM18–9) at 2,
within 15–20 days of the request, and
only cost $500—$5,000 depending on
the circumstances. They assert,
however, that for non-jurisdictional
interconnections, each resource must
wait up to six months for the queue
study process to begin and undergo a
Feasibility Study and sometimes a
System Impact Study, expected to take
three months each, before approval.
They assert that UofD was required to
provide deposits totaling $27,000 for its
933 kW electric vehicle project, which
is nine times the deposit that they
would have been charged if the
interconnection was Commission
jurisdictional.
83. UofD/Mensah therefore request
that the Commission align the RTO/ISO
market participation process
requirements for non-Commissionjurisdictional interconnections with the
Commission’s Small Generator
Interconnection Procedures.202 UofD/
Mensah also recommend that the
current distributed energy resource
interconnection process be improved by
permitting a subset of small, behind-themeter resources that already have state
or local interconnection approval to be
automatically approved to provide
wholesale services.203 For those
resources not automatically approved,
UofD/Mensah recommend that the
Commission limit the allowable cost
and time of existing RTO/ISO processes
and allow aggregations to be studied as
a group. Finally, after correcting the
non-Commission-jurisdictional
interconnection process, UofD/Mensah
recommend that the Commission
consider declining to exercise its
authority over the interconnection of
distributed energy resources that seek to
provide wholesale services or at least
clarify the ‘‘dual-use doctrine’’ in
specific cases so that developers need
not rely on RTOs/ISOs to interpret it.204
In response to UofD/Mensah, PJM notes
that its stakeholder process is currently
considering reforms designed to provide
a ‘‘fast-track’’ avenue for processing
energy-only resources under 2 MW.205
84. Advanced Energy Economy asserts
that the Commission does not need to
address interconnection practices in
order to issue a final rule, and suggests
that, if the Commission is interested in
exploring a different approach for
interconnection of distributed energy
resources, it should do so in a separate
proceeding.206 Advanced Energy
196 Icetec
197 Id.
4.
201 Id.
at 2.
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202 Id.
at 4–5.
at 5.
204 Id. at 5–6.
205 PJM Reply Comments (2019 RM18–9) at 4.
206 Advanced Energy Economy Comments (2019
RM18–9) at 1–2, 7–8.
203 Id.
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Economy also asserts that each of the
RTOs/ISOs described processes that are
generally consistent with the
Commission’s long-standing ‘‘dual use’’
policy.207
85. Several commenters argue that
distribution interconnection
requirements should address
distribution-level reliability concerns
that are raised by the interconnection of
distributed energy resources to
distribution systems.208 Vice Chairman
Place of the Pennsylvania Public
Utilities Commission argues for primacy
of a distribution utility’s
interconnection requirements in
determining the eligibility of distributed
energy resources to participate in
distributed energy resource
aggregations, and asserts that distributed
energy resource aggregations may
necessitate new interconnection
requirements or study.209 Vice
Chairman Place asserts that distribution
utilities are authorized by state
regulators to protect distribution
operations, and that distributed energy
resources participating in aggregations
will need to comply with state-level
interconnection agreements.210
FirstEnergy argues that states must
address the development of distributed
energy resource interconnection
standards and technical requirements,
and that distribution utilities are best
situated to identify system issues that
may affect ongoing reliable operations
on local systems.211
86. Several commenters argue that the
RTOs/ISOs should perform some sort of
study of a distributed energy resource
aggregation because distribution-level
interconnection reviews are only a
reliability and safety check for
individual resources, and do not
evaluate the combined impact that an
aggregation would have on the system
or the impact that the distributed energy
resource will have on the system if it
chooses to participate in an
aggregation.212 EEI, PJM Utilities
Coalition, and San Diego Gas & Electric
recommend that an aggregation study be
done if a distributed energy resource
joins an aggregation and if the
composition of an aggregation changes
207 Id.
at 2–3.
e.g., Advanced Energy Economy
Comments (2018 RM18–9) at 17; PJM Comments
(2018 RM18–9) at 18–19; Stem Comments (2018
RM18–9) at 15.
209 Vice Chairman Place Comments (2018 RM18–
9) at 2.
210 Id. at 2–3.
211 FirstEnergy Comments (2019 RM18–9) at 4–5.
212 EEI Comments (2018 RM18–9) at 14–16;
Organization of MISO States Comments (2018
RM18–9) at 8–9; San Diego Gas & Electric
Comments (2018 RM18–9) at 5; SoCal Edison
Comments (2018 RM18–9) at 11.
208 See,
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after registration.213 TAPS agrees, and
notes that, even for distribution utilities
with robust generation interconnection
processes that include rigorous
modeling and studies, it may be
impossible to anticipate and fully
evaluate every possible combination of
loads, resources, and distribution
system configurations to determine in
advance whether potential RTO/ISO
and distributed energy resource
aggregator dispatch decisions might
have adverse impacts.214 Similarly,
NRECA asserts that an interconnection
agreement with the distributed energy
resource is necessary but not sufficient;
NRECA argues that distribution utilities
need to be able to conduct an
integration study within a reasonable
timeline that considers grid topology, as
well as to modify their interconnection
procedures to ensure third-party
distributed energy resource
participation in RTO/ISO markets will
not create any safety, reliability or
power quality concerns, and that
implementation will conform with IEEE
standards (such as IEEE 1547).215 Pacific
Gas & Electric concurs with the need to
modify existing processes and protocols
for distribution review requirements for
assessing aggregation impacts and
points to an ongoing collaborative
process underway in California that
requires additional time to complete.216
87. On the other hand, several
commenters raise concerns about the
use of distribution interconnection
processes to limit participation of
distributed energy resources in
wholesale markets. Advanced Energy
Economy argues that the distribution
interconnection process should not be
used as a lever to unduly limit
participation in wholesale markets.217
Similarly, Stem asserts that the
Commission must prevent a distribution
utility from imposing discriminatory
state-level interconnection requirements
that are intended to foreclose
distributed energy resources from
participating in the RTO/ISO
markets.218 Stem asserts that, for
instance, the Commission should not
allow the distribution utilities to
effectively veto distributed energy
resource participation in wholesale
markets by unreasonably delaying
213 EEI Comments (2018 RM18–9) at 15–16; PJM
Utilities Coalition Comments (2018 RM18–9) at 14;
San Diego Gas & Electric Comments (2018 RM18–
9) at 5.
214 TAPS Comments (2018 RM18–9) at 12.
215 NRECA Comments (2018 RM18–9) at 29, 30.
216 Pacific Gas & Electric Comments (2018 RM18–
9) at 14–15, 18.
217 Advanced Energy Economy Comments (2018
RM18–9) at 18.
218 Stem Comments (2018 RM18–9) at 15.
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necessary updates to interconnection
tariffs.219 Advanced Energy
Management and Icetec agree that
distributed energy resources should
comply with distribution
interconnection requirements, but argue
that the exercise of state and local
regulatory and distribution utility
authority should occur prior to a
distributed energy resource’s
registration in an RTO/ISO.220
Specifically, they argue that state and
local regulatory authorities and
distribution utilities should define nondiscriminatory interconnection
procedures that ensure the distribution
grid can accommodate distributed
energy resources.221 NRG argues that
distributed energy resources should
only be required to have one
interconnection study and should not be
subject to additional review, noting that
collaboration on transmission and
distribution impact studies may be
necessary, and that NYISO, PJM, and
CAISO are already engaged in some
form of collaboration with distribution
utilities on these matters.222
88. Several commenters argue that the
relevant electric retail regulatory
authorities must have discretion to
allocate any distribution system-related
costs incurred by utilities as a result of
distributed energy resource
participation in RTO/ISO markets.223
Some commenters warn that, without
proper cost allocation methods, retail
customers effectively would be
subsidizing wholesale market
participation.224 EEI argues that
distribution utilities should not have to
absorb any stranded costs if they invest
in upgrades needed for distributed
energy resource aggregation that are
ultimately not utilized.225 APPA and
EEI argue that there is little evidence of
significant demand for distributed
energy resource aggregation programs,
and so distribution utilities may have to
invest in upgrades to the distribution
system that are ultimately never
needed.226 The Indiana Commission
219 Id.
at 16.
220 Advanced
Energy Management Comments
(2018 RM18–9) at 18; Icetec Comments (2018
RM18–9) at 18.
221 Advanced Energy Management Comments
(2018 RM18–9) at 18; Icetec Comments (2018
RM18–9) at 18–19.
222 NRG Comments (2018 RM18–9) at 8–9.
223 Vice Chairman Place Comments (2018 RM18–
9) at 3; APPA Comments (2018 RM18–9) at 21; EEI
Comments (2018 RM18–9) at 20; New Jersey Board
Comments (2018 RM18–9) at 4.
224 APPA Comments (2018 RM18–9) at 10;
Indiana Commission Comments (2018 RM18–9) at
8; NRECA Comments (2018 RM18–9) at 12.
225 EEI Comments (2018 RM18–9) at 20.
226 APPA Comments (2018 RM18–9) at 10–12; EEI
Comments (2018 RM18–9) at 21.
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asserts that distribution utilities may
have to procure additional capacity to
account for uncertainty in their forecasts
regarding the amount of future
distributed generation available to
them.227
89. Other commenters argue that any
cost allocation associated with a
distributed energy resource aggregator
participating in RTO/ISO markets
would fall under the Commission’s
jurisdiction because the aggregator
would be acting as a wholesale entity
engaged in a Commission-jurisdictional
transaction.228 Hence, a few
commenters suggest that, to the extent a
distribution utility incurs additional
costs to provide service to distributed
energy resource aggregations, those
costs should be recovered through a
wholesale distribution tariff filed with
the Commission.229 NRECA asserts that
the impact of a distributed energy
resource or distributed energy resource
aggregation interconnection on a host
distribution utility must be considered
in the interconnection process, whether
under RTO/ISO procedures or statejurisdictional procedures.230 NRECA
notes that to do so will require that
cooperatives in RTO/ISO regions
develop new distributed energy
resource interconnection agreements
and procedures.231
b. Commission Determination
90. For the reasons discussed below,
we decline to exercise our jurisdiction
over the interconnections of distributed
energy resources to distribution
facilities for the purpose of participating
in RTO/ISO markets exclusively as part
of a distributed energy resource
aggregation. Thus, we will not require
standard interconnection procedures
and agreements or wholesale
distribution tariffs for such
interconnections.
91. In Order Nos. 2003 and 2006, the
Commission first adopted standard
interconnection procedures and
agreements that apply when an
interconnection customer ‘‘that plans to
engage in a sale for resale in interstate
commerce or to transmit electric energy
227 Indiana Commission Comments (2018 RM18–
9) at 8.
228 Icetec Comments (2018 RM18–9) at 12 (citing
PJM Interconnection, LLC, 149 FERC ¶ 61,185, order
on reh’g, 151 FERC ¶ 61,231); SoCal Edison
Comments (2018 RM18–9) at 6 (citing Detroit
Edison Co., 334 F.3d 48 (D.C. Cir. 2003)).
229 Advanced Energy Economy Comments (2018
RM18–9) at 18 (citing Order No. 841, 162 FERC
¶ 61,127 at P 301); Icetec Comments (2018 RM18–
9) at 12; Stem Comments (2018 RM18–9) at 3.
230 NRECA Comments (2019 RM18–9) at 6–7.
231 Id. at 7.
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in interstate commerce’’ 232 requests
interconnection to the facilities of a
public utility’s Transmission System 233
or Distribution System 234 that, at the
time that the interconnection is
requested, are used either to transmit
electric energy in interstate commerce
or to sell electric energy at wholesale in
interstate commerce pursuant to a
Commission-filed OATT.235 The
Commission recognized that ‘‘some
[lower-voltage facilities] are used for
jurisdictional service such as carrying
power to a wholesale power customer
for resale and are included in a public
utility’s OATT,’’ and that ‘‘in some
instances, there is a separate OATT rate
for using them, sometimes called a
Wholesale Distribution Rate.’’ 236 The
Commission also noted that, with
respect to a Commission-jurisdictional
interconnection to a distribution
facility, the cost of upgrades needed on
the Distribution System to accommodate
the interconnection must be directly
assigned to the interconnection
customer because an upgrade to the
Distribution System generally does not
benefit all transmission customers.237 In
Order No. 2003–C, the Commission
concluded that, while it does not have
the authority to directly regulate a
‘‘local distribution’’ facility that is used
to transmit energy being sold at
wholesale, ‘‘the Commission may
regulate the entire transmission
component (rates, terms and conditions)
of the wholesale transaction.’’ 238
92. In practice, Order Nos. 2003 and
2006 established what some RTOs/ISOs
have labeled the ‘‘first use’’ test, under
which the first interconnection to a
distribution facility for the purpose of
making wholesale sales is not subject to
Commission jurisdiction. This is
because, at the time of the request, the
232 Order No. 2003, 104 FERC ¶ 61,103 at P 804;
see also Order No. 845, 163 FERC ¶ 61,043.
233 The Commission defined ‘‘Transmission
System’’ as ‘‘[t]he facilities owned, controlled or
operated by the Transmission Provider or the
Transmission Owner that are used to provide
transmission service under the Tariff.’’ Order No.
2006, 111 FERC ¶ 61,220 at P 6.
234 The Commission defined ‘‘Distribution
System’’ as ‘‘[t]he Transmission Provider’s facilities
and equipment used to transmit electricity to
ultimate usage points such as homes and industries
directly from nearby generators or from
interchanges with higher voltage transmission
networks which transport bulk power over longer
distances. The voltage levels at which Distribution
Systems operate differ among areas.’’ Id. P 7.
235 Order No. 2003, 104 FERC ¶ 61,103 at P 804;
see Order No. 2006, 111 FERC ¶ 61,220 at P 5; see
also Order No. 845, 163 FERC ¶ 61,043.
236 Order No. 2003, 104 FERC ¶ 61,103 at P 803;
see also Order No. 845, 163 FERC ¶ 61,043.
237 Order No. 2003, 104 FERC ¶ 61,103 at P 697;
see also Order No. 845, 163 FERC ¶ 61,043.
238 Order No. 2003–C, 111 FERC ¶ 61,401 at P 53;
see also Order No. 845, 163 FERC ¶ 61,043.
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distribution facility is not used to
transmit electric energy in interstate
commerce or subject to wholesale open
access under an OATT. Therefore, the
first interconnecting resource ‘‘that
plans to engage in a sale for resale in
interstate commerce or to transmit
electric energy in interstate
commerce’’ 239 on a distribution facility
is not required to use the transmission
provider’s Commission-jurisdictional
Generator Interconnection Procedures or
obtain a Commission-jurisdictional
Generator Interconnection
Agreement.240 As a result, such
interconnections are governed by the
applicable state or local law.
93. However, under the ‘‘first use’’
test, subsequent interconnections of
resources to the same distribution
facility for the purpose of engaging in
wholesale sales or transmission in
interstate commerce are subject to
Commission jurisdiction because the
distribution facilities are already being
used to facilitate wholesale transactions
and therefore are subject to an OATT.
Thus, any subsequent resources
interconnecting to the same distribution
facility for Commission-jurisdictional
purposes (e.g., to make wholesale sales
in interstate commerce) must use the
Commission-jurisdictional Generator
Interconnection Procedures and
Generator Interconnection Agreement
established in Order Nos. 2003 and 2006
and later amended in Order No. 845.
The United States Court of Appeals for
the District of Columbia Circuit upheld
this jurisdictional application as
consistent with the FPA.241
94. The Commission adopted this
limited jurisdictional approach to avoid
‘‘allow[ing] a potential wholesale seller
to cause the involuntary conversion of
a facility previously used exclusively for
state jurisdictional interconnections and
delivery, and subject to the exclusive
jurisdiction of the state, into a facility
also subject to the Commission’s
interconnection jurisdiction,’’ believing
that this outcome would cross the
jurisdictional line established by
239 Order No. 2003, 104 FERC ¶ 61,103 at P 804;
see also Order No. 845, 163 FERC ¶ 61,043.
240 See Order No. 2003–C, 111 FERC ¶ 61,401 at
P 53; Order No. 2006, 111 FERC ¶ 61,220 at P 7;
Order No. 845, 163 FERC ¶ 61,043; see also PJM
Interconnection, L.L.C., 114 FERC ¶ 61,191, at P 14,
order on reh’g, 116 FERC ¶ 61,102 (2006).
241 See Nat’l Ass’n of Regulatory Util. Comm’rs v.
FERC, 475 F.3d at 1280–82 (‘‘By establishing
standard agreements FERC has exercised its
jurisdiction over the terms of those relationships.’’)
(citing Transmission Access Policy Study Grp. v.
FERC, 225 F.3d 667, 696 (D.C. Cir. 2000) (‘‘FPA
[section] 201 makes clear that all aspects of
wholesale sales are subject to federal regulation,
regardless of the facilities used.’’)).
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67111
Congress.242 Nevertheless, the
Commission anticipated that its
standard interconnection procedures
and agreement terms would rarely apply
to distributed generation: ‘‘We recognize
that Order No. 2003 does not apply to
most distributed generation, since these
facilities almost always interconnect to
facilities that are not subject to an
OATT.’’ 243
95. We agree with commenters that
the integration of distributed energy
resource aggregations into the RTO/ISO
markets warrants our addressing the
application of the Commission’s
interconnection policy to the distributed
energy resource aggregations enabled by
this final rule. As the Commission
recognized in Order No. 792, renewable
portfolio standards, state policies
promoting distributed generation, and
decreases in capital costs have driven a
substantial increase in small generator
interconnection requests.244 In the
intervening years, those trends have
only intensified, further stimulating
distributed energy resource
development.245 We anticipate that
increased participation of distributed
energy resources in RTO/ISO markets
via distributed energy resource
aggregations will substantially increase
the number of distributed energy
resource interconnections to
distribution facilities for the purpose of
engaging in wholesale transactions and/
or transmission in interstate commerce.
Such growth could increase the number
of distribution-level interconnections
subject to the Commission’s
jurisdiction. As Public Interest
Organizations suggest, a large influx of
distribution-level interconnections
could create uncertainty as to whether
certain interconnections are subject to
Commission jurisdiction or state/local
jurisdiction, and whether they would
require the use of the Commission’s
242 Order No. 2003–C, 111 FERC ¶ 61,401 at P 51;
see also Order No. 845, 163 FERC ¶ 61,043.
243 Order No. 2003–A, 106 FERC ¶ 61,220 at P
739; see also Order No. 2006, 111 FERC ¶ 61,220
at P 8 (‘‘Because of the limited applicability of this
Final Rule, and because the majority of small
generators interconnect with facilities that are not
subject to an OATT, this Final Rule will not apply
to most small generator interconnections.’’); Order
No. 845, 163 FERC ¶ 61,043.
244 Small Generator Interconnection Agreements
& Procedures, Order No. 792, 145 FERC ¶ 61,159,
at P 23 (2013), as modified, errata notice, 146 FERC
¶ 61,019, as modified, errata notice, 148 FERC
¶ 61,215, clarified, Order No. 792–A, 146 FERC
¶ 61,214 (2014).
245 See Public Interest Organizations Comments
(2019 RM18–9) at 6–7. See also EIA, August 2019
Monthly Energy Review at Figure 7.2a, https://
www.eia.gov/totalenergy/data/monthly; Office of
Energy Projects, Energy Infrastructure Update For
July2019 at 4 (July 2019), https://www.ferc.gov/
legal/staff-reports/2019/july-energyinfrastructure.pdf).
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standard interconnection procedures
and agreement.246 It could additionally
burden RTOs/ISOs with an
overwhelming volume of
interconnection requests.247
96. Given these concerns and the
confluence of local, state, and federal
authority over distributed energy
resource interconnections, in this final
rule, we decline to exercise jurisdiction
over the interconnections of distributed
energy resources to distribution
facilities for those distributed energy
resources that seek to participate in
RTO/ISO markets exclusively as part of
a distributed energy resource
aggregation. We do not believe that
requiring standard interconnection
procedures and agreement terms for
these interconnections is necessary to
advance the objectives of Order Nos.
2003, 2006 and 845, which established
standard interconnection procedures
and agreements in order to prevent
undue discrimination, preserve
reliability, increase energy supply,
lower wholesale prices for customers by
increasing the number and types of new
generation that would compete in the
wholesale electricity market, reduce
interconnection time and costs, and
facilitate development of non-polluting
alternative energy sources.248 Rather, we
agree with commenters that state and
local authorities, which have
traditionally regulated distributed
energy resource interconnections, have
the requisite experience, interest, and
capacity to oversee these distributionlevel interconnections.
97. Because we decline here to
exercise our jurisdiction over the
interconnection of a distributed energy
resource to a distribution facility for the
purpose of participating in RTO/ISO
markets exclusively through a
distributed energy resource aggregation,
the interconnection of such a resource
for the purpose of participating in a
distributed energy resource aggregation
would not constitute a first
interconnection for the purpose of
making wholesale sales under the ‘‘first
use’’ test. As such, only a distributed
246 Public Interest Organizations Comments (2019
RM18–9) at 9.
247 Id. at 5.
248 See Order No. 2003, 104 FERC ¶ 61,103 at P
1; Order No. 2006, 111 FERC ¶ 61,220 at P 1; Order
No. 845, 163 FERC ¶ 61,043; see also New York v.
FERC, 535 U.S. 1, 26–27 (2002) (upholding the
Commission’s discretion to issue a tailored remedy
where ‘‘the remedy it ordered constituted a
sufficient response to the problems . . . identified
in the wholesale market’’). In issuing Order Nos.
2003 and 2006, the Commission acknowledged that
their requirements would rarely apply to the
interconnections of distributed energy resources.
See Order No. 2003–A, 106 FERC ¶ 61,220 at P 739;
Order No. 2006, 111 FERC ¶ 61,220 at P 8; Order
No. 845, 163 FERC ¶ 61,043.
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energy resource requesting
interconnection to the distribution
facility for the purpose of directly
engaging in wholesale transactions (i.e.,
not through a distributed energy
resource aggregation) would create a
‘‘first use’’ and any subsequent
distributed energy resource
interconnecting for the purpose of
directly engaging in wholesale
transactions would be considered a
Commission-jurisdictional
interconnection. We believe that this
approach will minimize any increase in
the number of distribution-level
interconnections subject to the
Commission’s jurisdiction that this final
rule may cause.
98. This final rule does not require
any changes to the pro forma Generator
Interconnection Procedures or Generator
Interconnection Agreements. To the
extent that the jurisdictional conditions
described in Order Nos. 2003 and 2006
are met, those standard interconnection
procedures and agreement terms
originally established in Order Nos.
2003 and 2006 and later amended by
Order No. 845 will continue to apply to
the interconnections of distributed
energy resources that participate in
RTO/ISO markets individually,
independent of a distributed energy
resource aggregation. This final rule also
does not revise the Commission’s
jurisdictional approach to the
interconnections of QFs that participate
in distributed energy resource
aggregations.249
99. With respect to arguments that
distributed energy resources should
only be required to have one
interconnection study—at the
distribution interconnection stage—and
should not be subject to additional
review in connection with the
possibility of RTO/ISO market
participation, and competing arguments
that both distribution interconnection
studies and separate distributed energy
resource aggregation studies are needed
when distributed energy resources join
an aggregation, we believe that there
could be different approaches to this
issue that would work in appropriate
circumstances. We therefore decline to
create new universal requirements or
initiate a process to standardize tariffs
with respect to these matters at this
time. In response to increased demand
for distributed energy resource
aggregations for wholesale market
participation, some state or local
authorities may choose to voluntarily
update their distribution
249 See Order No. 2003, 104 FERC ¶ 61,103 at PP
813–815; Order No. 2006, 111 FERC ¶ 61,220 at PP
516–518; Order No. 845, 163 FERC ¶ 61,043.
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interconnection processes to assess the
impacts of distributed energy resource
aggregations on the distribution system
at the initial interconnection stage,
while other state and local authorities
may not. In the latter scenario, it may be
both necessary and appropriate for the
RTO/ISO, in coordination with affected
distribution utilities, to conduct
separate studies of the impact on the
distribution system after a distributed
energy resource joins a distributed
energy resource aggregation. Moreover,
as the individual distributed energy
resources in an aggregation may change
over time,250 we cannot discount the
possibility that the electrical
characteristics of the aggregation will
change significantly enough to require
restudy. In practice, we expect that
modifications to the list of resources in
a distributed energy resource
aggregation could occasionally indicate
changes to the electrical characteristics
of the distributed energy resource
aggregation that are significant enough
to potentially adversely impact the
reliability of the distribution or
transmission systems and justify restudy
of the full distributed energy resource
aggregation; therefore, RTOs/ISOs and
distribution utilities may perform such
aggregation restudies if necessary.
Similarly, while the interconnections of
distributed energy resources seeking to
participate in RTO/ISO markets as part
of a distributed energy resource
aggregation would be subject to state or
local interconnection procedures, we
believe that coordination between
RTOs/ISOs and distribution utilities, as
discussed in Section IV.H below, should
ensure that RTOs/ISOs have the
information that they need to study the
impact of the aggregations on the
transmission system. In general, where
needed, such studies of the impact of an
aggregation as a whole on the
transmission system should be the only
aggregation-related studies that the
RTO/ISO needs to undertake.251
100. In response to the comments of
Advanced Energy Economy, we decline
to require standard interconnection
tariffs in those states where no retail
tariff exists for distributed energy
resources that are not QFs under
PURPA. We believe that such a situation
should be addressed at the state level,
as discussed above.
101. While some commenters raise
concerns that declining to create new
250 See infra Section IV.I (Modifications to List of
Resources in Aggregation).
251 However, as explained earlier, RTOs/ISOs may
still need to study individually those distributed
energy resources intending to individually
participate in RTO/ISO markets rather than through
aggregations.
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universal distribution interconnection
requirements or initiate a process to
standardize distribution interconnection
tariffs could result in uncertainty and
delay, or could be used to unduly limit
participation of distributed energy
resource aggregations in wholesale
markets, we believe that such concerns
are speculative at this time. In this
regard, we note that, while we are
herein declining to exercise jurisdiction
over the interconnections of distributed
energy resources to distribution
facilities for the purpose of participating
in distributed energy resource
aggregations, the Commission may
revisit this policy decision in the future,
should we discover abuses of the
distribution interconnection process or
the rise of unnecessary barriers to the
participation of distributed energy
resource aggregations in RTO/ISO
markets.
102. With respect to the related
arguments that the distribution
interconnection process and the
distributed energy resource aggregation
registration process are separate but
require coordination, we agree, and
believe that the coordination
requirements discussed in Section IV.H
of this final rule appropriately address
this need.
103. Although we find it appropriate
to decline to exercise jurisdiction over
the interconnections of distributed
energy resources intending to
participate in RTO/ISO markets
exclusively through a distributed energy
resource aggregation, we recognize that
such distributed energy resources may
already have interconnected pursuant to
procedures that were accepted by the
Commission prior to the effective date
of this final rule. Therefore, to minimize
disruption to existing interconnection
agreements for distributed energy
resources, we are not requiring
distributed energy resources that
already interconnected under
Commission-jurisdictional procedures
to convert to state or local
interconnection agreements.
104. Accordingly, in its compliance
filing, we require each RTO/ISO to make
any necessary tariff changes to reflect
the guidance above.
B. Definitions of Distributed Energy
Resource and Distributed Energy
Resource Aggregator
157 FERC ¶ 61,121 at PP 1 n.2, 104.
P 5 n.13.
254 EEI Comments (RM16–23) at 16 n.23.
255 AES Companies Comments (RM16–23) at 40–
41; NYISO Indicated Transmission Owners
Comments (RM16–23) at 13.
256 NYISO Indicated Transmission Owner
Comments (RM16–23) at 15.
253 Id.
105. In the NOPR, the Commission
proposed to define a distributed energy
resource as ‘‘a source or sink of power
that is located on the distribution
system, any subsystem thereof, or
17:20 Oct 20, 2020
2. Comments
106. Several commenters raise
concerns with the proposed definition
of distributed energy resource. EEI
suggests that the Commission use a term
besides ‘‘source or sink of power’’ to
reflect the Commission’s desire to
include all electric devices that can
produce or consume energy because a
source or sink is a location and not a
resource.254 AES Companies, MISO
Transmission Owners, and NYISO
Indicated Transmission Owners seek
clarification whether the definition of
distributed energy resources includes
resources that are behind and in front of
the meter. AES Companies explain that
it is not out of the ordinary for resources
such as solar or batteries to be
interconnected at the distribution
system but not behind the meter, and
NYISO Indicated Transmission Owners
state that aggregations of front-of-themeter distributed energy resources
should be able to elect to participate in
wholesale markets as part of a
distributed energy resource
aggregation.255
107. NYISO Indicated Transmission
Owners caution that, while a general
definition of a distributed energy
resource is appropriate, rules for
elective participation in RTO/ISO
markets may still require individual
classifications for types of distributed
energy resources because differences in
their capabilities may warrant specific
operational, reliability, and
compensation considerations.256 NYISO
points out that it has a broader
definition of distributed energy resource
than that proposed in the NOPR and
therefore asks the Commission to permit
regional flexibility to allow NYISO to
fashion rules and market designs that
252 NOPR,
1. NOPR Proposal
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behind a customer meter.’’ 252 The
Commission added that these resources
may include, but are not limited to,
electric storage resources, distributed
generation, thermal storage, and electric
vehicles and their supply equipment.
The Commission proposed to define a
distributed energy resource aggregator
as ‘‘an entity that aggregates one or more
distributed energy resources for
purposes of participation in the
capacity, energy and ancillary service
markets of the regional transmission
operators and independent system
operators.’’ 253
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67113
meet its needs while still achieving the
Commission’s goal of integrating
distributed energy resources into the
wholesale markets.257 NYISO notes that
it has also proposed to allow small
aggregations of community distributed
generation to provide wholesale market
services as distributed energy
resources.258 NRG encourages the
Commission to direct the RTOs/ISOs to
use a definition of distributed energy
resources based on technology-neutral
principles, including the capability to
provide load curtailment, load
consumption or charging, injection, and
ancillary services (e.g., regulation,
reserves, and flexible ramping
services).259 According to NRG,
regulatory authorities may differ in their
definition of distributed energy
resources, but generally reference their
ability to ‘‘generate and inject power
into the distribution and/or
transmission systems.’’ Thus, NRG
states, distributed energy resources
should be defined as a class of assets
that can both inject and curtail
electricity.260
108. EEI asks the Commission to
clarify the types of distributed energy
resources that qualify as ‘‘thermal
storage,’’ noting that if the thermal
energy cannot be readily transformed
into electric energy, then the storage
device cannot be used as an electric
resource.261 Public Interest
Organizations seek clarification that
thermal storage includes, but is not
limited to, both grid-enabled water
heaters and grid-enabled thermostats,
which can precool or preheat to avoid
energy usage during peak demand, make
and store ice to use as air conditioning,
and direct control of smart-home energy
management.262
109. Some commenters seek to
capture a broad range of distributed
257 NYISO Comments (RM16–23) at 11 (stating it
defines distributed energy resource as ‘‘a resource,
or a set of resources, typically located on an enduse customer’s premises that can provide wholesale
market services but are usually operated for the
purpose of supplying the customer’s electric load’’).
We note that, on January 23, 2020, the Commission
accepted NYISO’s proposed tariff revisions related
to aggregations, including its proposal to define
Distributed Energy Resource as: (i) A facility
comprising two or more Resource types behind a
single point of interconnection with an Injection
Limit of 20 MW or less; or (ii) a Demand Side
Resource; or (iii) a Generator with an Injection
Limit of 20 MW or less, that is electrically located
in the [New York Control Area]. NYISO Aggregation
Order, 170 FERC ¶ 61,033; see NYISO, NYISO
Tariffs, NYISO MST, Section 2.4 MST Definitions—
D (15.0.0).
258 NYISO Comments (RM16–23) at 11.
259 NRG Comments (2018 RM18–9) at 3.
260 Id. at 5–6.
261 EEI Comments (RM16–23) at 16 n.23.
262 Public Interest Organizations Comments
(RM16–23) at 15–16 & nn.45–46.
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energy resources in the definition.
Advanced Energy Economy asks the
Commission to revise the definition to
explicitly include energy efficiency and
demand response resources of all types
as well as ‘‘customer site[s] capable of
demand reduction.’’ 263 Other
commenters also request or support
including energy efficiency resources in
the definition of distributed energy
resource.264 NYISO Indicated
Transmission Owners request
clarification that intermittent generation
may be considered a distributed energy
resource, which can be aggregated into
dispatchable distributed energy resource
aggregations.265 They add that certain
behind-the-meter intermittent
generation may not be a distributed
energy resource if it participates in a
distribution utility’s net metering or
other program regarding which the
Commission has clarified that the
resource is not engaging in a wholesale
sale for jurisdictional purposes.266
110. Advanced Energy Management
requests that the Commission clarify
that its definition of distributed energy
resources includes demand response
resources, or that demand response
resources can choose to participate in
distributed energy resource
participation models where they are a
better fit.267
111. Commenters ask for assurance
that the NOPR does not change existing
demand response rules, and that
resources currently participating as
demand response could continue to do
so, even if they would fall under the
definition of a distributed energy
resource.268 They note that certain
reforms may drive existing, low-cost
commercial and industrial demand
response from the market.269 Advanced
263 Advanced Energy Economy Comments
(RM16–23) at 21.
264 E4TheFuture Comments (RM16–23) at 1;
Efficient Holdings Comments (RM16–23) at 6–7;
Public Interest Organizations Comments (RM16–23)
at 15–16.
265 NYISO Indicated Transmission Owners
Comments (RM16–23) at 15.
266 Id. at n.17.
267 Advanced Energy Management Comments
(RM16–23) at 8–10.
268 Advanced Energy Economy Comments
(RM16–23) at 50–51 (noting that existing market
rules recognize a distinction between demand
response and distributed energy resource
aggregations, such as in CAISO, where there are
separate programs for exporting distributed energy
resources and non-exporting distributed energy
resources that operate as demand response);
Advanced Energy Management Comments (RM16–
23) at 6 (noting specifically the reforms in Section
III.B.4 of the NOPR for distributed energy resource
aggregators as it applies to commercial and
industrial demand response); IRC Comments
(RM16–23) at 7; PJM Comments (RM16–23) at 6.
269 Advanced Energy Management Comments
(RM16–23) at 7.
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Energy Management argues that the
NOPR may be more applicable to newer
forms of distributed energy resources
that currently are not accommodated by
a demand response model and that the
demand response model should not be
changed.270
112. PJM, however, states that it does
not view energy efficiency or load
curtailment as distributed energy
resources, based upon PJM’s distinction
between its existing and robust
participation models for energy
efficiency and demand response.271 To
limit disruption to its models, PJM
distinguishes distributed energy
resources by limiting them to generation
and electric storage resources capable of
injecting energy onto the distribution
system.272
113. A few commenters discuss the
definition of a distributed energy
resource aggregator. E4TheFuture
supports the Commission’s proposal to
require each RTO/ISO to revise its tariff
to define distributed energy resource
aggregators as a type of market
participant.273 Efficient Holdings asks
the Commission to create a universal
and comprehensive market participant
definition for distributed energy
resource aggregators that would be
flexible enough to incorporate emerging
technologies and provide these
resources the same ability to offer
multiple products afforded to large scale
generators.274 MISO Transmission
Owners also assert that the term
‘‘distributed energy resource aggregator’’
should be formally defined; in addition,
they ask whether that term is inclusive
of behind- and front-of-the-meter
products and whether a utility could bid
its existing demand response peak
shaving assets into the market as a
distributed energy resource
aggregator.275 Advanced Energy
Management requests clarification on
the distinction between demand
response and distributed energy
resource aggregators, arguing that the
former should consist of behind-themeter resources that participate only in
the demand response framework, while
the latter could be either behind- or
front-of-the-meter resources and
participate in any model.276
270 Id.
at 6–8.
Comments (2018 RM18–9) at 1.
272 Id. at 2.
273 E4TheFuture Comments (RM16–23) at 2.
274 Efficient Holdings Comments (RM16–23) at 7.
275 MISO Transmission Owners Comments
(RM16–23) at 17–18.
276 Advanced Energy Management Comments
(RM16–23) at 6.
271 PJM
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3. Commission Determination
114. Upon consideration of the
comments received, we modify the
definition of distributed energy resource
proposed in the NOPR. Specifically, we
amend § 35.28(b) of the Commission’s
regulations to define a distributed
energy resource as ‘‘any resource
located on the distribution system, any
subsystem thereof or behind a customer
meter.’’ These resources may include,
but are not limited to, resources that are
in front of and behind the customer
meter, electric storage resources,
intermittent generation, distributed
generation, demand response, energy
efficiency, thermal storage, and electric
vehicles and their supply equipment—
as long as such a resource is ‘‘located on
the distribution system, any subsystem
thereof or behind a customer meter.’’ 277
The revised definition of distributed
energy resource that we adopt in this
final rule is technology-neutral, thereby
ensuring that any resource that is
technically capable of providing
wholesale services through aggregation
is eligible to do so, which enhances
competition in the RTO/ISO markets
and, in turn, helps to ensure that these
markets produce just and reasonable
rates.278
115. In response to Advanced Energy
Economy’s request, we clarify that
energy efficiency and demand response
resources are capable of providing
demand reductions at customer sites,
and therefore ‘‘customer sites capable of
demand reduction’’ may meet the
definition of a distributed energy
resource.279 In response to requests for
regional flexibility, we further note that
RTOs/ISOs can propose their own
definitions for the Commission’s
evaluation as long as the scope and
applicability of the proposed definitions
are consistent with the Commission’s
definition of distributed energy resource
and consistent with all aspects of this
final rule.
116. We find that the NOPR proposal
to define a distributed energy resource
as a source or sink of power risked
creating unnecessary confusion because
it was not clear as to which resources
could qualify and the definition
inadvertently excluded some resources
277 As discussed further in Section IV.C.2 below,
we find that RTOs/ISOs may not prohibit any
particular type of distributed energy resource
technology from participating in distributed energy
resource aggregations. We note that the types of
thermal storage described by EEI and Public Interest
Organizations may qualify as demand response or
energy efficiency resources under RTO/ISO market
rules.
278 See infra Section IV.C.2 (Types of
Technologies).
279 See Advanced Energy Economy Comments
(RM16–23) at 21.
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that could be aggregated to sell energy,
capacity, or ancillary services. The
revised definition of distributed energy
resource is intended to be broad enough
to encompass current and future
technologies that qualify as distributed
energy resources with no further need to
clarify or revise the definition as new
technologies are developed.
117. As discussed further below in
Sections IV.C, IV.F, and IV.H, we clarify
that distributed energy resource
aggregations must be able to meet the
qualification and performance
requirements to provide the service that
they are offering into RTO/ISO markets.
For example, because a type of resource
like energy efficiency cannot be
dispatched, metered, or telemetered, it
would likely be impossible for
distributed energy resource aggregations
comprised exclusively of energy
efficiency resources to be able to
provide energy or ancillary services to
the RTOs/ISOs because the aggregation
would not be technically capable of
providing those services.
118. We also adopt a modified
definition of distributed energy resource
aggregator than was proposed in the
NOPR, and therefore amend § 35.28(b)
of the Commission’s regulations to
define a distributed energy resource
aggregator as ‘‘the entity that aggregates
one or more distributed energy
resources for purposes of participation
in the capacity, energy and/or ancillary
service markets of the regional
transmission organizations and/or
independent system operators.’’ 280 We
clarify that, because demand response
falls under the definition of distributed
energy resource, an aggregator of
demand response could participate as a
distributed energy resource aggregator.
However, this final rule does not affect
existing demand response rules.
C. Eligibility To Participate in RTO/ISO
Markets Through a Distributed Energy
Resource Aggregator
1. Participation Model
a. NOPR Proposal
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119. In the NOPR, the Commission
proposed to require each RTO/ISO to
revise its tariff as necessary to allow
distributed energy resource aggregators
to offer to sell capacity, energy, and
ancillary services in RTO/ISO
280 As discussed further in Section IV.C.6,
consistent with Order No. 719, we require each
RTO/ISO to allow a single qualifying distributed
energy resource to serve as its own distributed
energy resource aggregator. See Order No. 719, 125
FERC ¶ 61,071 at P 158(d) (‘‘An [aggregator of retail
customers] can bid demand response either on
behalf of only one retail customer or multiple retail
customers.’’).
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markets.281 Specifically, the
Commission proposed to require that
each RTO/ISO revise its tariff to define
distributed energy resource aggregators
as a type of market participant that can
participate in RTO/ISO markets under
the participation model that best
accommodates the physical and
operational characteristics of its
distributed energy resource aggregation.
The Commission explained that this
means that the distributed energy
resource aggregator would register as,
for example, a generation asset if that is
the participation model that best reflects
its physical characteristics.282 The
Commission stated that, while it expects
efficiencies to be gained by allowing
distributed energy resource aggregations
to participate under existing
participation models, it also
acknowledges that the use of existing
participation models may not be
possible in every RTO/ISO based on
how market participation is structured.
However, the Commission emphasized
that, where participation under existing
participation models is possible, the
distributed energy resource aggregation
must still satisfy the eligibility
requirements of the applicable
participation model before it can
participate in RTO/ISO markets under
that participation model. Therefore, to
accommodate the participation of
distributed energy resource
aggregations, the Commission proposed
that each RTO/ISO modify the eligibility
requirements for existing participation
models as necessary to allow for such
participation.
b. Comments
120. Several commenters assert that a
new participation model for distributed
energy resource aggregations is
necessary.283 The Ohio Commission,
Tesla/SolarCity, and Public Interest
Organizations support the Commission’s
efforts to require each RTO/ISO to
modify its tariff to provide a
participation model for distributed
energy resource aggregators.284 AES
Companies explain that a new and
separate participation model is
necessary to facilitate market
participation of distributed energy
resource aggregations due to their
unique impacts on the bulk electric
system and state-jurisdictional
281 NOPR,
157 FERC ¶ 61,121 at P 124.
P 128.
283 See, e.g., Microsoft Comments (2018 RM18–9)
at 15; NRG Comments (2018 RM18–9) at 4.
284 Ohio Commission Comments (RM16–23) at 4;
Public Interest Organizations Comments (RM16–23)
at 21; Tesla/SolarCity Comments (RM16–23) at 20.
282 Id.
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67115
considerations.285 Stem also asserts that
each RTO/ISO needs to implement a
model that accommodates behind-themeter exporting resources or, if that is
impractical, to implement a model in
which behind-the-meter non-exporting
resources can fully participate.286
Microgrid Resources Coalition notes its
support for allowing aggregations of
behind-the-meter distributed energy
resources to participate fully and notes
that it is important to allow for the
participation of distributed energy
resources that have flexible controllable
output.287
121. Commenters offer a range of
views regarding how distributed energy
resource aggregations should be treated
under an RTO’s/ISO’s participation
model. Some commenters suggest that
when acting as a generator, distributed
energy resource aggregations should be
treated like any generator.288 Other
commenters focus on the need for
clarity around what services distributed
energy resources will be allowed to
provide and how they can be
aggregated.289 For example, Xcel Energy
Services contends that distributed
energy resources will likely not have
firm transmission service and may not
be able to deliver services to the system
that depend on firm transmission such
as capacity or black start capability.290
Some commenters argue that an
aggregation of distributed energy
resources should be treated as a single
resource by the wholesale market
operator, noting that this would reduce
barriers and may improve
performance.291 Other commenters
similarly support the ability of an
aggregator to transact directly in the
wholesale market without a load serving
entity or electric distribution company
as agent.292
122. Some commenters posit that the
Commission should allow the
285 AES Companies Comments (RM16–23) at 32
(noting that, because the proposed definition of a
distributed energy resource aggregation includes
resources that are both a source and a sink, the
aggregation can be a distributed generation entity or
a micro grid (includes generation, load, and
distribution lines)).
286 Stem Comments (RM16–23) at 12–13.
287 Microgrid Resources Coalition Comments
(2018 RM18–9) at 3, 4–5.
288 NYISO Comments (RM16–23) at 13; PJM
Comments (RM16–23) at 5–6.
289 AES Companies Comments (RM16–23) at 39;
Avangrid Comments (RM16–23) at 10; Tesla/
SolarCity Comments (RM16–23) at 20; Xcel Energy
Services Comments (RM16–23) at 12–13.
290 Xcel Energy Services Comments (RM16–23) at
12–13.
291 Advanced Microgrid Solutions Comments
(RM16–23) at 7; NRG Comments (RM16–23) at 10;
Stem Comments (RM16–23) at 5; Tesla/SolarCity
Comments (RM16–23) at 20–21.
292 Mosaic Power Comments (RM16–23) at 5.
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distributed energy resource aggregator to
determine the participation model for
distributed energy resource aggregations
based on the characteristics of the
aggregation as a whole, even if it
includes diverse technologies,293 and
that aggregators should be able to define
the capabilities of the resources in their
aggregations.294 Some commenters
stress the importance of allowing
diverse technologies (e.g., solar, storage,
and demand response) 295 to be in the
same aggregation, while others argue
that entities that own multiple
distributed energy resources should be
allowed to participate in more than one
aggregation.296 Stem asserts that, if
behind-the-meter resources are directed
to an existing participation model, then
the Commission should require a
detailed review to show that the existing
model does not discriminate against the
capabilities of new resources.297
123. Advanced Energy Management
states that, if an end-use customer is
capable of curtailing load and
discharging a battery located behind its
meter, it is unclear whether the
customer’s distributed energy resource
aggregator could aggregate both the
storage and load curtailment into the
same resource. Advanced Energy
Management also states that it would be
inefficient to have the same customer
participate as part of two different
resources or through two unnecessarily
separate participation models.298 MISO
Transmission Owners request clarity on
the interplay between the rules that
apply to storage and the rules that apply
to distributed energy resources, noting
that some resources may fall into both
categories, and any potential conflicts
should be resolved. For example, MISO
Transmission Owners seek clarity on
whether an aggregator of electric
vehicles is considered storage or a
distributed energy resource aggregator,
or both.299
124. Microgrid Resources Coalition
argues that RTOs/ISOs should allow
aggregators to bid their resources
together or separately as demand
response and delivered power.300
Energy Storage Association also argues
293 Advanced Energy Economy Comments
(RM16–23) at 21.
294 Microgrid Resources Coalition Comments
(RM16–23) at 6.
295 Advanced Energy Economy Comments
(RM16–23) at 21.
296 NextEra Comments (RM16–23) at 14; Public
Interest Organizations Comments (RM16–23) at 16.
297 Stem Comments (RM16–23) at 13.
298 Advanced Energy Management Comments
(RM16–23) at 9.
299 MISO Transmission Owners Comments
(RM16–23) at 20.
300 Microgrid Resources Coalition Comments
(2018 RM18–9) at 8.
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that any final rule should account for
distributed energy resources’ provision
of bi-directional services,301 and Icetec
asserts that a participation model
should allow sites that mix load
reductions and distributed energy
resources to offer their combined
capacity as a single market resource.302
Microgrid Resources Coalition also
argues that distributed energy resource
aggregations, particularly microgrids, do
not fit neatly into existing participation
models or the new participation model
for electric storage resources proposed
in the NOPR.303
125. Other commenters recommend
that the Commission require the RTOs/
ISOs to incorporate sufficient flexibility
into their participation models. Public
Interest Organizations suggest that, in
order to take advantage of distributed
energy resources’ ability to absorb
excess electricity, shift load, and
reinject electricity onto the grid at peak
times, participation models should be
flexible and enable resources to act as
demand-side resources and/or as
generation and should not require
resources to choose one participation
model exclusively.304 Efficient Holdings
similarly contends that participation
models should not force distributed
energy resources to choose between
individual categories of services to offer
into the market at any given time.305
NYISO Indicated Transmission Owners
request that energy-only distributed
energy resource aggregations be allowed
in the distributed energy resource
participation model, and consistent
with existing practice for other energyonly resources, should not be required
to offer in the day-ahead market and
should be permitted in both the dayahead and real-time markets.306 NYISO
also asks the Commission to permit
regional flexibility that would allow
NYISO to create rules and market
designs that meet its needs while
301 Energy Storage Association Comments (2018
RM18–9) at 2.
302 Icetec Energy Services Comments (2018
RM18–9) at 6.
303 Microgrid Resources Coalition Comments
(RM16–23) at 5–6 (noting that demand response
participation models that are based on shutting
down an industrial process or activating a seldom
used generator are not appropriate for resources like
a microgrid that uses multiple conventional and
unconventional resources to manage multiple loads
of varying flexibility and is optimized by
sophisticated controls).
304 Public Interest Organizations Comments
(RM16–23) at 19.
305 Efficient Holdings Comments (RM16–23) at 7–
8.
306 NYISO Indicated Transmission Owners
Comments (RM16–23) at 10–11 (citing Cal. Indep.
Sys. Operator Corp., 155 FERC ¶ 61,229 at P 11
(accepting CAISO model that allows intermittent
resources to participate in a dispatchable
aggregation)).
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meeting the Commission’s desire to
integrate distributed energy resources
into the wholesale energy, ancillary
service, and capacity markets.307
126. New York State Entities ask the
Commission to grant RTOs/ISOs the
flexibility to devise participation
models that reflect market conditions
and ongoing initiatives such as those
described in NYISO’s Distributed
Energy Resource Roadmap.308 New York
State Entities highlight that NYISO is
attempting to harmonize the developing
wholesale market enhancements with
the complementary retail programs
emerging from New York’s Reforming
the Energy Vision initiative.309
127. Some commenters note that the
RTOs/ISOs need new and revised
market rules to incorporate distributed
energy resources, but not necessarily a
new participation model.310 ISO–NE
argues that a new participation model
would be costly and disruptive and
create no additional value because
distributed energy resources can
monetize their value to the grid through
several existing avenues.311
128. Advanced Energy Management
argues that a final rule should not
require RTOs/ISOs to replace their
existing programs, such as demand
response programs.312 Icetec argues,
however, that existing ‘‘interconnected
generation’’ models and demand
response models are not sufficient for
distributed energy resource
participation, and states that capacity
market requirements for year-round
performance in PJM prevent distributed
energy resources from offering their full
capacity value.313 Tesla argues that,
regardless of model, distributed energy
resources should receive comparable
compensation.314
c. Commission Determination
129. In this final rule, we adopt the
NOPR proposal to require each RTO/
ISO to have tariff provisions that allow
307 NYISO
Comments (RM16–23) at 11.
York State Entities Comments (RM16–23)
at 12, 13 (citing Distributed Energy Resources
Roadmap for New York’s Wholesale Electricity
Markets, (January 2017), New York Independent
System Operator, Inc.) (Distributed Energy Resource
Roadmap); see supra note 21.
309 New York State Entities Comments (RM16–23)
at 13 (citing Distributed Energy Resource Roadmap
at 4–6).
310 Advanced Energy Economy Comments (2018
RM18–9) at 5–6; Advanced Energy Management
Comments (2018 RM18–9) at 3; Icetec Energy
Comments (2018 RM18–9) at 3–4, 6; NYISO
Indicated Transmission Owners Comments (2018
RM18–9) at 5.
311 ISO–NE Comments (2018 RM18–9) at 2–4.
312 Advanced Energy Management Comments
(2018 RM18–9) at 3.
313 Icetec Comments (2018 RM18–9) at 5
314 Tesla Comments (2018 RM18–9) at 1, 9.
308 New
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distributed energy resource aggregations
to participate directly in RTO/ISO
markets. We conclude that existing
participation models may create barriers
to the participation of distributed energy
resource aggregators in RTO/ISO
markets by limiting the operation of
distributed energy resource aggregations
and the services that they may be
eligible to provide.
130. We therefore adopt the NOPR
proposal to add § 35.28(g)(12)(i) to the
Commission’s regulations and require
each RTO/ISO to establish distributed
energy resource aggregators as a type of
market participant and to allow
distributed energy resource aggregators
to register distributed energy resource
aggregations under one or more
participation models in the RTO’s/ISO’s
tariff that accommodate the physical
and operational characteristics of the
distributed energy resource aggregation.
However, upon consideration of the
comments, we modify the NOPR
proposal to provide each RTO/ISO with
greater flexibility to determine how best
to revise the participation models set
forth in its market rules to facilitate the
participation of distributed energy
resource aggregations. Specifically, to
meet the goals of the final rule, each
RTO/ISO can comply with the
requirement to allow distributed energy
resource aggregators to participate in its
markets by modifying its existing
participation models to facilitate the
participation of distributed energy
resource aggregations, by establishing
one or more new participation models
for distributed energy resource
aggregations, or by adopting a
combination of those two approaches.
The Commission will evaluate each
proposal submitted on compliance to
determine whether it meets the goals of
this final rule to allow distributed
energy resources to provide all services
that they are technically capable of
providing through aggregation.
131. This approach will provide each
RTO/ISO with the flexibility to facilitate
the participation of distributed energy
resource aggregations in its markets in a
way that is efficient and cost-effective as
well as fits the market design of the
RTO/ISO. Permitting each RTO/ISO to
create one or more new participation
models for distributed energy resources
addresses commenter concerns about
the limitations of existing models.
Likewise, permitting each RTO/ISO to
modify existing participation models,
instead of requiring creation of one or
more new participation models,
addresses commenter concerns that
creating a new participation model may
be too costly or disruptive, or that
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existing models do not need to be
replaced.
132. Providing RTOs/ISOs with the
flexibility to determine whether to
modify existing participation models,
create one or more new participation
models, or use a combination of existing
and new participation models will
allow each RTO/ISO to reflect varying
regional needs in its approach to allow
distributed energy resource aggregators
to participate in its markets.
2. Types of Technologies
a. NOPR Proposal
133. In the NOPR, the Commission
stated that distributed energy resources
may include, but are not limited to,
electric storage resources, distributed
generation, thermal storage, and electric
vehicles and their supply equipment.315
The Commission also preliminarily
found that limiting the types of
technologies that are allowed to
participate in the RTO/ISO markets
through distributed energy resource
aggregators would create a barrier to
entry for emerging or future
technologies, potentially precluding
them from being eligible to provide all
of the capacity, energy and ancillary
services that they are technically
capable of providing.316 The
Commission stated that, while some
individual resources or certain
technologies may not be able to meet the
qualification or performance
requirements to provide services to the
RTO/ISO markets on their own, they
may satisfy such requirements as part of
a distributed energy resource
aggregation where resources
complement one another’s capabilities.
The Commission further stated that
combining electric storage resources
with distributed generation could allow
the aggregate resource to achieve
performance requirements (such as
minimum run times) that an electric
storage resource could not meet on its
own and provide services (such as
regulation) that distributed generation
may not be able to provide on its
own.317
134. In the NOPR, the Commission
proposed to require that each RTO/ISO
revise its tariff so that it does not
prohibit the participation of any
particular type of technology in the
RTO/ISO markets through a distributed
energy resource aggregator.318 This was
315 NOPR, 157 FERC ¶ 61,121 at P 104; see supra
Section IV.B. (Definitions of Distributed Energy
Resource and Distributed Energy Resource
Aggregation).
316 NOPR, 157 FERC ¶ 61,121 at P 133.
317 Id. P 133 n.231.
318 Id. P 133.
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to help ensure that the market rules that
RTOs/ISOs develop to comply with any
final rule issued in this proceeding were
sufficiently flexible to accommodate the
participation of new distributed energy
resources as technology evolves, and to
acknowledge the potential that a
distributed energy resource may meet
qualification or performance
requirements by participating in a
distributed energy resource aggregation
that it cannot on its own. The
Commission stated, however, that, to
the extent that existing rules or
regulations explicitly prohibit certain
technologies from participating in RTO/
ISO markets, it did not intend to
overturn those rules or regulations.
b. Comments
135. Several commenters support the
Commission’s proposal not to prohibit
the participation of any particular type
of technology in RTO/ISO markets
through a distributed energy resource
aggregation.319 Generally, they state that
it is important for the market rules to be
resource neutral, allowing other
attributes such as cost, quality,
flexibility, and other attributes sought
by market participants, to dictate which
resources can successfully participate in
RTO/ISO markets. They assert that
resource neutrality reduces risk for
investment in new technologies and
preserves flexibility for the participation
of future technologies and avoid
unnecessary barriers to entry.
136. Several commenters argue that
distributed energy resource aggregation
participation models must allow a
variety of technology configurations.
Efficient Holdings argues that third
party aggregators of behind-the-meter
resources must have better access to the
markets, which can be achieved through
reforms including refined product
definitions, reduction of burdensome
and expensive operational
requirements, and rules to address
distribution utility non-compliance,
embracing the broadest array of
technologies possible.320 Energy Storage
Association and Stem seek to ensure
that front-of-the-meter resources,
behind-the-meter exporting and nonexporting resources, and heterogeneous
groups of resources are all able to
participate in distributed energy
319 See, e.g., AES Companies (RM16–23) at 32–33;
CAISO Comments (RM16–23) at 23; City of New
York Comments (RM16–23) at 8; Massachusetts
Commission Comments (RM16–23) at 8–10; R Street
Institute Comments (RM16–23) at 8.
320 Efficient Holdings Comments (RM16–23) at 7–
9.
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resource aggregations.321 Stem states
that it is reasonable to restrict the
mixing of front-of-the-meter, behindthe-meter exporting, and behind-themeter non-exporting resources within a
single aggregation.322
137. Commenters also note that
allowing distributed energy resource
aggregations to include multiple types
of distributed technologies allows multitechnology aggregations such as
microgrids and complementary
resources such as solar and storage to
participate in RTO/ISO markets, will
provide RTOs/ISOs another source of
flexible controllable output. CAISO
states that, consistent with the
Commission’s proposal, its
Commission-approved Distributed
Energy Resource Provider model allows
aggregations to consist of different
distributed energy resource types.323
AES Companies encourage the
Commission to review the validity of
any prohibitions on the participation of
existing technologies (i.e., rules
currently exist prohibiting certain types
of resources in the tariffs for direct
market participation) in a separate
docket rather than in this proceeding.324
138. In contrast, some commenters
express general concerns about
aggregations that include different types
of technologies.325 American Petroleum
Institute contends that aggregating
different types of distributed energy
resources will make market
optimization more difficult.326 TAPS
urges the Commission to give RTOs/
ISOs discretion, claiming that
combining multiple types of distributed
energy resources within a single
aggregation may be beneficial but could
pose issues when determining
locational and minimum size
requirements for mixed aggregations.327
139. Several commenters state that
RTOs/ISOs will need flexibility to avoid
imposing additional costs or barriers to
entry on different types and
configurations of prospective
distributed energy resource
aggregations.328 SPP argues that
managing an aggregation as a discrete
321 Energy Storage Association (RM16–23) at 24–
25; Stem Comments (RM16–23) at 7, 12, 13.
322 Stem Comments (RM16–23) at 12, 13.
323 CAISO Comments (RM16–23) at 23.
324 AES Companies Comments (RM16–23) at 32–
33.
325 American Petroleum Institute Comments
(RM16–23) at 10; ISO–NE Comments (RM16–23) at
31–35; TAPS Comments (RM16–23) at 27.
326 American Petroleum Institute Comments
(RM16–23) at 10.
327 TAPS Comments (RM16–23) at 27.
328 CAISO Comments (RM16–23) at 38; Fresh
Energy/Sierra Club/Union of Concerned Scientists
Comments (RM16–23) at 3; New York State Entities
Comments (RM16–23) at 21.
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set of different assets may be infeasible
in commitment and dispatch and that
sub-categorizing different types of
distributed energy resources within a
single aggregation would be extremely
complex.329 PJM Market Monitor states
that distributed generation and
distributed storage should not be mixed
within aggregations and that resources
should be aggregated by type for each
wholesale market node. For example,
according to PJM Market Monitor,
distributed generation should be
aggregated, at the same node with other
distributed generation, while distributed
storage should be aggregated at the same
node with other distributed storage.330
140. ISO–NE also asks for flexibility
and provides several arguments as to
why certain heterogeneous aggregations
are not desirable.331 More specifically,
ISO–NE argues that (1) demand-side
load resources should only be allowed
to participate in aggregations with other
load because of how certain charges and
credits are allocated to load; 332 (2)
electric storage resources would not
benefit from participating in
aggregations with non-storage
distributed energy resources because of
state-of-charge management issues; 333
and (3) aggregations of non-intermittent
resources with different physical and
economic characteristics would need to
self-schedule, potentially adding
financial risk for the participant,
reducing the efficiency of the dispatch,
and contributing to uplift or excess
generation conditions.334 In addition,
ISO–NE states that demand response
resources should not be allowed to
participate in distributed energy
resource aggregations because of their
distinct settlement rules.335 According
to ISO–NE, in order to accommodate
aggregations that include both demand
response and non-demand response
resource components, ISO–NE would
need to establish rules to disaggregate
these components for purposes of
settlement. ISO–NE requests that, if they
are not required to participate
separately, the Commission clarify
which rules must apply to such
resources.336 ISO–NE adds that its
region is steadily transitioning its
energy market away from selfscheduling and toward requiring all
energy supply and demand to be priced
and that being required to implement
rules that accommodate aggregations
composed of heterogenous resource
types would be a significant step
backwards in that effort.337
c. Commission Determination
141. To implement § 35.28(g)(12)(ii)(a)
of the Commission’s regulations, we
require that each RTO’s/ISO’s rules do
not prohibit any particular type of
distributed energy resource technology
from participating in distributed energy
resource aggregations. We find that
limiting the types of technologies that
are allowed to participate in RTO/ISO
markets through a distributed energy
resource aggregator would create a
barrier to entry for emerging or future
technologies, potentially precluding
them from being eligible to provide all
of the capacity, energy, and ancillary
services that they are technically
capable of providing. Requiring that
each RTO’s/ISO’s rules do not exclude
any particular types of technology from
participating in distributed energy
resource aggregations in RTO/ISO
markets will ensure a technologyneutral approach to distributed energy
resource aggregations, which will
ensure that more resources are able to
participate in such aggregations, thereby
helping to enhance competition and
ensure just and reasonable rates.
142. We agree with commenters that
generally support requiring RTOs/ISOs
to allow groupings of different
technology types in distributed energy
resource aggregations.338 Additionally,
we agree with NRG that, while some
individual resources or certain
technologies may not be able to meet the
qualification or performance
requirements to provide certain services
to RTO/ISO markets on their own, they
may be able to satisfy such requirements
as part of a distributed energy resource
aggregation where resources
complement one another’s
capabilities.339 For instance, in the
NOPR, the Commission stated that
aggregating electric storage resources
with distributed generation could allow
the aggregation to achieve performance
requirements (such as minimum run
times) that an electric storage resource
could not meet on its own and provide
services (such as regulation) that
337 Id.
at 34–35.
e.g., AES Companies (RM16–23) at 32–33;
CAISO Comments (RM16–23) at 23; City of New
York Comments (RM16–23) at 8; Energy Storage
Association (RM16–23) at 24–25; Fresh Energy/
Sierra Club/Union of Concerned Scientists
Comments (RM16–23) at 3; Massachusetts
Commission Comments (RM16–23) at 8–10; New
York State Entities Comments (RM16–23) at 21; R
Street Institute Comments (RM16–23) at 8; Stem
Comments (RM16–23) at 7, 12, 13.
339 NRG Comments (RM16–23) at 19.
338 See,
329 SPP
330 PJM
Comments (RM16–23) at 22.
Market Monitor Comments (RM16–23) at
15–16.
331 ISO–NE Comments (RM16–23) at 31–36.
332 Id. at 33.
333 Id. at 33–34.
334 Id. at 34–35.
335 Id. at 32.
336 Id. at 32–33.
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distributed generation may not be able
to provide on its own.340 Therefore, to
implement § 35.28(g)(12)(ii)(a) of the
Commission’s regulations, we clarify the
NOPR proposal and require each RTO/
ISO to revise its tariff to allow different
types of distributed energy resource
technologies to participate in a single
distributed energy resource aggregation
(i.e., allow heterogeneous distributed
energy resource aggregations).341
Requiring that RTOs/ISOs allow
heterogeneous aggregations will further
enhance competition in RTO/ISO
markets by ensuring that
complementary resources, including
those with different physical and
operational characteristics, can meet
qualification and performance
requirements such as minimum run
times, which will help ensure that these
markets produce just and reasonable
rates.
143. We are unconvinced by
arguments in favor of homogeneous
aggregations. We find that the benefits
of allowing heterogeneous aggregations
outweigh the concerns regarding
complexity of implementation. While
SPP and ISO–NE indicate that market
rules allowing for heterogeneous
aggregations would be challenging to
develop and implement,342 neither
explains why their markets are unique
such that it would be necessary for the
Commission to permit regional
flexibility. In addition, concerns about
RTOs’/ISOs’ ability to manage a diverse
set of distributed energy resources are
misplaced because the distributed
energy resource aggregator, not an
individual distributed energy resource
in the aggregation, is the market
participant with whom the RTO/ISO
would be interacting. Moreover, the
aggregator, not the RTO/ISO, would be
responsible for ensuring that the
distributed energy resource aggregation
meets applicable RTO/ISO performance
and registration requirements.
144. We also are not persuaded by
ISO–NE’s reservations related to stateof-charge management and selfscheduling. We find that market
participants are best positioned to make
these participation decisions. If ISO–NE
is correct that self-scheduling adds
financial risk for the participant and
that, because of state-of-charge
management issues, electric storage
resources would not benefit from
340 NOPR,
157 FERC ¶ 61,121 at P 133 n.231.
defines a heterogeneous aggregation
as consisting of ‘‘different resource types, such that,
for example, a single aggregation might consist of
a battery, distributed generation assets, and electric
vehicles.’’ ISO–NE Comments (RM16–23) at 31.
342 ISO–NE Comments (RM16–23) at 32; SPP
Comments (RM16–23) at 21–22.
341 ISO–NE
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participating in distributed energy
resource aggregations, then we would
expect market participants to act in their
economic interest.
145. As to ISO–NE’s concerns about
incorporating demand response
resources into distributed energy
resource aggregations, we note that
demand response aggregations and the
resources in them that effectuate load
reductions currently are not necessarily
composed of the same types of
technologies and are already providing
services in numerous RTO/ISO markets.
Therefore, similar to the Commission’s
finding in Order No. 745–A, from the
perspective of the RTO/ISO, the means
by which an aggregation is able to
provide wholesale services does not
change the value of that service to the
wholesale grid.343 In response to ISO–
NE’s request for clarification about
which settlement rules apply to
distributed energy resource aggregations
composed of both demand response and
non-demand response resources, we
clarify that the requirements in Order
No. 745 would apply to demand
response resources participating in
heterogeneous aggregations. In addition,
while ISO–NE would prefer to exclude
demand response resources from
distributed energy resource aggregations
to simplify settlement and the allocation
of charges and credits to load, we
reiterate that the benefits of allowing
heterogeneous aggregations outweigh
ISO–NE’s preference to limit the types
of resources that can participate in
aggregations. We clarify, however, that
the participation of demand response in
distributed energy resource aggregations
is subject to the opt-out and opt-in
requirements of Order Nos. 719 and
719–A. Therefore, if the relevant electric
retail regulatory authority where a
demand response resource is located
has either chosen to opt out or has not
opted in, then the demand response
resource may not participate in a
distributed energy resource
aggregation.344
146. As to ISO–NE’s concern that selfscheduling will reduce the efficiency of
the dispatch and contribute to uplift or
343 As the Commission stated in Order No. 745–
A, ‘‘[f]rom the perspective of the grid, the manner
in which a customer is able to produce such a load
reduction from its validly established baseline
(whether by shifting production, using internal
generation, consuming less electricity, or other
means) does not change the effect or value of the
reduction to the wholesale grid.’’ Demand Response
Compensation in Organized Wholesale Energy
Markets, Order No. 745–A, 137 FERC ¶ 61,215, at
P 66 (2011), reh’g denied, Order No. 745–B, 138
FERC ¶ 61,148 (2012), vacated sub nom. Elec.
Power Supply Ass’n v. FERC, 753 F.3d 216 (D.C.
Cir. 2014), rev’d & remanded sub nom. EPSA, 136
S. Ct. 760.
344 See supra P 59.
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excess generation conditions, we note
that no other RTOs/ISOs raise this
concern. Market rules allowing for
heterogeneous aggregations are already
in place in CAISO,345 and the
Commission recently accepted market
rules allowing for heterogeneous
aggregations in NYISO.346 Based on the
record before us, ISO–NE has not
sufficiently demonstrated why it is
uniquely unable to implement market
rules that can overcome these dispatch,
uplift, and excess generation challenges.
3. Double Counting of Services
a. NOPR Proposal
147. In the NOPR, the Commission
stated that it is appropriate for each
RTO/ISO to limit the participation of
resources in RTO/ISO markets through
a distributed energy resource aggregator
that are receiving compensation for the
same services as part of another
program.347 The Commission explained
that, because resources able to register
as part of a distributed energy resource
aggregation will be located on the
distribution system, they may also be
eligible to participate in retail
compensation programs, such as net
metering, or other wholesale programs,
such as demand response programs.
Therefore, to ensure that there is no
duplication of compensation, the
Commission proposed that distributed
energy resources that are participating
in one or more retail compensation
programs such as net metering or
another wholesale market participation
program will not be eligible to
participate in RTO/ISO markets as part
of a distributed energy resource
aggregation.
b. Comments
148. Most commenters that address
the issue of double counting agree that
distributed energy resources should not
be compensated twice for providing the
same service but disagree on what
constitutes ‘‘the same service,’’ how to
implement such a requirement, or who
should be responsible.348 In this regard,
Pacific Gas & Electric supports
prevention of double compensation and
discusses the processes in California
that protects against the bypass of retail
rates for behind-the-meter distributed
energy resources that both consume and
345 Cal. Indep. Sys. Operator Corp., 155 FERC
¶ 61,229 at P 11.
346 NYISO Aggregation Order, 170 FERC ¶ 61,033.
347 NOPR, 157 FERC ¶ 61,121 at P 134.
348 See, e.g., Advanced Energy Economy
Comments (RM16–23) at 33–34; Calpine Comments
(2018 RM18–9) at 6–7; Dominion Comments
(RM16–23) at 9–10; Microsoft Corporation
Comments (2018 RM18–9) at 17; New York State
Entities Comments (RM16–23) at 13.
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export electricity for both retail and
wholesale purposes.349 Some
commenters also assert that the NOPR
proposal provides a solution to prevent
double compensation,350 provides clear
jurisdictional lines,351 reduces
confusion,352 and could ease
coordination issues for distributed
energy resources and alleviate the
limitations of metering and accounting
practices to distinguish between
wholesale and retail activities.353 In
addition, some commenters posit that
allowing distributed energy resources
that earn compensation in out-of-market
retail programs to participate in RTO/
ISO markets may distort price
formation, skewing market results and
clearing prices.354 Other commenters
express concern that dual wholesale and
retail participation could enable
distributed energy resources to arbitrage
between retail and wholesale markets,
creating opportunities for market
manipulation,355 or to cherry pick
between retail and wholesale constructs,
preventing effective distribution system
planning.356 To address this concern,
some commenters suggest that the
Commission should require RTOs/ISOs
to restrict the ability of distributed
energy resources to switch between
wholesale and retail participation by
imposing a waiting period of at least one
year.357
149. CAISO comments that, consistent
with the NOPR proposal, its Distributed
Energy Resource Provider model
specifies that resources participating in
a wholesale market aggregation may not
participate in a retail net energy
metering program if that program does
not expressly also permit wholesale
349 Pacific Gas & Electric Comments (2019 RM18–
9) at 5.
350 Avangrid Comments (RM16–23) at 11; Pacific
Gas & Electric Comments (RM16–23) at 17.
351 Delaware Commission Comments (RM16–23)
at 4.
352 See, e.g., Calpine Comments (2018 RM18–9) at
6; Organization of MISO States Comments (2018
RM18–9) at 8; PJM Utilities Coalition Comments
(2018 RM18–9) at 13.
353 See, e.g., APPA/NRECA Comments (RM16–23)
at 39–40; EEI Comments (RM16–23) at 25–26;
Massachusetts Municipal Electric Comments
(RM16–23) at 3; National Hydropower Association
Comments (RM16–23) at 11; Six Cities Comments
(RM16–23) at 6.
354 Calpine Comments (2018 RM18–9) at 6; EPSA
Comments (2018 RM18–9) at 15; TAPS Comments
(2018 RM18–9) at 25.
355 TAPS Comments (2018 RM18–9) at 26.
356 PJM Utilities Coalition Comments (2018
RM18–9) at 13.
357 APPA Comments (2018 RM18–9) at 25
(suggesting a waiting period of one year); Calpine
Comments (2018 RM18–9) at 7 (suggesting a waiting
period of five years as in PJM’s Fixed Resource
Requirement process).
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market participation.358 CAISO states
that this rule extends to various aspects
of retail net metering programs such as
net metering with storage or virtual net
metering.359 CAISO explains that the
rationale for this rule is that CAISO’s
Distributed Energy Resource Provider
model requires continuous wholesale
participation.360 Additionally, CAISO
states that under California’s current net
energy metering program rules, a
participating resource already benefits
from netting its excess energy against
subsequent electricity bills.361 Based on
this netting approach, there is no energy
available to offer into the CAISO
markets because the excess energy is
banked for later withdrawal. CAISO
believes the Commission’s approach in
the NOPR is consistent with
Commission orders determining that
exports to the transmission grid under a
net energy metering program do not
constitute a sale for resale of electricity
under the FPA because these customers
are, on a net basis, consumers.
150. Some commenters ask the
Commission to modify or clarify certain
issues related to the NOPR proposal to
prevent double counting. For instance,
several commenters urge the
Commission to give clear guidance
about the definition of a retail
compensation program or to clarify the
scope of the retail prohibition.362 A
number of commenters argue that the
RTOs/ISOs should be responsible for
demonstrating how they will prevent
duplicate compensation for the same
service.363 To that end, some
commenters urge the Commission to, at
a minimum, direct RTOs/ISOs to
establish protocols that address
duplicate compensation,364 monitor
distributed energy resource offers for
true cost, and hold distributed energy
resources accountable for performance,
among other measures.365 ISO–NE notes
that if distributed energy resources have
to choose between wholesale and retail
participation, retail programs and
358 CAISO Comments (RM16–23) at 24 (citing Cal.
Indep. Sys. Operator Corp., 155 FERC ¶ 61,229 at
P 6).
359 Id. at 24.
360 CAISO Comments (2018 RM18–9) at 15.
361 CAISO Comments (RM16–23) at 24.
362 ISO–NE Comments (RM16–23) at 54; SEIA
Comments (RM16–23) at 16–17; TAPS Comments
(RM16–23) at 11.
363 See, e.g., Advanced Microgrid Solutions
Comments (RM16–23) at 6; Dominion Comments
(RM16–23) at 9–10; EEI Comments (RM16–23) at
25–26; Gridwise Comments (RM16–23) at 2; Public
Interest Organizations Comments (RM16–23) at 23–
24; Stem Comments (RM16–23) at 4, 7–8.
364 EPSA Comments (2018 RM18–9) at 14; TAPS
Comments (2018 RM18–9) at 26–27.
365 Calpine Comments (2018 RM18–9) at 7; EPSA
Comments (2018 RM18–9) at 20.
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behind-the-meter demand response may
be more attractive in New England.366
151. Conversely, numerous
commenters assert that the Commission
should permit distributed energy
resource aggregations to participate in
both wholesale and retail markets,367
provided that the distributed energy
resources are technically capable of
doing so and there are not physical
system limitations that would prevent
such participation.368 Some of these
commenters argue that distributed
energy resources should not receive
duplicate compensation for the same
service but should receive
compensation for each distinct or
incremental value they provide at the
retail or wholesale level, and that being
allowed to do so will improve efficiency
and lower overall costs.369 Some
commenters that are in favor of RTOs/
ISOs allowing dual participation also
note that relevant electric retail
regulatory authorities have the ability to
prevent it.370 Several commenters
contend that there is precedent for dual
participation 371 and argue that a blanket
ban would create a barrier to distributed
energy resource participation,
underestimating their capabilities, and
inhibit competition, undermining the
NOPR.372 Icetec and Tesla point out that
capacity markets have long avoided
duplicate compensation for demand
response and for generators providing
multiple services at once (e.g., energy
and reserves) and urge the Commission
to apply the logic of these constructs to
366 ISO–NE
Comments (2018 RM18–9) at 3.
e.g., Advanced Energy Buyers Comments
(2018 RM18–9) at 2; Genbright Comments (RM16–
23) at 2–4; Global Cold Chain Alliance Comments
(2018 RM18–9) at 2; MISO Transmission Owners
Comments (RM16–23) at 6; New York Commission
Comments (2018 RM18–9) at 16.
368 Energy Storage Association (2018 RM18–9) at
2; Microsoft Corporation Comments (2018 RM18–9)
at 17; NRG Comments (2018 RM18–9) at 6–8; SEIA
Comments (RM16–23) at 16; Sunrun Comments
(RM16–23) at 3.
369 See, e.g., Advanced Energy Economy
Comments (2018 RM18–9) at 8, 12–13; American
Petroleum Institute Comments (RM16–23) at 13;
Direct Energy Comments (2018 RM18–9) at 11–13;
EPSA Comments (2018 RM18–9) at 15; NARUC
Comments (RM16–23) at 5; Viking Cold Solutions
Comments (2018 RM18–9) at 2.
370 California Commission Comments (2018
RM18–9) at 10–11; New York Commission
Comments (2018 RM18–9) at 17–18.
371 See, e.g., Advanced Energy Economy
Comments (RM16–23) at 39; Advanced Energy
Management Comments (RM16–23) at 11–14; City
of New York Comments (RM16–23) at 10–11; NRG
Comments (2018 RM18–9) at 7–8; NYPA Comments
(2018 RM18–9) at 2.
372 See, e.g., California Energy Storage Alliance
Comments (RM16–23) at 4–6; Genbright Comments
(RM16–23) at 3–4; Microgrid Resources Coalition
Comments (RM16–23) at 12; SEIA Comments
(RM16–23) at 16; Stem Comments (RM16–23) at 4,
7.
367 See,
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distributed energy resources.373
Advanced Energy Economy claims that
the NOPR proposal would prevent the
RTOs/ISOs from accessing a growing
pool of resources located close to load
that can be cost-effectively dispatched
to ensure reliability.374 Several
commenters argue that requiring
resources to choose between markets
would diminish the incremental value
of distributed energy resources, leading
to less efficient and flexible markets and
reducing distributed energy resources’
commercial viability.375 Commenters
contend that, even if some services
could qualify generally as the same
service, it would be possible to
distinguish them.376 Some commenters
identify a number of scenarios in which
providing distinct wholesale and retail
services is feasible and explain that
dispatch triggers for these programs
usually do not overlap, which further
indicates that they are not the same
services.377 Additional commenters note
potential discrepancies between the
NOPR proposal and the Commission’s
recent policy statement enabling
multiple-use applications for electric
storage resources,378 and contend that
experience in CAISO has demonstrated
that it is possible to differentiate
between services.379
373 Icetec Comments (2018 RM18–9) at 14; Tesla
Comments (2018 RM18–9) at 4.
374 Advanced Energy Economy Comments
(RM16–23) at 33–34.
375 See, e.g., Advanced Energy Management
Comments (RM16–23) at 10–11; Advanced
Microgrid Solutions Comments (RM16–23) at 6;
Energy Storage Association Comments (RM16–23)
at 22–23; Public Interest Organizations Comments
(RM16–23) at 22–24; Tesla/SolarCity Comments
(RM16–23) at 3.
376 Energy Storage Association Comments (2018
RM18–9) at 2; New York Commission Comments
(2018 RM18–9) at 15; NYISO Indicated
Transmission Owners Comments (2018 RM18–9) at
13. See also California Commission Comments
(2018 RM18–9) at 8 (noting that the California
Commission declined to categorize the 22 services
defined for the multiple use application framework
adopted in D.18–01–003 by their service elements,
which are either energy or capacity).
377 See, e.g., Advanced Energy Economy
Comments (RM16–23) at 34–35; California Energy
Storage Alliance Comments (RM16–23) at 5–6;
DER/Storage Developers Comments (RM16–23) at
2–3; Tesla/SolarCity Comments (RM16–23) at 5–7.
Advanced Energy Management notes that dispatch
for the Consolidated Edison programs only
overlapped with dispatch for the NYISO programs
in six percent of hours from 2011 to 2015.
Advanced Energy Management Comments (RM16–
23) at 12–13.
378 Institute for Policy Integrity Comments
(RM16–23) at 7; Open Access Technology
Comments (RM16–23) at 4–5; Stem Comments
(RM16–23) at 4 (citing Utilization of Elec. Storage
Res. for Multiple Servs. When Receiving Cost-Based
Rate Recovery, 158 FERC ¶ 61,051 (2017)).
379 Leadership Group Comments (RM16–23) at 3
(citing Cal. Indep. Sys. Operator Corp., 155 FERC
¶ 61,229 at P 11).
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152. However, many commenters
disagree over how the Commission
should assess what constitutes ‘‘the
same service.’’ Some commenters assert
that ‘‘same service’’ should refer
narrowly to retail and wholesale
programs that compensate a distributed
energy resource for the exact same kW
or kWh for the same value, providing no
incremental value to the system.380
Other commenters argue that tools are
necessary to prevent double
compensation for the same service and
suggest using performance requirements
and dispatch triggers, contracting,
market/participation rules,
registration,protections, mathematical/
accounting solutions, and/or a
coordination framework, among other
measures, to prevent double
counting.381 According to some of these
commenters, market rules could prevent
double compensation when a resource
is dispatched simultaneously for
multiple programs or to prevent a
resource from being permitted to sell the
same market product as both an
individual resource and as part of an
aggregation in the same timeframe.382
Some commenters suggest using certain
criteria to determine when a service
provides incremental value to the retail
or wholesale system or using metrics to
enable segmentation of time or service
provided.383 PJM asks the Commission
not to prohibit PJM from using
accounting rules to delineate between a
behind-the-meter distributed energy
resource aggregation’s wholesale and
retail transactions, as applicable.384
153. IRC urges the Commission to
work with states to set forth clear
processes for resolving jurisdictional
and rate issues to prevent double
compensation based on the details of a
particular retail program.385 Some
commenters suggest that the
Commission collaborate with local
regulatory authorities because local
conditions may warrant special rules
and restrictions for distributed energy
380 Advanced Energy Management Comments
(2018 RM18–9) at 13; New York Commission
Comments (2018 RM18–9) at 15.
381 See, e.g., California Commission Comments
(2018 RM18–9) at 9–10; Microgrid Resources
Coalition Comments (2018 RM18–9) at 12–14; New
York Commission Comments (2018 RM18–9) at 16,
18–19; NYISO Indicated Transmission Owners
Comments (2018 RM18–9) at 13–14; Tesla
Comments (2018 RM18–9) at 3–7.
382 Advanced Energy Management Comments
(RM16–23) at 13; AES Companies Comments
(RM16–23) at 39; New York State Entities
Comments (RM16–23) at 15–16.
383 Advanced Energy Buyers Comments (2018
RM18–9) at 6; Advanced Energy Economy
Comments (2018 RM18–9) at 13; Advanced Energy
Management Comments (2018 RM18–9) at 14–15.
384 PJM Comments (RM16–23) at 23.
385 IRC Comments (RM16–23) at 3–5.
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67121
resource participation in multiple
markets or defer to state jurisdictions.386
Some commenters request that the
Commission clarify the right of state
regulators to monitor and regulate
potential duplicate compensation 387
and request that the Commission
provide guidance to distribution
utilities regarding the proposal.388
154. In addition, several commenters
seek clarification that RTOs/ISOs are
not precluded from allowing distributed
energy resources to provide multiple
non-overlapping wholesale services.389
NYISO requests clarification on whether
distributed energy resources are
permitted to offer the ‘‘same service’’ to
the wholesale markets and distribution
system-level retail programs.390 Lastly,
some commenters state that the
Commission should revisit and further
examine the issue of dual participation
in the future.391
155. Other commenters argue that the
NOPR proposal would undermine state
policy.392 Numerous commenters argue
that the NOPR proposal conflicts with
the Commission’s findings in New York
State Public Service Commission v. New
York Independent System Operator,
Inc., in which the Commission stated
that ‘‘[w]hile the wholesale- and the
retail-level demand response programs
may complement each other, they serve
different purposes, provide different
benefits, and compensate distinctly
different services,’’ 393 and would
interfere with New York’s existing
programs and state objectives.394 The
California Commission maintains that
dual participation of a distributed
energy resource in retail programs and
RTO/ISO markets is a retail matter
under state jurisdiction.395 The
386 EEI Comments (RM16–23) at 26–27; Pacific
Gas & Electric Comments (2018 RM18–9) at 10.
387 Massachusetts Commission Comments
(RM16–23) at 11.
388 ISO–NE Comments (RM16–23) at 54.
389 NextEra Comments (RM16–23) at 14; NYISO
Comments (RM16–23) at 14–15; Public Interest
Organizations Comments (RM16–23) at 21–22.
390 NYISO Comments (RM16–23) at 14–15.
391 EEI Comments (RM16–23) at 25; New York
Utility Intervention Unit Comments (RM16–23) at 6;
Pacific Gas & Electric Comments (RM16–23) at 17–
18; SoCal Edison Comments (RM16–23) at 10.
392 California Commission Comments (RM16–23)
at 6–7; City of New York Comments (RM16–23) at
13; New York State Entities Comments (RM16–23)
at 18.
393 N.Y. Pub. Serv. Comm’n v. N.Y. Indep. Sys.
Operator, Inc., 158 FERC ¶ 61,137, at P 33 (2017).
394 See, e.g., Advanced Energy Economy
Comments (RM16–23) at 35–36; Advanced Energy
Management Comments (RM16–23) at 11–13;
Harvard Environmental Policy Initiative Comments
(RM16–23) at 7; New York State Entities Comments
(RM16–23) at 14,16–18; Union of Concerned
Scientists Comments (RM16–23) at 19.
395 California Commission Comments (2018
RM18–9) at 10–11.
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Arkansas Commission, with support
from Advanced Energy Economy, states
that dual participation of distributed
energy resource aggregations in RTO/
ISO and retail markets requires a
cooperative federalism approach in
which the Commission has authority
over RTO/ISO eligibility rules, states
have exclusive jurisdiction over retail
customer programs and may set terms
and conditions so long as they do not
conflict with Commission orders, and
state regulators play a complementary
role.396
156. In addition, some commenters
assert that the Commission does not
have authority to prevent distributed
energy resources from selling retail
services.397 The Harvard Environmental
Policy Initiative argues that there is no
legal barrier that prevents distributed
energy resources from participating in
both state and Commission programs,
and that the Commission has the
authority to allow each RTO/ISO to
determine how to allow distributed
energy resources to participate in both
state-level and wholesale programs,
though they note it may be operationally
complex.398 Tesla/SolarCity asserts that
differences in jurisdiction must not
prevent distributed energy resources
from receiving compensation for
distinct services 399 and argues that
effects on retail rates should not be
relevant.400 Several commenters add
that the Commission’s decision in this
final rule will not affect the ability of
relevant electric retail regulatory
authorities to restrict wholesale
participation for distributed energy
resources wishing to participate in retail
programs.401
157. However, some commenters
disagree with other commenters’
proposed approaches to differentiate
between wholesale and retail services.
APPA contends that the methods
proposed by some commenters of
determining what constitutes the same
396 Supplemental Comments of Arkansas
Commission (2018 RM18–9–000) at 1–2; Answer of
Advanced Energy Economy to Supplemental
Comments of Arkansas Commission (2018 RM18–
9) at 2.
397 California Commission Comments (RM16–23)
at 6; DER/Storage Developers Comments (RM16–23)
at 2; SEIA Comments (RM16–23) at 16; Stem
Comments (RM16–23) at 7.
398 Harvard Environmental Policy Initiative
Comments (RM16–23) at 6–7 (citing NOPR, 157
FERC ¶ 61,121 at P 134).
399 Tesla/SolarCity Comments (RM16–23) at 2–3.
400 Id. at 3 (quoting EPSA, 136 S. Ct. 760 at 776
(‘‘When FERC regulates what takes place on the
wholesale market, as a part of carrying out its
charge to improve how that market runs, then no
matter that effect on retail rates . . .’’)).
401 APPA Comments (2018 RM18–9) at 25–26;
PJM Utilities Coalition Comments (2018 RM18–9) at
13; TAPS Comments (2018 RM18–9) at 25.
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service are flawed, an incremental value
approach is conceptually complicated,
and using dispatch triggers to
distinguish services is problematic
because a resource could not respond to
a reliability event in both the wholesale
and retail markets at once.402 Similarly,
Sunrun argues that a universal
characterization of services would
create litigation and confusion.403 PJM
asserts that the Commission should not
‘‘over-define’’ the services that
distributed energy resources provide but
instead should focus on the services
traditionally addressed in the wholesale
market (e.g., capacity, energy and
ancillary services), and require that any
unit of capacity/resource adequacy only
be compensated once across the
wholesale and retail domains.404 NYISO
Indicated Transmission Owners point
out that the ability to differentiate
services is dependent on particular
programs and markets, and suggest that
the Commission consider programs as
they are filed by the relevant RTOs/
ISOs.405 MISO states that it defers to
relevant electric retail regulatory
authorities to address any double
compensation matters.406 NYISO states
that if competing dispatch obligations
still arise, it will be the aggregator’s
responsibility to resolve the conflict and
face penalties, as appropriate.407
158. NRG and Stem argue that the
Commission should only be concerned
with double compensation if retail
participation interferes with the
provision of wholesale services.408
Similarly, other commenters argue that
the Commission should focus on
preventing distributed energy resources
from receiving double payment for the
same wholesale service and not whether
those resources are also receiving retail
level compensation.409 NYISO Indicated
Transmission Owners note that many
distribution utilities have established
programs to accommodate technology
within retail service programs and argue
that any changes to market rules for
participation of distributed energy
resource aggregations in wholesale
markets should avoid encroaching upon
or abrogating the jurisdictional status of
these distribution-level programs,
402 APPA
Comments (2018 RM18–9) at 24–25.
Comments (2018 RM18–9) at 9–10.
404 PJM Comments (2018 RM18–9) at 14.
405 NYISO Indicated Transmission Owners
Comments (2018 RM18–9) at 7–8.
406 MISO Comments (2018 RM18–9) at 22.
407 NYISO Comments (2018 RM18–9) at 9–11.
408 NRG Comments (RM16–23) at 8; Stem
Comments (RM16–23) at 7.
409 Advanced Energy Economy Comments (2018
RM18–9) at 13; Energy Storage Association
Comments (2018 RM18–9) at 5; New York
Commission Comments (2018 RM18–9) at 18; Stem
Comments (RM16–23) at 7.
403 Sunrun
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which, they state, do not involve
wholesale sales.410
c. Commission Determination
159. To implement § 35.28(g)(12)(ii)(a)
of the Commission’s regulations and
upon consideration of the comments
received, we adopt the NOPR proposal,
as modified and clarified below, to
allow RTOs/ISOs to limit the
participation of resources in RTO/ISO
markets through a distributed energy
resource aggregator that are receiving
compensation for the same services as
part of another program.
160. However, we agree with many
commenters that the NOPR proposal to
prohibit distributed energy resources
that are receiving compensation in a
retail program from being eligible to
participate in the RTO/ISO markets as
part of a distributed energy resource
aggregation was overly broad.
Commenters identify multiple examples
where participation in both wholesale
and retail markets is feasible 411 and is
already permitted and occurring,412 and
they identify a variety of existing and
potential approaches to address
reasonable concerns about double
counting and overcompensation.413
Therefore, rather than barring
participation in both wholesale and
retail or multiple wholesale programs,
we modify the NOPR proposal to
require each RTO/ISO to revise its tariff
to: (1) Allow distributed energy
resources that participate in one or more
retail programs to participate in its
wholesale markets; (2) allow distributed
energy resources to provide multiple
wholesale services; and (3) include any
appropriate restrictions on the
distributed energy resources’
participation in RTO/ISO markets
through distributed energy resource
aggregations, if narrowly designed to
avoid counting more than once the
services provided by distributed energy
resources in RTO/ISO markets. In
compliance with this final rule, we
410 NYISO Indicated Transmission Owners
Comments (RM16–23) at 8.
411 See, e.g., Advanced Microgrid Solutions
Comments (RM16–23) at 5–6; American Petroleum
Institute Comments (RM16–23) at 13; NRG
Comments (RM16–23) at 8; Open Access
Technology Comments (RM16–23) at 5; Public
Interest Organizations Comments (RM16–23) at 22.
412 Direct Energy Comments (2018 RM18–9) at
11–13; Energy Storage Association Comments (2018
RM18–9) at 5; NRG Comments (2018 RM18–9) at 6–
8.
413 NESCOE Comments (RM16–23) at 14–15
(citing Utilization of Electric Storage Resources for
Multiple Services When Receiving Cost-Base Rate
Recovery, 158 FERC ¶ 61,051 at P 2); SEIA
Comments (RM16–23) at 16 (citing Utilization of
Electric Storage Resources for Multiple Services
When Receiving Cost-Based Rate Recovery, 158
FERC ¶ 61,051).
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require each RTO/ISO to describe how
it will properly account for the different
services that distributed energy
resources provide in the RTO/ISO
markets.
161. We find that it is appropriate for
RTOs/ISOs to place narrowly designed
restrictions on the RTO/ISO market
participation of distributed energy
resources through aggregations, if
necessary to prevent double counting of
services. For instance, if a distributed
energy resource is offered into an RTO/
ISO market and is not added back to a
utility’s or other load serving entity’s
load profile, then that resource will be
double counted as both load reduction
and a supply resource. Also, if a
distributed energy resource is registered
to provide the same service twice in an
RTO/ISO market (e.g., as part of
multiple distributed energy resource
aggregations, as part of a distributed
energy resource aggregation and a
standalone demand response resource,
and/or a standalone distributed energy
resource), then that resource would also
be double counted and double
compensated if it clears the market as
part of both market participants. Thus,
we find that it is appropriate for RTOs/
ISOs to place restrictions on the RTO/
ISO market participation of distributed
energy resources through aggregations
after determining whether a distributed
energy resource that is proposing to
participate in a distributed energy
resource aggregation is (1) registered to
provide the same services either
individually or as part of another RTO/
ISO market participant; 414 or (2)
included in a retail program to reduce
a utility’s or other load serving entity’s
obligations to purchase services from
the RTO/ISO market.
162. This restriction is similar to that
adopted by the Commission in Order
No. 719 in the context of aggregations of
demand response, which states that
‘‘[a]n RTO or ISO may place appropriate
restrictions on any customer’s
participation in an [aggregation of retail
customers]-aggregated demand response
bid to avoid counting the same demand
response resource more than once.’’ 415
In addition, as discussed in Section
IV.A.2 above, relevant electric retail
regulatory authorities may decide
whether to permit the customers of
small utilities to participate in the RTO/
ISO markets through distributed energy
resource aggregations and relevant
electric retail regulatory authorities
continue to have authority to condition
participation in their retail distributed
energy resource programs on those
resources not also participating in RTO/
ISO markets,416 which should allow
them to mitigate any doublecompensation concerns.
163. We agree with many commenters
that the NOPR proposal could
undermine the effectiveness of existing
retail and wholesale programs, render
current RTO/ISO market participants
ineligible to continue their
participation, and reduce competition in
RTO/ISO markets, which could lead to
unjust and unreasonable rates. Further,
there may be instances in which an
individual distributed energy resource
could technically, reliably, and
economically provide multiple, distinct
services at wholesale and retail levels,
and therefore preventing it from doing
so may undermine the final rule by
creating a new barrier to participation in
RTO/ISO markets, thereby inhibiting
competition and decreasing reliability.
We believe the modified rules that we
adopt herein will enable efficient
outcomes in RTO/ISO markets by
capturing the full value of distributed
energy resources and enabling efficient
resource allocation while also requiring
RTOs/ISOs to address double-counting
concerns.
164. In addition to addressing the
potential market and reliability impacts
of the NOPR proposal described above,
we find that the reforms we adopt here
are consistent with the Commission’s
determination that a single distributed
energy resource can participate in both
retail and wholesale programs and be
compensated in each for providing
‘‘distinctly different services.’’ 417 While
commenters suggest several tests to
identify duplicate services, the record
does not include a consistent or
practical method for the Commission to
universally define ‘‘same services’’
across wholesale and retail markets, and
we therefore do not believe that it is
appropriate to prescribe an approach
across all RTOs/ISOs. For this reason,
we will grant RTOs/ISOs regional
flexibility with respect to the
restrictions they propose in their tariffs
to minimize market impacts caused by
the double counting of services
provided by distributed energy
resources in the RTO/ISO markets.
414 For example, as part of another distributed
energy resource aggregation, a demand response
resource, and/or a standalone distributed energy
resource.
415 Order No. 719, 125 FERC ¶ 61,071 at P 158.
416 Supplemental Comments of Arkansas
Commission (RM16–23–000) at 2.
417 N.Y. Pub. Serv. Comm’n v. N.Y. Indep. Sys.
Operator, Inc., 158 FERC ¶ 61,137 at P 33.
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4. Minimum and Maximum Size of
Aggregation
a. NOPR Proposal
165. In the NOPR, the Commission
proposed that distributed energy
resource aggregations must meet any
minimum size requirements of the
participation model under which they
elect to participate in RTO/ISO
markets.418 The Commission stated that,
for example, if a distributed energy
resource aggregator decides to register
using the participation model for
electric storage resources given the
cumulative physical and operational
characteristics of the distributed energy
resources in its aggregation, then its
distributed energy resource aggregation
would be required to meet the 100 kW
minimum size requirement that the
Commission required for that
participation model. The Commission
stated that, alternatively, if the
distributed energy resource aggregator
registered as a generator, then its
aggregation would be required to meet
the minimum size requirement for the
generator participation model in the
relevant RTO/ISO market.
166. After the April 2018 technical
conference, the Commission sought
comments on whether reducing the
minimum size of distributed energy
resource aggregations to participate in
RTO/ISO markets would help alleviate
concerns about requiring distributed
energy resource aggregations to locate
only at a single node.419
b. Comments
167. SPP agrees with the
Commission’s proposal for aggregations
to meet any minimum size requirements
of the participation model under which
they elect to participate, noting that that
is consistent with SPP’s registration
requirements for any resource type.420
168. In contrast, several commenters
argue that the Commission should
require RTOs/ISOs to adopt a minimum
size requirement of 100 kW for all
distributed energy resource
aggregations, regardless of the
participation model in which they elect
to participate.421 NYISO states that it is
currently working with stakeholders on
a distributed energy resource market
design proposal that would set a
minimum aggregation size of 100 kW
418 NOPR,
157 FERC ¶ 61,121 at P 136.
Inviting Post-Technical Conference
Comments at 3.
420 SPP Comments (RM16–23) at 16.
421 See, e.g., Advanced Energy Management
Comments (RM16–23) at 16–17, 25–26; Mensah
Comments (RM16–23) at 3; Efficient Holdings
Comments (RM16–23) at 8; NYISO Comments
(RM16–23) at 15–16; Tesla/SolarCity Comments
(RM16–23) at 17, 26.
419 Notice
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because this is the smallest increment
that NYISO believes it can accurately
model, commit, and dispatch with its
current grid operations software.422
Some of those commenters contend that
a minimum size requirement above 100
kW runs counter to the NOPR’s goal of
improving competition in the wholesale
markets while avoiding excessive
registration of individual small
resources and modeling complexity.423
Tesla/SolarCity state that a minimum
size requirement of 100 kW across all
markets would avoid any confusion
caused by artificial differences between
the electric storage and distributed
energy resource aggregation
participation models.424 Some
commenters argue that minimum size
requirements greater than 100 kW pose
a significant barrier to entry.425 Direct
Energy disagrees with ISO–NE’s
assertion at the technical conference
that there is no real need for aggregation
because there is no minimum size
limitation for participating in ISO–NE’s
markets, stating that while Direct Energy
is supportive of establishing a
framework without minimum size
limitations for distributed energy
resources, the lack of such limitations
should not serve as an alternative for
aggregation.426 NRG states that 100 kW
is an efficient minimum size
requirement but that the participation
model for distributed energy resource
aggregations should set minimum
resource participation thresholds only
to the extent necessary to accommodate
422 NYISO Comments (RM16–23) at 15–16; PJM
Comments (RM16–23) at 27. On January 23, 2020,
the Commission accepted NYISO’s tariff revisions
establishing a new participation model for
aggregations of resources, including distributed
energy resources, which requires that each energy,
ancillary service, and capacity transaction on behalf
of an aggregation must have a minimum offer of
100 kW, and if an aggregation offers a combination
of withdrawals, injections, and/or demand
reductions, it must offer at least 100 kW of each. See
NYISO Aggregation Order, 170 FERC ¶ 61,033 at P
14.
423 Advanced Energy Management Comments
(RM16–23) at 16–17; Advanced Energy Economy
Comments (RM16–23) at 51–52 (citing NOPR, 157
FERC ¶ 61,121 at P 94); California Energy Storage
Alliance Comments (RM16–23) at 7–8.
424 Tesla/SolarCity Comments (RM16–23) at 26.
425 Fresh Energy/Sierra Club/Union of Concerned
Scientists Comments (RM16–23) at 2 (citing MISO
Market Subcommittee Presentation, November 29th,
2016, https://www.misoenergy.org/Library/
Repository/Meeting%20Material/Stakeholder/MSC/
2016/20161129/20161) (stating that the integration
of distributed energy resources and smaller-scale
resources is within the ‘‘probable limit of current
systems’’); Tesla/SolarCity Comments (RM16–23) at
27 (citing N.Y. Indep. Sys. Operator, Inc., 155 FERC
¶ 61,166 (2016)).
426 Direct Energy Comments (2018 RM18–9) at 8–
9 (citing Technical Conference Transcript at 22).
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existing metering and data management
systems infrastructure.427
169. Several commenters argue that
the Commission should provide the
RTOs/ISOs with flexibility to establish
any minimum size requirement for
distributed energy resource aggregations
based on their ability to model and
dispatch these resources.428 SoCal
Edison states that each RTO/ISO should
be allowed to determine its own
minimum size requirements, providing
the example of CAISO’s requirement
that distributed energy resource
aggregations be at least 500 kW to help
ensure that an aggregation is large
enough to have a measurable impact on
the transmission system.429 EPRI and
SoCal Edison both highlight the
software challenges and potential costs
associated with implementing a
minimum size requirement at or below
100 kW.430 Pacific Gas & Electric asserts
that RTOs/ISOs must be allowed to
account for the differences between
interacting with aggregations and standalone resources in their markets.431
MISO states that, to the extent the
Commission deems it necessary to set a
volume threshold for aggregated
participation, the threshold should
apply to registration minimums and not
be related to how RTOs/ISOs model or
dispatch resources.432 NYISO Indicated
Transmission Owners assert that
aggregations should be subject to the
same minimum size requirements as
traditional resources that are based on
the services they are providing.433
170. Energy Storage Association
agrees that a lower limit is necessary but
asserts that the Commission should not
allow RTOs/ISOs to place upper limits
on the size of distributed energy
resource aggregations.434 In contrast,
CAISO believes that the Commission
should adopt an upper limit on the size
of these aggregations to ensure reliable
operation of the transmission system
while obtaining more experience with
distributed energy resource
427 NRG Comments (RM16–23) at 12; NRG
Comments (2018 RM18–9) at 4.
428 See, e.g., AES Companies Comments (RM16–
23) at 34; IRC Comments (RM16–23) at 7; ISO–NE
Comments (RM16–23) at 36; MISO Comments
(RM16–23) at 20; Pacific Gas & Electric Comments
(RM16–23) at 17.
429 SoCal Edison Comments (RM16–23) at 11
(citing CAISO Tariff, Section 4.17.5.1; CAISO,
Transmittal Letter, Docket No. ER16–1085, at 9
(filed March 4, 2016)).
430 EPRI Comments (2018 RM18–9) at 7–8; SoCal
Edison Comments (2018 RM18–9) at 5.
431 Pacific Gas & Electric Comments (RM16–23) at
17.
432 MISO Comments (2018 RM18–9) at 16–17.
433 NYISO Indicated Transmission Owners
Comments (RM16–23) at 12.
434 Energy Storage Association Comments (RM16–
23) at 25–26.
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aggregations. CAISO notes that its
Distributed Energy Resource Provider
model imposes a maximum capacity
requirement of 20 MW on aggregations
that span multiple pricing nodes to limit
the impact of these aggregations on
congestion on the CAISO grid without
severely constraining the ability of
distributed energy resource providers to
form viable aggregations.435 Similarly,
SPP argues that the Commission should
consider a maximum size requirement
for aggregations across multiple nodes
but that no maximum requirement is
necessary for aggregations located at a
single node.436 University of Delaware’s
EV R&D Group argues that upper power
limits should allow for an aggregation of
100–200 kW resources as this will better
permit the participation of electric bus
fleets.437
c. Commission Determination
171. We adopt the NOPR proposal,
with modifications, and add
§ 35.28(g)(12)(iii) to the Commission’s
regulations to require each RTO/ISO to
implement a minimum size requirement
not to exceed 100 kW for all distributed
energy resource aggregations. We agree
with commenters that a minimum size
requirement not to exceed 100 kW will
help improve competition in the RTO/
ISO markets and avoid confusion about
appropriate minimum size requirements
for distributed energy resource
aggregations under existing or new
participation models. We do not expect
this requirement to overburden RTO/
ISO modeling software with an
excessive number of small resources
because 100 kW is currently a
commonly used resource size. In
contrast, larger minimum size
requirements that may have been
designed for different types of resources
could pose a significant barrier to entry
for distributed energy resource
aggregations. In addition, this minimum
size requirement is consistent with the
Commission’s minimum size
requirement for electric storage
resources in Order No. 841.438
172. Several RTOs/ISOs support a
minimum size requirement not to
exceed 100 kW. PJM and SPP have a
minimum size requirement of 100 kW
for all resources and support the same
requirement for distributed energy
resource aggregations, and all of the
RTOs/ISOs have at least one
participation model that allows
resources as small as 100 kW to
435 CAISO
Comments (RM16–23) at 25–26.
Comments (RM16–23) at 16.
437 University of Delaware EV R&D Group
Comments (2018 RM18–9) at 1.
438 Order No. 841, 162 FERC ¶ 61,127 at P 270.
436 SPP
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participate in their markets.439
However, we recognize concerns about
the ability of modeling and dispatch
software to handle a large number of
small distributed energy resource
aggregations. Therefore, while we
require each RTO/ISO to implement on
compliance a minimum size
requirement not to exceed 100 kW for
all distributed energy resource
aggregations, we will consider any
future post-implementation requests to
increase the minimum size requirement
above 100 kW if the RTO/ISO
demonstrates that it is experiencing
difficulty calculating efficient market
results and there is not a viable software
solution for improving such
calculations.440
173. We agree with the post-technical
conference comments that a minimum
size requirement that is lower than some
existing RTO/ISO minimum size
requirements will help alleviate
concerns about the ability of single node
aggregations to achieve the necessary
minimum size, particularly given our
findings on locational requirements for
distributed energy resource
aggregations.441 NYISO recently
adopted this approach, stating that
because it decided to limit distributed
energy resource aggregations to a single
pricing node in its distributed energy
resources roadmap, NYISO thought it
was appropriate to lower the minimum
size threshold for distributed energy
resource aggregations to 100 kW.442
Therefore, not only will a minimum size
requirement that does not exceed 100
kW remove a barrier to distributed
energy resource aggregations, improve
competition in RTO/ISO markets, avoid
confusion about appropriate
requirements, and help ensure just and
reasonable rates, but application of this
requirement in conjunction with our
findings on locational requirements,
discussed in Section IV.D below, will
help alleviate any adverse competitive
impacts that single node aggregations
may have.443
174. We are not persuaded by
commenters to adopt a maximum size
439 See, e.g., CAISO Data Request Response
(AD16–20) at 10–11; ISO–NE Data Request
Response (AD16–20) at 13–14; MISO Data Request
Response (AD16–20) at 10; NYISO Data Request
Response (AD16–20) at 9; PJM Data Request
Response (AD16–20) at 10.
440 The Commission offered the RTOs/ISOs a
similar accommodation for the minimum size
requirement for electric storage resources. See
Order No. 841, 162 FERC ¶ 61,127 at P 275.
441 See infra Section IV.D (Locational
Requirements).
442 Technical Conference Transcript at 27; see
NYISO Aggregation Order, 170 FERC ¶ 61,033.
443 See infra Section IV.D (Locational
Requirements).
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requirement for distributed energy
resource aggregations that span multiple
pricing nodes. We do not see a need to
adopt such a requirement because, as
explained in Section IV.E below, to the
extent that RTOs/ISOs allow for multinode distributed energy resource
aggregations, distribution factors and
bidding parameters should provide the
RTOs/ISOs with the information from
geographically dispersed resources in a
distributed energy resource aggregation
necessary to reliably operate their
systems regardless of the size of the
aggregation.444 We also note that, given
our findings on locational requirements,
we are not requiring RTOs/ISOs to
establish multi-node distributed energy
resource aggregations.445
5. Minimum and Maximum Capacity
Requirements for Distributed Energy
Resources Participating in an
Aggregation
a. NOPR Proposal
175. The Commission proposed not to
establish a minimum or maximum
capacity requirement for an individual
distributed energy resource to be able to
participate in RTO/ISO markets through
a distributed energy resource
aggregator.446 The Commission stated
that it believes participation in RTO/ISO
markets through a distributed energy
resource aggregator should not be
conditioned on the size of the resource
but recognized that existing RTO/ISO
market rules may require distributed
energy resources to meet certain
minimum or maximum capacity
requirements under certain
participation models. Therefore, the
Commission sought comment on
whether to establish a minimum or
maximum capacity limit for individual
distributed energy resources seeking to
participate in RTO/ISO markets through
a distributed energy resource aggregator,
or whether to allow each RTO/ISO to
propose such a minimum or maximum
capacity requirement on compliance
with any final rule issued in this
rulemaking proceeding. To the extent
that commenters believe that the
Commission should adopt a minimum
or maximum capacity requirement for
individual distributed energy resources
participating in RTO/ISO markets
through a distributed energy resource
aggregator, the Commission sought
comment on what that requirement
should be.
444 See infra Section IV.E (Distribution Factors
and Bidding Parameters).
445 See infra Section IV.D (Locational
Requirements).
446 NOPR, 157 FERC ¶ 61,121 at P 135.
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b. Comments
176. Several commenters support the
Commission’s proposal not to establish
a minimum capacity requirement for
individual distributed energy resources
participating in RTO/ISO markets
through distributed energy resource
aggregations.447 Some commenters state
that minimum or maximum capacity
requirements are not necessary for
individual distributed energy resources
because the aggregator will interact with
the wholesale market as a single
resource and, as such, that aggregation
will be subject to eligibility rules.448
Fluidic, Fresh Energy/Sierra Club/
Union of Concerned Scientists, and
Tesla/SolarCity argue that aggregators
should be allowed to optimize their
portfolio with any mix of resources to
ensure the most cost-effective
aggregation.449 Energy Storage
Association notes that, while many
behind-the-meter electric storage
resources are relatively small (only a
few kW in some cases), in aggregate,
they can operate nearly identically to a
single, much larger electric storage
resource.450
177. Several commenters ask the
Commission to defer to the RTOs/ISOs
to propose and justify to the
Commission any minimum and
maximum capacity requirements for
individual distributed energy resources
participating in RTO/ISO markets
through distributed energy resource
aggregations.451 EEI argues that the
RTO/ISO-established requirements
should be based on their individual
market rules and their ability to verify
the accuracy of the metering and the
verification process for the resource.452
NYISO notes that it is evaluating
whether there should be a maximum
size for a distributed energy resource in
an aggregation in order to permit
447 See, e.g., APPA/NRECA Comments (16–23) at
43; Fluidic Comments (RM16–23) at 5; Fresh
Energy/Sierra Club/Union of Concerned Scientists
Comments (RM16–23) at 2; ISO–NE Comments
(RM16–23) at 36; NYISO Indicated Transmission
Owners Comments (RM16–23) at 12.
448 See, e.g., NYISO Indicated Transmission
Owners Comments (RM16–23) at 12; R Street
Institute Comments (RM16–23) at 8; SEIA
Comments (RM16–23) at 18; SPP Comments
(RM16–23) at 16; Tesla/SolarCity Comments
(RM16–23) at 27.
449 Fluidic Comments (RM16–23) at 5, Fresh
Energy/Sierra Club/Union of Concerned Scientists
Comments (RM16–23) at 2; Tesla/SolarCity
Comments (RM16–23) at 27.
450 Energy Storage Association Comments (RM16–
23) at 25–26.
451 See, e.g., Advanced Energy Economy
Comments (RM16–23) at 51; Duke Energy
Comments (RM16–23) at 5; ISO–NE Comments
(RM16–23) at 36; MISO Transmission Owners
Comments (RM16–23) at 20; Pacific Gas & Electric
Comments (RM16–23) at 16.
452 EEI Comments (RM16–23) at 27.
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independent modeling of relatively
large distributed energy resources and
provide grid operators more operational
awareness and control over distributed
energy resources that may be needed to
address system conditions.453
178. MISO Transmission Owners
argue that capacity limits should be
identified at the RTO/ISO level unless a
distribution utility is impacted, in
which case the distribution utility
should have discretion to set its own
requirements so that any minimum size
requirement respects capacity
limitations on a distribution circuit,
whether individual or in the
aggregate.454 Similarly, APPA/NRECA
assert that the Commission has no
jurisdiction over facilities used for
generation or local distribution and that
state and local regulators are likely best
equipped to address minimum or
maximum capacity requirements.455
c. Commission Determination
179. To implement § 35.28(g)(12)(ii)(a)
of the Commission’s regulations, we
adopt the NOPR proposal, as modified
below, and will not establish a
minimum or maximum capacity
requirement for individual distributed
energy resources to participate in RTO/
ISO markets through a distributed
energy resource aggregation. Although
we decline to establish a specific
maximum capacity requirement for
individual distributed energy resources
in an aggregation, we direct each RTO/
ISO to propose a maximum capacity
requirement for individual distributed
energy resources participating in its
markets through a distributed energy
resource aggregation or, alternatively, to
explain why such a requirement is not
necessary, as discussed further below.
180. We decline to require RTOs/ISOs
to adopt minimum capacity
requirements for individual distributed
energy resources to participate in their
markets through a distributed energy
resource aggregation. We agree with
commenters that minimum capacity
requirements for distributed energy
resources to participate in an
aggregation are not necessary because
each individual resource will
participate in the market via an
aggregation, which acts as a single
resource. To this end, we note that
distributed energy resource aggregators,
as market-interfacing entities, are
453 NYISO Comments (RM16–23) at 15. The
Commission accepted NYISO’s proposal to limit the
size of resources in an aggregation to 20 MW or less.
NYISO Aggregation Order, 170 FERC ¶ 61,033 at P
9.
454 MISO Transmission Owners Comments
(RM16–23) at 20.
455 APPA/NRECA Comments (RM16–23) at 43.
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responsible for meeting applicable RTO/
ISO qualification and performance
requirements, including minimum size
requirements, and for determining how
any performance penalties or deratings
determined by the RTO/ISO would
apply to the individual resources in an
aggregation.
181. While we find that minimum
capacity requirements are unnecessary,
we recognize the concerns raised by EEI
and NYISO with respect to each RTO’s/
ISO’s ability to accurately model and
verify the metering of larger distributed
energy resources. We believe that
capping the maximum capacity size of
an individual distributed energy
resource participating in a distributed
energy resource aggregation would
ensure that larger resources are required
to participate individually, thereby
allowing RTOs/ISOs to independently
model and verify the metering of these
larger resources. Independent modeling
and verification may provide system
operators with greater operational
awareness and control to address
changing system conditions. Therefore,
to implement § 35.28(g)(12)(ii)(a) of the
Commission’s regulations, we require
each RTO/ISO, in compliance with this
final rule, to either propose a maximum
capacity requirement for individual
distributed energy resources
participating in its markets through a
distributed energy resource aggregation
or, alternatively, to explain why such a
requirement is not necessary.
6. Single Resource Aggregation
a. NOPR Proposal
182. The NOPR proposed, consistent
with Order No. 719, that each RTO/ISO
revise its tariff to allow a single
qualifying distributed energy resource to
avail itself of the proposed distributed
energy resource aggregation rules by
serving as its own distributed energy
resource aggregator.456
b. Comments
183. AES Companies, NextEra, and
NYISO agree with the Commission’s
proposal to require each RTO/ISO to
revise its tariff to allow a single
qualifying distributed energy resource to
avail itself of the proposed distributed
energy resource aggregation rules by
serving as its own distributed energy
resource aggregator.457 CAISO states
that, consistent with the NOPR
proposal, CAISO allows a distributed
energy resource provider to aggregate
one or more distributed energy
resources for purposes of wholesale
market participation.458
184. Xcel Energy Services suggests
that a higher minimum threshold size
should be established for single
distributed energy resource aggregations
because a proliferation of individual
aggregators could increase
administrative costs.459
c. Commission Determination
185. To implement § 35.28(g)(12)(ii)(a)
of the Commission’s regulations, we
adopt the NOPR proposal to require
each RTO/ISO to revise its tariff to allow
a single qualifying distributed energy
resource to avail itself of the proposed
distributed energy resource aggregation
rules by serving as its own distributed
energy resource aggregator.460
186. We decline to require a
minimum size greater than 100 kW for
a single qualifying distributed energy
resource that serves as its own
distributed energy resource aggregator,
as requested by Xcel Energy Services.
We find that such a requirement is
unnecessary at this time as the 100 kW
minimum size requirement is a
commonly used resource size that
should not overburden RTO/ISO
modeling software even if many
individual resources choose to
participate as such single distributed
energy resource aggregations. In
addition, a consistent minimum size
requirement for aggregations of both
single and multiple distributed energy
resources will minimize barriers in the
event that an individual distributed
energy resource ceases to participate in
a multi-resource aggregation and
subsequently seeks to participate in
RTO/ISO markets as a single qualifying
distributed energy resource aggregation.
As discussed above in Section IV.C.5, a
single distributed energy resource
aggregation would need to comply with
all of the applicable RTO’s/ISO’s
requirements, including any minimum
or maximum capacity requirements for
individual distributed energy
resources.461 We clarify that, like other
distributed energy resources seeking to
participate in RTO/ISO markets
exclusively through a distributed energy
resource aggregation, we will not
exercise jurisdiction over the
interconnection to a distribution facility
of a distributed energy resource for the
purpose of participating in RTO/ISO
markets exclusively through a single458 CAISO
456 NOPR,
157 FERC ¶ 61,121 at P 137 (citing
Order No. 719, 125 FERC ¶ 61,071 at P 158(d)).
457 AES Companies Comments (RM16–23) at 39;
NextEra Comments (RM16–23) at 14; NYISO
Comments (RM16–23) at 16.
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459 Xcel
Comments (RM16–23) at 26.
Energy Services Comments (RM16–23) at
24.
460 See
supra P 118 n.280.
supra Section IV.C.5 (Minimum and
Maximum Capacity Requirements).
461 See
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resource aggregation. We also clarify
that a single qualifying distributed
energy resource that serves as its own
aggregator would also be subject to any
requirements applicable to distributed
energy resource aggregators.
D. Locational Requirements
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a. NOPR Proposal
187. In the NOPR, the Commission
stated that it was concerned that some
existing requirements for aggregations to
be located behind a single point of
interconnection or pricing node may be
overly stringent and may unnecessarily
restrict opportunities for distributed
energy resources to participate in the
RTO/ISO markets through a distributed
energy resource aggregator.462 The
Commission noted that recent
improvements in metering, telemetry,
and communication technology should
facilitate better situational awareness
and enable management of
geographically dispersed distributed
energy resource aggregations,
potentially rendering such restrictive
locational requirements unnecessary.
188. Thus, the Commission proposed
to require each RTO/ISO to revise its
tariff to establish locational
requirements for distributed energy
resources to participate in a distributed
energy resource aggregation that are as
geographically broad as technically
feasible.463 The Commission stated that
this proposal would give each RTO/ISO
flexibility to adopt locational
requirements that both allow for the
participation of geographically
dispersed distributed energy resources
in the RTO/ISO markets through a
distributed energy resource aggregation,
where technically feasible, and also
account for the modeling and dispatch
of the RTO’s/ISO’s transmission system.
The Commission further acknowledged
that the appropriate locational
requirements may differ based on the
services that a distributed energy
resource aggregator seeks to provide
(e.g., the locational requirements for
participation in the day-ahead energy
market may differ from those for
participation in ancillary service
markets).
189. To the extent that commenters
would prefer that the Commission
require the RTOs/ISOs to adopt
consistent locational requirements, the
Commission sought comment on what
locational requirements it could require
each RTO/ISO to adopt that would
allow distributed energy resources to be
aggregated as widely as possible without
462 NOPR,
463 Id.
157 FERC ¶ 61,121 at P 138.
P 139.
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threatening the reliability of the
transmission grid or the efficiency of
RTO/ISO markets.464 The Commission
noted that, in some RTOs/ISOs and for
some services, the only geographic
limitations imposed on distributed
energy resource aggregations are by zone
or due to modeled transmission
constraints.465 The Commission also
sought comment on potential concerns
about dispatch, pricing, or settlement
that the RTOs/ISOs must address if the
distributed energy resources in a
particular distributed energy resource
aggregation are not limited to the same
pricing node or behind the same point
of interconnection.466
190. At the April 2018 technical
conference, the Commission sought
comment on how to establish locational
requirements for distributed energy
resource aggregations that are as broad
as technically feasible.467 After the
technical conference, the Commission
sought further comment on how RTOs/
ISOs can accurately represent
distributed energy resources in each
node within a multi-node
aggregation.468
b. Comments
191. Several commenters support the
Commission’s proposal to require
distributed energy resource aggregations
that are as geographically broad as
technically feasible and cite numerous
benefits of broad aggregation.469 IRC
states that this proposal strikes the
appropriate balance between
accommodating smaller distributed
energy resources and providing the
necessary flexibility to RTOs/ISOs.470
Advanced Energy Economy contends
that aggregation across a broad
geographic area is fundamental to the
distributed energy resource business
model.471 Advanced Energy
Management contends that the larger
the aggregation, the lower the chance of
464 Id.
P 140.
n.233 (citing CAISO and NYISO tariff
provisions).
466 Id. P 141. The Commission noted that its
proposal to allow the relevant distribution utility or
utilities to review the list of distributed energy
resources in a distributed energy resource
aggregation would help ensure that dispatch of the
aggregated distributed energy resources as a single
resource will not cause any reliability concerns.
467 Supplemental Notice of Technical Conference
at 2–3.
468 Notice Inviting Post-Technical Conference
Comments at 2–3.
469 See, e.g., Advanced Energy Management
Comments (RM16–23) at 24; DER/Storage
Developers Comments (RM16–23) at 4; Efficient
Holdings Comments (RM16–23) at 17–18; IRC
Comments (RM16–23) at 8; NRG Comments (RM16–
23) at 10–11.
470 IRC Comments (RM16–23) at 8.
471 Advanced Energy Economy Comments
(RM16–23) at 45.
465 Id.
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67127
underperformance.472 Several
commenters support multi-node
aggregation, stating that it will improve
market entry and overall competitive
benefits.473 Others assert that multinode aggregation will improve the
services that distributed energy resource
aggregations can provide, enhancing
grid resilience and reliability.474
192. Several commenters highlight
examples of current RTO/ISO activities
supporting broad geographic
aggregation. Advanced Energy Economy
states that PJM and NYISO have allowed
aggregation at a broad level for behindthe-meter resources.475 Several
commenters note that CAISO allows
aggregation across nodes by permitting
an aggregator to submit distribution
factors.476 Advanced Energy
Management highlights that ISO–NE
allows aggregation at the dispatch zone
level, stating that this suggests that it is
technically feasible to aggregate behindthe-meter resources to that level even
for energy and ancillary services
participation.477
193. Multiple commenters also
articulate concerns regarding limiting
distributed energy resource aggregations
to a single node.478 Advanced Energy
Economy and Advanced Energy
Management contend that aggregation
limited to the nodal level will not meet
the ‘‘geographically broad as technically
feasible’’ standard, and Advanced
Energy Management asks the
Commission to clarify that it does
not.479 Advanced Energy Economy and
CAISO further caution against the
economic effects of single-node
aggregation, stating that it would erode
472 Advanced Energy Management Comments
(RM16–23) at 24.
473 See, e.g., Advanced Energy Buyers Comments
(2018 RM18–9) at 7; CAISO Comments (2018
RM18–9) at 10–11; EPRI Comments (2018 RM18–9)
at 6; NRG Comments (2018 RM18–9) at 4–5; SEIA
Comments (2018 RM18–9) at 14.
474 Advanced Energy Management Comments
(2018 RM18–9) at 5; Direct Energy Comments (2018
RM18–9) at 2–3; Lorenzo Kristov Comments (2018
RM18–9) at 14; SEIA Comments (2018 RM18–9) at
14.
475 Advanced Energy Economy Comments
(RM16–23) at 45.
476 Id.; DER/Storage Developers Comments
(RM16–23) at 4; Tesla/SolarCity Comments (RM16–
23) at 28. CAISO uses load distribution factors to
reflect the relative amount of load at each node. The
sum of all load distribution factors for a single
aggregation is one. See CAISO Tariff, Appendix A.
477 Advanced Energy Management Comments
(RM16–23) at 25.
478 See, e.g., AES Companies Comments (RM16–
23) at 36; Efficient Holdings Comments (RM16–23)
at 18; Public Interest Organizations Comments
(RM16–23) at 24; R Street Institute Comments
(RM16–23) at 9; Sunrun Comments (2018 RM18–9)
at 14.
479 Advanced Energy Economy Comments
(RM16–23) at 46–47; Advanced Energy
Management Comments (RM16–23) at 24.
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the economics of aggregating distributed
energy resources and create a barrier to
their wholesale market participation.480
194. Several commenters state that, at
the technical conference, CAISO and
PJM described workable approaches to
mitigate any reliability concerns and to
achieve proper price formation for
multi-node aggregations of distributed
energy resources.481 Other commenters
point to approaches used elsewhere,
such as multi-node aggregations of
demand response resources in other
regions.482 Organization of MISO States
comments that, in MISO, multi-node
aggregation is allowed for purposes of
capacity accreditation, but only for a
limited set of resource types.483
195. Other commenters further
express support for the feasibility of
dispatching and settling distributed
energy resource aggregations across
multiple nodes. For instance, PJM
explains that it already dispatches
demand response resources across
varying levels of geographic areas,
including across different pricing nodes,
which could be used as a foundation for
developing similar rules to dispatch
distributed energy resources injecting
past the applicable retail meter.484 Xcel
Energy Services states that it is not
concerned with aggregations across
multiple nodes if the region has
accurate topology models, volumetric
weightings, and billing/settlement
metering at each location (and penalties
are assessed at the individual resource
level to disincentivize gaming,
480 Advanced Energy Economy Comments (2018
RM18–9) at 22; CAISO Comments (2018 RM18–9)
at 10–11.
481 Advanced Energy Economy Comments (2018
RM18–9) at 22; Advanced Energy Management
Comments (2018 RM18–9) at 5–6; Direct Energy
Comments (2018 RM18–9) at 6 (citing Technical
Conference Transcript at 17, 18, 53); Sunrun
Comments (2018 RM18–9) at 14.
482 See, e.g., Advanced Energy Economy
Comments (2018 RM18–9) at 22; Advanced Energy
Management Comments (2018 RM18–9) at 6 (citing
ISO–NE Comments, Docket No. AD16–20–000 (filed
Feb. 13, 2017) (‘‘ISO–NE explains that, for the
capacity market, demand resources may consist of
an aggregation of multiple end-use customers,
though they must be at least 100 kW and located
within a dispatch zone or load zone as required
under the participation model through which they
are participating. ISO–NE further explains that for
the energy and reserve markets, demand response
resources may also be aggregated as long as they are
individually at least 10 kW, have an expected
maximum interruptible capacity of 5 MW or less,
and are located within a dispatch zone and reserve
zone.’’)); CAISO Comments (2018 RM18–9) at 10,
12–13; Lorenzo Kristov Comments (2018 RM18–9)
at 14; PJM Market Monitor Comments (2018 RM18–
9) at 7–8.
483 Organization of MISO States Comments (2018
RM18–9) at 2 (citing Midcontinent Independent
System Operator, Open Access Transmission,
Energy, and Operating Reserve Markets Tariff,
Module E–1, Section 69A.3.5).
484 PJM Comments (RM16–23) at 28.
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manipulation, and price formation
errors).485 Avangrid contends that
provisions that would allow
‘‘settlement-only’’ generation treatment
for aggregated distributed energy
resources would allow aggregation of
these resources on a broader load zone
basis for energy market settlement.486
196. Some commenters address the
relationship between the minimum and
maximum size requirement for
distributed energy resource aggregations
and the locational requirements for
them. Eversource and other commenters
state that limiting the maximum size of
a distributed energy resource
aggregation can also mitigate any
negative operational impacts of
geographically broad aggregations.487
Tesla/Solar City state that a minimum
size requirement of 100 kW would allow
the reasonable development of
aggregations within any locational
requirement established for distributed
energy resource aggregations.488 In their
comments in response to the Notice
Inviting Post-Technical Conference
Comments, multiple commenters agree
that reducing the minimum size
requirement for distributed energy
resource aggregations to 100 kW may
alleviate concerns about requiring
aggregations to be located at a single
node.489 Organization of MISO States
observes that lowering the minimum
size requirement for distributed energy
resource aggregations would decrease
the need for broad aggregation across
Local Balancing Authorities and that
this could also reduce the size of
resources, which inherently lowers any
related reliability risk to the system.490
Lorenzo Kristov states that single-node
distributed energy resource aggregations
that meet the minimum size threshold
would be useful resources for the
wholesale market, so the question is
whether the additional complexity of
multi-node distributed energy resource
aggregations has commensurate
benefits.491 SEIA states that it supports
a 100 kW minimize size limit, but does
not support limiting aggregations to
single pricing nodes.492
197. Other commenters, however,
recommend that the Commission
restrict aggregation to one pricing node
or interconnection point.493 Some
commenters are concerned that a
geographically broad locational
requirement could have potential
reliability impacts on the distribution
system or the bulk electric system.494
For instance, several RTOs/ISOs,
including those that support multi-node
aggregations, express concerns related to
managing the aggravation of
transmission constraints and resulting
pricing and operational implications in
real time if aggregated resources were to
span both sides of a constraint.495 PJM
Market Monitor states that the potential
addition of more distributed energy
resources means they should be
aggregated at a single node to allow
operators to have visibility and
control.496 PJM Market Monitor asserts
that it is impossible to ensure that
dispatch of a multi-node aggregation of
distributed energy resources does not
exacerbate a transmission constraint in
a nodal system.497
198. NYISO Indicated Transmission
Owners argue that aggregations
spanning more than one transmission
zone could present both administrative
and operational difficulties for the RTO/
ISO and the distribution utility and that
aggregations should be limited to a
single transmission node unless price
separation does not exist.498 EPSA and
the PJM Market Monitor argue that
because all the RTOs/ISOs rely on nodal
security constrained economic dispatch,
it is appropriate for a generic rule to
limit aggregations to a single node to
ensure that the markets continue to be
491 Lorenzo
Kristov Comments (2018 RM18–9) at
14.
485 Xcel
Energy Services Comments (RM16–23) at
25.
Comments (2018 RM18–9) at 14.
Comments (RM16–23) at 37–40;
NYISO Comments (RM16–23) at 17; NYISO
Indicated Transmission Owners Comments (RM16–
23) at 13–14; PJM Market Monitor Comments
(RM16–23) at 13.
494 See, e.g., American Petroleum Institute
Comments (RM16–23) at 10–11; Duke Energy
Comments (RM16–23) at 3, 5–6; EEI Comments
(RM16–23) at 28–29; Institute for Policy Integrity
Comments (RM16–23) at 9; Pacific Gas & Electric
Comments (RM16–23) at 18–19.
495 See, e.g., CAISO Comments (RM16–23) at 27;
ISO–NE Comments (RM16–23) at 37; MISO
Comments (RM16–23) at 21–22; NYISO Comments
(2018 RM18–9) at 6, 16; SPP Comments (RM16–23)
at 17–19.
496 PJM Market Monitor Comments (2018 RM18–
9) at 12.
497 Id. at 4.
498 NYISO Indicated Transmission Owners
Comments (RM16–23) at 13–14.
493 ISO–NE
486 Avangrid
Comments (RM16–23) at 12.
Energy Economy Comments (2018
RM18–9) at 22 (citing Technical Conference
Transcript, Comments of Andrew Levitt, Senior
Market Strategist, PJM Interconnection, L.L.C., at p.
20, lines 2–8, and P 49, lines 21–24 (noting the
ability of economic dispatch engines to manage any
constraints that may be caused by dispatching
individual resources within an aggregation));
CAISO Comments (2018 RM18–9) at 5; Eversource
Comments (2018 RM18–9) at 13; PJM Comments
(2018 RM18–9) at 5, 11–12; SEIA Comments (2018
RM18–9) at 14.
488 Tesla/SolarCity Comments (RM16–23) at 26.
489 See, e.g., EPRI Comments (2018 RM18–9) at 7–
8; Lorenzo Kristov Comments (2018 RM18–9) at 14;
Organization of MISO States Comments (2018
RM18–9) at 2; PJM Comments (2018 RM18–9) at 12.
490 Organization of MISO States Comments (2018
RM18–9) at 2.
487 Advanced
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efficient and competitive.499 EPRI states
that aggregations at single nodes would
generally be the most beneficial for the
distributed energy resources financially,
for the RTOs/ISOs with respect to
reliability, and for consumers
economically.500 NYISO states that
single-node aggregation allows NYISO
to telemeter only the aggregation rather
than each individual resource within
the aggregation, reducing the cost of
participation and better allowing
smaller resources to participate in the
NYISO markets.501
199. Commenters also address the
dynamic nature of managing multi-node
aggregations of distributed energy
resources—such as the challenges that
come from frequent changes in
congestion patterns and system
topology.502 Several commenters
express concerns that a geographically
broad locational requirement for
distributed energy resource aggregations
could disrupt nodal pricing methods
and result in different treatment of
resources located at a single node (i.e.,
among multi-node distributed energy
resource aggregations and
generators).503 Calpine states that it may
be possible to revisit procedures for
multi-node aggregation of distributed
energy resources as the system topology
changes due to congestion, but that
rules associated with locational
requirements may not provide the
flexibility necessary for the RTOs/ISOs
to manage dynamic grid conditions in
real time.504
200. With respect to whether the
Commission should require the RTOs/
ISOs to adopt consistent locational
requirements for distributed energy
resource aggregations, commenters
provide varied recommendations. Tesla/
SolarCity recommend that the
Commission establish consistent
locational requirements across the
RTOs/ISOs, similar to CAISO’s
Distributed Energy Resource Provider
framework.505 Mensah supports
499 EPSA Comments (2018 RM18–9) at 8–9; PJM
Market Monitor Comments (2018 RM18–9) at 2–3.
500 EPRI Comments (2018 RM18–9) at 6.
501 NYISO Comments (2018 RM18–9) at 6, 8.
502 CAISO Comments (2018 RM18–9) at 5–6; EPRI
Comments (2018 RM18–9) at 3–4; MISO Comments
(2018 RM18–9) at 18; NYISO Comments (2018
RM18–9) at 6; PJM Market Monitor Comments
(2018 RM18–9) at 3.
503 See, e.g., American Petroleum Institute
Comments (RM16–23) at 10–11; EEI Comments
(RM16–23) at 28–30; ISO–NE Comments (RM16–23)
at 37–40; NYISO Indicated Transmission Owners at
16–17; PJM Market Monitor Comments (RM16–23)
at 13.
504 Calpine Comments (2018 RM18–9) at 4–5
(citing comments of Dr. Joseph Bowring, Technical
Conference Transcript at 37; comments of Jeff
Bladen, Technical Conference Transcript at 36).
505 Tesla/SolarCity Comments (RM16–23) at 27.
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locational requirements by distribution
utility zones or defined sub-zones,
while noting locational requirements
may vary across RTOs/ISOs.506 Mensah
asserts that locational requirements
should be consistent for all wholesale
market services within an individual
RTO/ISO in order to avoid unnecessary
complications.
201. Other commenters suggest that
the RTOs/ISOs should have flexibility to
determine the locational requirements
appropriate for their region. Noting
CAISO’s approach to distributed energy
resource aggregation within ‘‘subzones,’’ ISO–NE’s approach to selfscheduling distributed energy resources,
and the PJM Market Monitor’s desire for
nodal aggregations, MISO argues that
the Commission should allow each
RTO/ISO to establish tailored
approaches based on its regional
needs.507 Similarly, Calpine and SoCal
Edison assert that the Commission
should allow regional variations.508 PJM
asserts that the Commission should
require RTOs/ISOs to adopt measures
necessary to ensure control of
congestion, but should allow flexibility
to tailor those measures for individual
systems.509
202. Other commenters, including
AES Companies and MISO
Transmission Owners, argue for regional
flexibility but recommend that other
entities besides the RTOs/ISOs, such as
affected balancing authorities,
distribution utilities, states, and nonregulated distribution cooperatives,
determine the locational
requirements.510
203. Several of the commenters that
support the Commission adopting rules
for multi-node aggregations suggest that
the RTOs/ISOs could be permitted to
present evidence in their compliance
filings demonstrating that limiting
aggregations is necessary for reliability
reasons.511 Direct Energy and NRG
argue that any limits or boundaries on
aggregations of distributed energy
resources must be supported by a
transparent, comprehensive, and data506 Mensah
Comments (RM16–23) at 3.
Comments (2018 RM18–9) at 20 (citing
Technical Conference Transcript at 9–11, 14–15,
20–23).
508 Calpine Comments (2018 RM18–9) at 5–6;
SoCal Edison Comments (2018 RM18–9) at 3.
509 PJM Comments (2018 RM18–9) at 6–7.
510 AES Companies Comments (RM16–23) at 10,
34; MISO Transmission Owners Comments (RM16–
23) at 21.
511 Advanced Energy Economy Comments (2018
RM18–9) at 22–23; Advanced Energy Management
Comments (2018 RM18–9) at 6; Direct Energy
Comments (2018 RM18–9) at 3–4 (describing
examples of distributed energy resource
aggregations being operated in Belgium, France and
Australia); NRG Comments (2018 RM18–9) at 5.
507 MISO
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driven regional analysis, and that a
distributed energy resource’s
participation should only be precluded
if its participation would undermine
reliability.512
c. Commission Determination
204. We adopt the NOPR proposal
and add § 35.28(g)(12)(ii)(b) to the
Commission’s regulations to require
each RTO/ISO to revise its tariff to
establish locational requirements for
distributed energy resources to
participate in a distributed energy
resource aggregation that are as
geographically broad as technically
feasible. However, given the variety of
approaches to locational requirements
proposed by commenters, we will
provide each RTO/ISO with flexibility
to determine the locational
requirements for its region, as long as it
demonstrates that those requirements
are as geographically broad as
technically feasible. To the extent that
an RTO/ISO seeks to continue its
currently effective locational
requirements for distributed energy
resources, it must demonstrate on
compliance that its approach meets this
requirement. To comply with this rule,
each RTO/ISO must provide a detailed,
technical explanation for the
geographical scope of its proposed
locational requirements. This
explanation could include, for example,
a discussion of the RTO/ISO’s system
topology and regional congestion
patterns, or any other factors that
necessitate its proposed locational
requirements.
205. We recognize the arguments for
both multi-node and single-node
aggregations. There are several benefits
of multi-node aggregations, such as
improved market entry and competition,
lower chance of underperformance, and
improved services that aggregations can
provide. However, single-node
aggregations may reduce the cost of
participation for smaller resources by
telemetering the aggregation rather than
each individual resource and allows
RTOs/ISOs to better manage intra-zonal
price congestion. Additionally, as
discussed above, the reduction of the
minimum size requirement for
distributed energy resource aggregations
will help alleviate commenters’
concerns about requiring aggregations to
locate only at a single node.513
206. We are persuaded by comments
that identify the various benefits of
multi-node distributed energy resource
512 Direct Energy Comments (2018 RM18–9) at 4–
5, 6–7 (citing Technical Conference Transcript at 9,
34).
513 See supra Section IV.C.4 (Minimum and
Maximum Size of Aggregation).
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aggregations. In particular, we are
persuaded by CAISO’s arguments that
multi-node aggregations allow for
greater market participation by reducing
transaction costs and assembling
appropriately sized resources optimized
for the wholesale electricity markets,
and by PJM’s assertion that it already
dispatches demand response resources
across different pricing nodes.514 We
believe that the challenges of managing
a multi-node aggregation—especially
around a transmission constraint—can
be overcome through coordination
between RTOs/ISOs, aggregators, and
distribution system operators. However,
we also recognize that existing
differences—both operational and
administrative—among RTOs/ISOs
make such a uniform requirement
challenging. Those differences are
relevant here because some RTOs/ISOs
already aggregate resources in a
different manner, dynamic changes in
system topology and congestion patterns
vary across each RTO/ISO, and each
RTO/ISO may have different solutions
addressing reliability impacts on their
respective systems. Accordingly, while
each RTO/ISO must provide a detailed,
technical explanation for the
geographical scope of its proposed
locational requirements, this final rule
provides RTOs/ISOs with a certain
degree of flexibility as to the technical
aspects of a locational requirement that
is as geographically broad as possible.
207. As to arguments regarding the
relative merits of single node and multinode aggregations, we find that
providing RTOs/ISOs with the
flexibility to establish their own
locational requirements on compliance
that are as geographically broad as
technically feasible will allow such
arguments to be considered in the
stakeholder process and in each RTO/
ISO-specific compliance proceeding. We
also are not persuaded by Mensah’s and
Tesla/SolarCity’s arguments for
consistent locational requirements
either across the RTOs/ISOs or for all
wholesale market services within an
individual RTO/ISO. We find that there
is no need to standardize the locational
requirements and therefore instead
provide the RTOs/ISOs the flexibility to
develop more tailored approaches based
on their regional needs. In addition, we
are not persuaded by AES Companies’
and MISO Transmission Owners’
arguments that entities other than the
RTO/ISO should determine the
locational requirements of distributed
energy resources. We find that RTOs/
ISOs have the primary responsibility of
514 See CAISO Comments (2018 RM18–9) at 10;
PJM Comments (RM16–23) at 28.
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administering the regional markets and
reliably operating the system, and are
therefore in the best position to propose
on compliance the appropriate
locational requirements, as long as they
demonstrate that those requirements are
as geographically broad as technically
feasible, to enable distributed energy
resources to participate in a distributed
energy resource aggregation for their
regions.
E. Distribution Factors and Bidding
Parameters
a. NOPR Proposal
208. In the NOPR, the Commission
proposed to require each RTO/ISO to
revise its tariff to include the
requirement that distributed energy
resource aggregators (1) provide default
distribution factors 515 when they
register their distributed energy resource
aggregation; and (2) update those
distribution factors if necessary when
they submit offers to sell or bids to buy
into the RTO/ISO markets.516 The
Commission also proposed to require
each RTO/ISO to revise the bidding
parameters for each participation model
in its tariff to allow distributed energy
resource aggregators to update their
distribution factors when participating
in RTO/ISO markets. The Commission
sought comment on this proposal as
well as comment on alternative
approaches that may provide the RTOs/
ISOs with the information from
geographically or electrically dispersed
resources in a distributed energy
resource aggregation necessary to
reliably operate their systems. The
Commission also sought comment on
whether bidding parameters in addition
to those already incorporated into
existing participation models may be
necessary to adequately characterize the
physical or operational characteristics of
distributed energy resource
aggregations.
209. After the April 2018 technical
conference, the Commission sought
additional information about bidding
parameters or other potential
mechanisms needed to represent the
physical and operational characteristics
of distributed energy resource
aggregations in RTO/ISO markets.517
b. Comments
210. A number of commenters
support the Commission’s proposed
515 Distribution factors indicate how much of the
total response from a distributed energy resource
aggregation would be coming from each node at
which one or more resources participating in the
aggregation are located.
516 NOPR, 157 FERC ¶ 61,121 at P 143.
517 Notice Inviting Post-Technical Conference
Comments at 4–5.
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requirement for distributed energy
resource aggregators to provide default
distribution factors to the RTO/ISO
when registering distributed energy
resource aggregations and to update
those distribution factors as
necessary.518 Tesla/SolarCity states that
this method strikes the proper balance
between providing flexibility and
market access to distributed energy
resource aggregators while providing
sufficient information to RTOs/ISOs
about the locations of the individual
distributed energy resources and how
dispatching them will affect the
system.519 DER/Storage Developers
assert that distribution factors would
provide the RTO/ISO with sufficient
information to maintain reliability
without requiring unnecessary
information about individual
distributed energy resources.520
211. CAISO generally supports the
Commission’s proposal and notes that
its Distributed Energy Resource Provider
model rules require an aggregator to
submit generation distribution factors
with its bid.521 CAISO states that multinode aggregations require distribution
factors to model the impact of the
resource on the transmission system and
that allowing resources to update
distribution factors in the bid
submission process mitigates the
potential for inaccuracies. If an
aggregator does not submit distribution
factors with its bid, CAISO states that it
uses the aggregation’s default generation
distribution factors registered in
CAISO’s Master File for a reasonable
expectation of how the resource will
perform across applicable pricing
nodes.522 CAISO notes that using
distribution factors to schedule load is
an acceptable and feasible practice
despite inherent inaccuracies.523
Microgrid Resources Coalition notes
that CAISO’s Distributed Energy
Resource Provider model permits
participation in aggregations of
separately metered resources
independent of the various attributes of
the other loads and resources behind the
meter and that the critical feature of this
arrangement is the ability to define the
limits of participation so that the
aggregator and the system operator can
dispatch the aggregation within those
518 See, e.g., CAISO Comments (RM16–23) at 30;
DER/Storage Developers Comments (RM16–23) at 4;
NextEra Comments (RM16–23) at 15; SEIA
Comments (RM16–23) at 19; Xcel Energy Services
Comments (RM16–23) at 25.
519 Tesla/SolarCity Comments (RM16–23) at 28.
520 DER/Storage Developers Comments (RM16–
23) at 4.
521 CAISO Comments (2018 RM18–9) at 11.
522 CAISO Comments (RM16–23) at 30–31.
523 CAISO Comments (2018 RM18–9) at 11.
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limits.524 Lorenzo Kristov also notes
that the CAISO Distributed Energy
Resource Provider structure enables
multi-node aggregations using both
default and biddable distribution
factors.525 Lorenzo Kristov states,
however, that these provisions have not
yet been practically tested by a nondemand-response resource. Conversely,
NYISO states that it does not need
distribution factors to dispatch
distributed energy resource aggregations
accurately because it intends to limit
distributed energy resource aggregations
to resources at a single transmission
node.526
212. Other RTOs/ISOs assert that
implementing the Commission’s
proposal may be technically difficult.
SPP states that implementing
distribution factors in the software is
not trivial.527 MISO states that it
currently updates the distribution
factors daily and that updating more
frequently may result in a significantly
large amount of data exchange and
processing in the market system.528
213. Several RTOs/ISOs also describe
the limitations of distribution factor
requirements. SPP notes that
distribution factors provide the
reliability coordinator with the
distribution of the resources in the
aggregation, but those factors do not
guarantee that the resources in the
aggregation will move pro-rata. SPP
asserts that the uncertainty in the
aggregate response may cause a
reliability issue by introducing
uncertainty in its effective dispatch to
resolve constraints. SPP adds that the
economics and pricing of the aggregate
may not reflect the actual response on
the sub-aggregate level.529 Similarly,
ISO–NE also argues that distribution
factors may vary based on the actual
level of dispatch of the aggregate, for
example, there could be a large
difference between distribution factors
based upon the maximum MW output
and the minimum MW output of an
aggregation.530 Pacific Gas & Electric
suggests that, because the distribution
factors will impact settlements and
congestion, distributed energy resource
aggregations should use an outage
524 Microgrid
Resources Coalition (2018 RM18–9)
at 9.
525 Lorenzo
Kristov Comments (2018 RM18–9) at
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14.
526 NYISO Comments (RM16–23) at 17. The
Commission accepted NYISO’s tariff provisions
related to aggregations, which require that facilities
within an aggregation are electrically connected to
the same transmission node. NYISO Aggregation
Order, 170 FERC ¶ 61,033 at PP 6, 11.
527 SPP Comments (RM16–23) at 19.
528 MISO Comments (RM16–23) at 23.
529 SPP Comments (RM16–23) at 19–20.
530 ISO–NE Comments (RM16–23) at 42–43.
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management-like system to report if
real-time distribution factors differ from
those that are used for the market
award.531
214. Some commenters assert that the
Commission should not impose the
distribution factor requirements in all
regions. NYISO Indicated Transmission
Owners state that the application of
distribution factors may not be the
optimal approach for dispatching
resources within an aggregation in all
systems, especially if it leads to
dispatching resources on either side of
a single constraint.532 NYISO Indicated
Transmission Owners argue that the
Commission should require RTOs/ISOs
to develop solutions that are regionally
appropriate and that promote efficient
dispatch of resources with effective
resolution of constraints on both the
transmission and distribution systems.
215. Similarly, ISO–NE asks the
Commission to allow each RTO/ISO to
develop an approach that works well in
light of each region’s particular network
configuration, infrastructure, and
existing operational processes.533 ISO–
NE explains that, rather than providing
distribution factors, an aggregator could,
for example, report the expected MW
capability at each node, or that size
limits for being dispatchable in the
markets could be lowered, reducing the
need to aggregate across multiple nodes
to participate.534 ISO–NE states that, for
a mesh network such as most of New
England, using distribution factors as
the basis for dispatch is problematic.535
ISO–NE explains that a participant
would be unable to predict the changing
power flows to multiple connected
nodes without possessing the same
detailed knowledge of grid
configuration used by ISO–NE and the
distribution utilities in real-time
operations. As a result, ISO–NE
contends that any stated distribution
factors could bear little relation to realtime operations.
216. ISO–NE contends that, in
scenarios where the distribution system
is not radial to the transmission system,
a single resource located in the
distribution network may have
sensitivities to multiple nodes in the
transmission system.536 ISO–NE argues
that it is not reasonable for an aggregator
to try to submit distribution factors for
each node as they would not have
visibility to these sensitivities. ISO–NE
531 Pacific
Gas & Electric Comments (RM16–23) at
19.
PO 00000
notes that it has addressed this problem
with Asset-Related Demand by only
supporting aggregations of Asset-Related
Demand that have similar sensitivities
to each node, so that an aggregated node
can be modeled to reflect the impacts to
the system of the Asset-Related Demand
for which the Asset-Related Demand has
a 100% distribution factor. ISO–NE
states that this approach may or may not
be appropriate for distributed energy
resource aggregations and would require
further evaluation and coordination
with the distribution utilities.537
217. In response to the Commission’s
request for comment on whether
bidding parameters in addition to those
already incorporated into existing
participation models may be necessary
to adequately characterize the physical
or operational characteristics of
distributed energy resource
aggregations, some commenters argue
that RTOs/ISOs should be allowed to
require additional bidding parameters
for distributed energy resource
aggregations to reliably operate the bulk
power system and accurately reflect
resources in the wholesale markets.538
Stem suggests that bidding parameters
in current RTO/ISO rules assume that a
resource’s physical attributes, such as
ramp rate or maximum charge limit, are
fixed values and that the resource is
dispatchable to those levels at all times,
which will need to change.539 Stem
argues that behind-the-meter resources
should be able to elect to be out of the
market at certain times, as long as their
existing service obligations are met.540
PJM Market Monitor asserts that, as long
as distributed energy resources are
priced and dispatched locationally, the
existing offer parameters should address
the characteristics of the resources.541
Dominion argues that distributed energy
resource aggregators should be allowed
to communicate distributed energy
resource aggregations’ operating
limitations to the RTO/ISO and control
their dispatch to the same extent as
other resources.542 Dominion adds that
certain distributed energy resources,
such as solar generators, should also
have the option to only be curtailed for
reliability concerns.
218. NYISO Indicated Transmission
Owners assert that distributed energy
resource aggregations participating in
capacity markets should bid a capacity
value that reflects the aggregation’s
537 Id.
at 44–45.
Comments (RM16–23) at 11; NYISO
Comments (RM16–23) at 17.
539 Stem Comments (RM16–23) at 15, 16.
540 Id. at 16.
541 PJM Market Monitor Comments (2018 RM18–
9) at 5.
542 Dominion Comments (RM16–23) at 11.
538 Dominion
532 NYISO Indicated Transmission Owners
Comments (RM16–23) at 20.
533 ISO–NE Comments (RM16–23) at 41.
534 Id. at 45.
535 Id. at 42.
536 Id. at 44.
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value in satisfying the peak period
resource adequacy requirements.543
NYISO Indicated Transmission Owners
state that the capacity value for
distributed energy resource aggregations
should take into account various factors,
such as variability of the aggregation,
extent to which the distributed energy
resource aggregation is energy limited,
and composition of technologies that
comprise the aggregation, but
underscores that solutions should be
addressed during implementation in
each RTO’s/ISO’s stakeholder process to
ensure regional variations are
accommodated.544
219. MISO states that it needs more
time to further investigate and better
understand the potential need for
additional bidding parameters for
distributed energy resource
aggregations.545 MISO asserts that such
parameters will likely be needed to the
extent a distributed energy resource may
involve an aggregation of electric storage
resources and if the RTO/ISO is
expected to manage their state of charge.
MISO explains that, as an example,
distributed energy resource aggregations
might need to provide information
describing sub-aggregations for MISO to
address security constraints associated
with separate distribution networks or
separate nodes within a distribution
network.546
220. Advanced Microgrid Solutions
asserts that RTOs/ISOs must have
separate rules regarding attributes,
bidding parameters, and dispatch in
order to recognize the multiple uses for
behind-the-meter electric storage
resources.547 Advanced Microgrid
Solutions further explains that some
requirements relevant to a single-site
resource are irrelevant for an
aggregation.548 For instance, Advanced
Microgrid Solutions states that an
aggregation of behind-the-meter
resources does not have an equivalent to
a state of charge for a single-site
distributed energy resource to be used
as a bidding parameter for a fleet of
aggregated distributed energy resources
and, instead, the aggregator must bid
based on calculated availability and
should be penalized if the fleet does not
perform as bid. Furthermore, Microgrid
Resources Coalition asserts that
microgrids can also provide wholesale
services with suitable metering and
controls but that their participation is
frequently restricted.549 Microgrid
Resources Coalition argues that it is
important that the resource be able to
define the limits of participation within
the aggregation, so that it can be
dispatched within its own limits, noting
that an aggregation would be subject to
penalties if it cannot comply.
221. EPRI states that an injection of
energy from a resource on the
distribution system usually results in
reduced losses as compared to the same
injection on the transmission bus.550
EPRI argues that this reduction of losses
is one of the substantial values that
distributed energy resources can
provide and that this value should be
reflected in marginal prices at
distributed energy resource locations.551
EPRI states that the RTO/ISO may not be
able to calculate the value without
information on the distribution system,
so this value may need to be included
as a bidding parameter, which may
require verification by the distribution
utility.
222. Several RTOs/ISOs do not
believe that the Commission should
mandate additional universal bidding
parameters. SPP believes that each RTO/
ISO should have the discretion to
develop bidding parameters that reflect
their unique needs relative to their
individual software and applications.552
CAISO notes that its existing market
participation models available to
distributed energy resource aggregations
provide the means to account for the
physical and operational characteristics
of an aggregation and argues that no
universal bidding parameters need to be
established.553
223. Duke Energy argues that any
RTO/ISO bidding parameters must treat
all resources comparably and not favor
certain new technologies or resources
over others.554 NRG contends that, for
aggregations, bidding parameters should
generally match the appropriate
participation model. For example, NRG
states generation bidding parameters
should apply to aggregations composed
strictly of distributed generators, and
demand response bidding parameters
should apply to aggregations containing
only load resources with no ability to
net inject into the system.555 NRG notes
that the bidding parameters for bidirectional resources should be general
enough to encompass requirements of
543 NYISO Indicated Transmission Owners
Comments (RM16–23) at 11.
544 Id. at 11–12.
545 MISO Comments (RM16–23) at 23.
546 Id. at 23–24.
547 Advanced Microgrid Solutions Comments
(RM16–23) at 7.
548 Id. at 8.
549 Microgrid Resources Coalition Comments
(RM16–23) at 6.
550 EPRI Comments (RM16–23) at 28.
551 Id. at 29.
552 SPP Comments (RM16–23) at 20.
553 CAISO Comments (RM16–23) at 31.
554 Duke Energy Comments (RM16–23) at 6–7.
555 NRG Comments (RM16–23) at 14.
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distributed energy resource aggregators
as well as storage-only resources.
224. EPRI states that distribution
factors are the primary unique
parameter, noting that they may need to
be allowed to vary dynamically in order
for values to be as accurate as
possible.556 EPRI also suggests that the
value of marginal distribution losses on
the distribution system is unique and
may help the RTO/ISO determine
economically efficient resources.
c. Commission Determination
225. In this final rule, we adopt the
NOPR proposal, as modified below, and
add § 35.28(g)(12)(ii)(c) to the
Commission’s regulations to require
each RTO/ISO to establish market rules
that address distribution factors and
bidding parameters for distributed
energy resource aggregations.
Specifically, we require each RTO/ISO
that allows multi-node aggregations to
revise its tariff to (1) require that
distributed energy resource aggregators
give to the RTO/ISO the total distributed
energy resource aggregation response
that would be provided from each
pricing node, where applicable, when
they initially register their aggregation
and to update these distribution factors
if they change; 557 and (2) incorporate
appropriate bidding parameters into its
participation models as necessary to
account for the physical and operational
characteristics of distributed energy
resource aggregations.558
226. As the Commission explained in
the NOPR, RTOs/ISOs need to know
which resources in a distributed energy
resource aggregation will be responding
to their dispatch signals and where
those resources are located.559 As the
Commission also explained in the
NOPR, this information is particularly
important if the resources in a
distributed energy resource aggregation
are located across multiple points of
interconnection, multiple transmission
or distribution lines, or multiple nodes
on the grid.
227. Additionally, we agree with
commenters that some bidding
parameters for existing participation
models may not accommodate the
556 EPRI
Comments (2018 RM18–9) at 5.
note that distribution factors are only
necessary to the extent that distributed energy
resources participating in an aggregation are located
at different nodes. This methodology would apply
only when distributed energy resources located at
different nodes participate in the same aggregation
to provide a particular market service.
558 For example, such bidding parameters could
include response rates, ramp rates, and upper and
lower operating limits. See CAISO Tariff, Section
30.5.2.1; NYISO Tariffs, NYISO MST, Section
4.2.1.3.3 (18.0.0).
559 NOPR, 157 FERC ¶ 61,121 at P 142.
557 We
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unique features of certain distributed
energy resource aggregations, and that
different bidding parameters may be
needed to recognize distributed energy
resources’ multiple uses. Therefore, we
further modify the NOPR proposal to
require that each RTO/ISO incorporate
appropriate bidding parameters into its
participation models as necessary to
account for the physical and operational
characteristics of distributed energy
resource aggregations. In meeting this
requirement, each RTO/ISO must either
(1) incorporate appropriate bidding
parameters that account for the physical
and operational characteristics of
distributed energy resource aggregations
into its one or more new participation
models for such aggregations; and/or (2)
adjust the bidding parameters of the
existing participation models to account
for the physical and operational
characteristics of distributed energy
resource aggregations.
228. We find that the revisions
directed by this final rule will provide
distributed energy resource aggregators
with the flexibility to update their
distribution factors and provide RTOs/
ISOs with the information needed to
model aggregations accurately enough to
issue feasible dispatch instructions and
maintain reliability.
229. However, several commenters
contend that requiring the RTOs/ISOs to
account for distribution factors and
other bidding parameters as described
in the NOPR may be technically
difficult to implement, or of little
benefit considering the RTO’s/ISO’s
network configuration. In light of this
concern, we find that, in meeting this
requirement, each RTO/ISO may revise
its tariff to manage the locational
attributes of distributed energy resource
aggregations in a manner that reflects
the RTO’s/ISO’s unique network
configuration, infrastructure, and
existing operational processes. We will
evaluate, upon compliance, the RTO’s/
ISO’s proposal to ensure that it will
provide the RTO/ISO with sufficient
information from resources in a multinode distributed energy resource
aggregation that is necessary to reliably
operate its systems without imposing
undue burden on individual distributed
energy resources or utility distribution
companies.560 RTOs/ISOs that allow
multi-node aggregations must, at a
minimum, propose clear protocols
explaining how a distributed energy
resource aggregation can provide the
required information and update that
information when needed.
560 Id.
P 143.
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F. Information and Data Requirements
York Commission asserts that local
distribution utilities must have
a. NOPR Proposal
information on the activities of
230. In the NOPR, the Commission
distributed energy resources, even when
proposed that the distributed energy
they are only providing wholesale
resource aggregator must initially
services.565 However, Mosaic Power
provide to the RTO/ISO a description of requests that electric distribution
the physical parameters of the
companies address their operational
distributed energy resource aggregation, need for information in the least
including (1) the total capacity; (2) the
restrictive manner possible, given that
minimum and maximum operating
account owner registration requirements
limits; (3) the ramp rate; (4) the
would create prohibitive costs under its
minimum run time; and (5) the default
business model.566 ISO–NE and NYISO
561
distribution factors, if applicable.
The request that the Commission give them
Commission also proposed to require
flexibility to develop their own
each RTO/ISO to revise its tariff to
information and data requirements and
require each distributed energy resource urge the Commission to provide only
aggregator to provide the RTO/ISO with high-level guidance.567
a list of the distributed energy resources
232. In contrast, many developers
in the distributed energy resource
argue that information and data
aggregation that includes information
requirements should only apply to the
about each of those distributed energy
distributed energy resource aggregation
resources, including each resource’s
as a whole because (1) it is the single
capacity, location on the distribution
interface with the RTO/ISO; and (2) it is
system, and operating limits. In
not necessary for the RTO/ISO to model
addition, the Commission proposed to
each and every resource included in an
require each RTO/ISO to revise its tariff aggregation to effectively model and
to require distributed energy resource
dispatch the aggregation.568 Efficient
aggregators to maintain aggregate
Holdings claims that failure to account
settlement data for the distributed
for the dynamic nature of a distributed
energy resource aggregation so that the
energy resource aggregation asset’s
RTO/ISO can regularly settle with the
performance capabilities and the likely
distributed energy resource aggregator
turnover of individual resources within
for its market participation.562 Lastly,
a distributed energy resource
the Commission proposed to require
aggregation will place undue burden on
distributed energy resource aggregators
these assets.569
to maintain data, for a length of time
233. Several commenters believe
consistent with the RTO’s/ISO’s
RTOs/ISOs currently have information
auditing requirements, for each
and data requirements for other market
individual resource in its distributed
participants that should not apply to
energy resource aggregation so that each individual distributed energy resources
resource can verify its performance if
participating in RTO/ISO markets
audited. The Commission sought
through an aggregation.570 For example,
comment on these proposed data
CAISO explains that it has certain
requirements and on whether there are
requirements that do not apply to
information and data requirements
distributed energy resources in an
imposed by RTOs/ISOs that apply to
aggregation (e.g., its meteorological data
other market participants that should
requirements that apply to eligible
not apply to individual distributed
intermittent resources do not extend to
energy resources participating in RTO/
a distributed energy resource
ISO markets through a distributed
aggregation) and urges the Commission
563
energy resource aggregation.
to maintain a degree of flexibility on
b. Comments
this issue.571 R Street Institute similarly
231. Some commenters support the
565 New York Commission Comments (RM16–23)
NOPR proposal to require information
at 14.
and data requirements for individual
566 Mosaic Power Comments (RM16–23) at 6.
distributed energy resources. CAISO,
567 ISO–NE Comments (RM16–23) at 46–47;
EEI, and Organization of MISO States
NYISO Comments (RM16–23) at 17.
568 See, e.g., Advanced Microgrid Solutions
support requiring distributed energy
Comments (RM16–23) at 8; AES Companies
resource aggregators to provide a list of
Comments (RM16–23) at 41, 45–46; DER/Storage
individual resources and their location
Developer Comments (RM16–23) at 3–4; MISO
564
and technical capabilities.
The New
Transmission Owners Comments (RM16–23) at 22;
561 Id.
P 145.
562 Id. P 147.
563 Id. PP 146, 147.
564 CAISO Comments (RM16–23) at 32; EEI
Comments (RM16–23) at 31; Organization of MISO
States Comments (RM16–23) at 8.
PO 00000
Frm 00041
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Stem Comments (RM16–23) at 13–14.
569 Efficient Holdings Comments (RM16–23) at
20.
570 CAISO Comments (RM16–23) at 33; Efficient
Holdings Comments (RM16–23) at 11, 19–20; R
Street Institute Comments (RM16–23) at 10.
571 CAISO Comments (RM16–23) at 32–34.
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argues that requiring the same
meteorological data for distributed
energy resource aggregators as standalone variable energy resources could
impose undue burdens on individual
distributed energy resources.572 MISO
argues that current data communication
methods between MISO, the local
balancing authority, and the generation
operator may be cost prohibitive for
distributed energy resource
aggregators.573 However, several
distribution utilities argue that
information and data requirements
should be comparable for all wholesale
market participants.574
234. Some commenters generally
support the requirements for distributed
energy resource aggregators to maintain
aggregate settlement data 575 and
maintain data for a defined length of
time, consistent with the RTO’s/ISO’s
auditing requirements, for each
individual resource in the aggregation
so that each resource can verify its
performance if audited.576 However,
Sunrun requests that RTOs/ISOs only
apply these requirements to the
aggregation and not to individual
resources within the aggregation.577
235. Advanced Energy Buyers state
that RTOs/ISOs should facilitate
streamlined data collection and sharing,
including from the RTO/ISO to the
distribution utility, to enable datadriven planning and operation to
maximize efficiency, as well as to send
good investment signals to enable
customers to prioritize delivery of
distributed energy resources where they
will add maximum value.578
c. Commission Determination
236. Upon consideration of the
comments, we adopt the NOPR
proposal, with modifications, and add
§ 35.28(g)(12)(ii)(d) to the Commission’s
regulations to require each RTO/ISO to
establish market rules that address
information requirements and data
requirements for distributed energy
resource aggregations. Specifically, we
require each RTO/ISO to revise its tariff
to (1) include any requirements for
distributed energy resource aggregators
that establish the information and data
572 R
Street Institute Comments (RM16–23) at 10.
Comments (2018 RM18–9) at 19.
574 EEI Comments (RM16–23) at 31; Duke Energy
Comments (RM16–23) at 6; Xcel Energy Services
Comments (RM16–23) at 26.
575 CAISO Comments (RM16–23) at 34; MISO
Comments (RM16–23) at 25; Xcel Energy Services
at 26.
576 CAISO Comments (RM16–23) at 34; IRC
Comments (RM16–23) at 10; SoCal Edison
Comments (RM16–23) at 12–13.
577 Sunrun Comments (RM16–23) at 5.
578 Advanced Energy Buyers Comments (2018
RM18–9) at 7.
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that a distributed energy resource
aggregator must provide about the
physical and operational characteristics
of its aggregation; (2) require distributed
energy resource aggregators to provide a
list of the individual resources in its
aggregation; and (3) establish any
necessary information that must be
submitted for the individual distributed
energy resources. We also require each
RTO/ISO to revise its tariff to require
distributed energy resource aggregators
to provide aggregate settlement data for
the distributed energy resource
aggregation and to retain performance
data for individual distributed energy
resources in a distributed energy
resource aggregation for auditing
purposes.
237. With respect to the NOPR
proposal that the distributed energy
resource aggregator initially provide to
the RTO/ISO ‘‘a description of the
physical parameters of the distributed
energy resource aggregation,’’ 579 we
believe that the physical attributes of
the distributed energy resource
aggregation as a whole may already be
captured by an RTO’s/ISO’s registration
requirements for all market participants
or may otherwise be inapplicable to
distributed energy resource
aggregations. Therefore, to avoid
creating unnecessary or redundant
requirements for distributed energy
resource aggregations and to provide
flexibility to the RTOs/ISOs, we do not
adopt that proposal. Rather, we require
the RTOs/ISOs to revise their tariffs to
establish any necessary physical
parameters that distributed energy
resource aggregators must submit as part
of their registration process only to the
extent these parameters are not already
represented in general registration
requirements or bidding parameters
applicable to distributed energy
resource aggregations.
238. With respect to information
requirements for individual distributed
energy resources, we do not adopt the
NOPR proposal to require each RTO/
ISO to revise its tariff to require
distributed energy resource aggregators
to provide the RTO/ISO with specific
information about each of the
distributed energy resources in an
aggregation, including each resource’s
capacity, location on the distribution
system, and operating limits. Instead,
we direct each RTO/ISO to revise its
tariff to require distributed energy
resource aggregators to provide a list of
the individual distributed energy
resources participating in their
aggregations to the RTO/ISO. If an RTO/
ISO needs additional information
579 NOPR,
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157 FERC ¶ 61,121 at P 145.
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beyond this list, the RTO/ISO should
identify and explain in its compliance
filing what additional specific
information about the individual
distributed energy resources within an
aggregation that the RTO/ISO needs.
The RTO/ISO should also propose how
the information requested must be
shared with the RTO/ISO and affected
distribution utilities. As part of these
tariff revisions, and as further discussed
in Section IV.I. below, each RTO/ISO
must also require that the distributed
energy resource aggregator update that
list of individual resources and
associated information as it changes. We
find that this approach provides greater
flexibility to RTOs/ISOs and imposes
potentially less onerous requirements
upon distributed energy resource
aggregators, while ensuring that
necessary information is conveyed to
RTOs/ISOs.
239. We also clarify that the
distributed energy resource aggregator,
not an individual distributed energy
resource in the aggregation, is the single
point of contact with the RTO/ISO, and
the aggregator would be responsible for
managing, dispatching, metering, and
settling the individual distributed
energy resources in its aggregation. As
such, the RTO/ISO may only need the
information necessary to model and
dispatch the distributed energy resource
aggregation as a whole, and thus we
agree with commenters that sharing
detailed information about the
individual distributed energy resources
may be an unnecessary and unduly
burdensome requirement. We believe
that the modified approach described
above strikes a reasonable balance
between the information needs of RTOs/
ISOs and the burden that providing
such information can place on
distributed energy resource aggregators
seeking to participate in RTO/ISO
markets.
240. With respect to the aggregate
settlement data for a distributed energy
resource aggregation, as well as
performance data for individual
distributed energy resources in a
distributed energy resource aggregation,
we find that these sets of information
are necessary for the participation of
any type of resource in RTO/ISO
markets and to enable RTOs/ISOs to
perform necessary audit functions.
Therefore, we adopt the NOPR proposal
to require each RTO/ISO to revise its
tariff to require each distributed energy
resource aggregator to maintain and
submit aggregate settlement data for the
distributed energy resource aggregation,
so that the RTO/ISO can regularly settle
with the distributed energy resource
aggregator for its market participation,
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and to provide, upon request from the
RTO/ISO, performance data for
individual resources in a distributed
energy resource aggregation for auditing
purposes.580 However, we clarify that
the requirements for settlement and
performance data should be consistent
with the settlement and auditing data
requirements for other market
participants. Additionally, while we
believe that performance data for
individual distributed energy resources
will be necessary for distributed energy
resource aggregations to comply with
the data retention and auditing
procedures of the RTOs/ISOs, we are
also sympathetic to the concerns that
data requirements for individual
distributed energy resources in a
distributed energy resource aggregation
can be unduly burdensome. To reduce
the burden on distributed energy
resource aggregators and the RTOs/ISOs,
we find that distributed energy resource
aggregators should only be required to
retain that performance data for
individual distributed energy resources
in an aggregation that the RTO/ISO
deems necessary for auditing purposes.
Therefore, to the extent that an RTO/ISO
does not need certain performance data
from individual distributed energy
resources in a distributed energy
resource aggregation for auditing
purposes, it should not require a
distributed energy resource aggregator to
retain that information for individual
distributed energy resources
participating in a distributed energy
resource aggregation. With respect to
Advanced Energy Buyers’ assertion that
RTOs/ISOs should facilitate streamlined
data collection and sharing, we decline
to prescribe the specific manner in
which information and data should be
collected and shared with distribution
utilities.
G. Metering and Telemetry System
Requirements
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a. NOPR Proposal
241. In the NOPR, the Commission
stated that, while the distributed energy
resources in an aggregation will need to
be directly metered, the metering and
telemetry system, i.e., hardware and
software, requirements RTOs/ISOs
impose on distributed energy resource
aggregators and individual resources in
distributed energy resource aggregations
can pose a barrier to the participation of
these aggregations in RTO/ISO
markets.581 The Commission recognized
that RTOs/ISOs need metering data for
settlement purposes and telemetry data
to determine a resource’s real-time
operational capabilities so that they can
efficiently dispatch resources. The
Commission found, however, that
metering and telemetry systems are
often expensive, potentially creating a
burden for small distributed energy
resources. The Commission stated that,
while telemetry data about a distributed
energy resource aggregation is necessary
for the RTO/ISO to efficiently dispatch
the aggregation, telemetry data for each
individual resource in the aggregation
may not be.
242. The Commission stated that,
while it did not propose to require
specific metering and telemetry systems
for distributed energy resource
aggregators, it proposed to require each
RTO/ISO to revise its tariff to identify
any necessary metering and telemetry
hardware and software requirements for
distributed energy resource aggregators
and the individual resources in a
distributed energy resource
aggregation.582 The Commission stated
that these requirements must ensure
that the distributed energy resource
aggregator can provide necessary
information and data to the RTO/ISO,583
but must not impose unnecessarily
burdensome costs on the distributed
energy resource aggregators or
individual resources in a distributed
energy resource aggregation that may
create a barrier to their participation in
the RTO/ISO markets.
243. The Commission noted that there
may be different types of resources in
these aggregations, some in front of the
meter, some behind the meter with the
ability to inject energy back to the grid,
and some behind the meter without the
ability to inject energy to the grid.584
The Commission therefore sought
comment on whether the RTOs/ISOs
need to establish metering and telemetry
hardware and software requirements for
each of the different types of distributed
energy resources that participate in the
RTO/ISO markets through distributed
energy resource aggregations as well as
whether the Commission should
establish specific metering and
telemetry system requirements and, if
so, what requirements would be
appropriate.
244. With respect to telemetry, the
Commission stated that the distributed
energy resource aggregator should be
able to provide to the RTO/ISO the realtime capability of its aggregated
resource in a manner similar to the
requirements for generators, including
582 Id.
P 151.
(citing the Commission’s proposal
pertaining to information and data requirements).
584 Id. P 151.
583 Id.
580 See
id. P 147.
157 FERC ¶ 61,121 at P 150.
581 NOPR,
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the operating level of the resource and
how much that resource can ramp up or
ramp down over its full range of
capability, including its charging
capability for distributed energy
resource aggregations that include
electric storage resources.585 The
Commission further noted that these
telemetry system requirements may also
need to be in place at different locations
for geographically dispersed distributed
energy resource aggregations that have
to provide distribution factors or other
similar information.
245. With respect to metering, the
Commission recognized that distributed
energy resources may be subject to
metering system requirements
established by the distribution utility or
local regulatory authority.586 Therefore,
the Commission proposed that each
RTO/ISO rely on meter data obtained
through compliance with these
distribution utility or local regulatory
authority metering system requirements
whenever possible for settlement and
auditing purposes, only applying
additional metering requirements for
distributed energy resource aggregations
when this data is insufficient.
b. Comments
246. In their comments, the various
RTOs/ISOs describe slightly different
approaches to metering and telemetry
requirements for distributed energy
resource aggregations. CAISO states
that, under its Distributed Energy
Resource Provider model, the aggregator
must follow the same metering and
telemetry standards as other
resources.587 NYISO states that it will
propose to require distributed energy
resource aggregators to have six-second
real-time metering and telemetry that
will be sent either directly to NYISO or
through the utility and to provide afterthe-fact meter data uploads for
settlement purposes.588 ISO–NE states
that individual distributed energy
resources in an aggregation should meet
585 Id.
P 152.
586 Id.
587 CAISO
Comments (RM16–23) at 38.
Comments (RM16–23) at 18–19.
NYISO’s Aggregation Participation Model, accepted
by the Commission on January 23, 2020, requires
that (1) aggregations provide real-time telemetry
every six seconds; (2) NYISO send real-time base
point signals to, receive revenue-quality meter data
for settlement purposes from, and receive real-time
telemetry from an aggregation, not the individual
facilities within an aggregation; (3) aggregations of
like resource types are subject to the existing
metering and telemetry rules for that resource type;
and (4) metering and telemetry of the individual
facilities in an aggregation derive from either
directly measured or calculated values, or a
combination thereof, in accordance with the
requirements set forth in NYISO’s procedures. See
NYISO Aggregation Order, 170 FERC ¶ 61,033 at PP
57–74.
588 NYISO
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the same product-based metering and
telemetry requirements as all other
resources, whether the distributed
energy resource is behind the meter or
in front and whether or not it can inject
power into the grid.589 PJM states that,
generally, it is reasonable for behindthe-meter distributed energy resources
that seek to inject power onto the grid
(either individually or as part of a
distributed energy resource aggregation)
to follow existing telemetry and
metering rules from the generation
framework for similarly sized resources,
noting that metering and telemetry rules
for generation may vary by resource
size.590
247. A number of commenters
support the Commission’s proposal to
provide the RTOs/ISOs with flexibility
to establish and implement metering
and telemetry rules to suit their
individual needs.591 CAISO states that
local regulatory authorities already
impose metering and telemetry
standards and that RTOs/ISOs need
flexibility to incorporate those local
requirements without imposing
additional costs or barriers to entry on
prospective distributed energy resource
aggregations.592 A number of other
commenters make similar points.593
ISO–NE recommends that the
Commission avoid being overly
prescriptive so that ISO–NE can apply
existing metering and telemetry
requirements to distributed energy
resources.594 SoCal Edison asks that the
Commission not issue a standard
directive but rather encourage the
distribution utilities in an RTO/ISO to
work together with the RTO/ISO to
continue the development of
appropriate metering and telemetry
technologies.595 IRC asserts that RTOs/
ISOs should be given the flexibility to
define metering and telemetry
requirements outside of their tariffs.596
Tesla argues that RTOs/ISOs should
589 ISO–NE
Comments (RM16–23) at 48–50.
Comments (RM16–23) at 22 (citing PJM
Manual 14D: Generation Operational Requirements,
rev. 40, section 4.2.2 (Jan. 1, 2017)).
591 See, e.g., CAISO Comments (RM16–23) at 38;
IRC Comments (RM16–23) at 10; ISO–NE
Comments (RM16–23) at 48; New York State
Entities Comments (RM16–23) at 21; SoCal Edison
Comments (RM16–23) at 14–15.
592 CAISO Comments (RM16–23) at 38.
593 See, e.g., Advanced Energy Economy
Comments (2018 RM18–9) at 9; Advanced Energy
Management Comments (2018 RM18–9) at 22–23;
Microsoft Comments (2018 RM18–9) at 18 (citing
Justin Gundlach & Romany Webb, Distributed
Energy Res. Participation in Wholesale Markets:
Lessons from the California ISO, 39 ENERGY L.
REV. 47, 68–69 (2018)); NRG Comments (2018
RM18–9) at 3; Tesla Comments (2018 RM18–9) at
10–11 (citing NOPR, 157 FERC ¶ 61,121 at P 150).
594 ISO–NE Comments (RM16–23) at 48.
595 SoCal Edison Comments (RM16–23) at 14–15.
596 IRC Comments (RM16–23) at 10.
allow alternatives to metering and
telemetry requirements that could
provide the needed information, such as
sampling, end-use metering devices, or
verifiable behavioral actions.597
248. Other commenters contend that
the Commission should take a more
active role in establishing specific
metering and telemetry requirements for
distributed energy resource
aggregations. MISO believes that it is
appropriate for the Commission to
define the telemetry and metering
requirements,598 while others suggest
that the Commission establish a set of
standards or generally applicable
criteria but allow RTOs/ISOs flexibility
on how those standards are
implemented or to exceed the
Commission’s requirements.599
249. Several commenters
acknowledge that metering and
telemetry requirements for distributed
energy resource aggregators and
individual resources participating in
distributed energy resource aggregations
can pose a barrier to the participation of
these resources in RTO/ISO markets.600
Advanced Energy Management and R
Street Institute note that the costs of
metering, telemetry, and
communication equipment pose a
disproportionately high burden for
small distributed energy resources
because they cannot spread the cost
across as many MWs as large
generators.601 Advanced Energy
Economy requests that the Commission
clarify that real-time and short interval
telemetry is not required for distributed
energy resource aggregations and
individual distributed energy
resources.602
250. Several commenters argue that
telemetry requirements comparable to
those of traditional generators would be
too burdensome, even if imposed only
at the aggregation level.603 Advanced
Energy Economy asserts that such
requirements would be prohibitively
expensive and unnecessary to ensure
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597 Tesla
Comments (2018 RM18–9) at 10–11.
Comments (RM16–23) at 25.
599 Fresh Energy/Sierra Club/Union of Concerned
Scientists Comments (RM16–23) at 3; Independent
Energy Producers Association Comments (RM16–
23) at 5; PJM Comments (RM16–23) at 22.
600 See, e.g., Advanced Energy Management
Comments (RM16–23) at 17–18; New York State
Entities Comments (RM16–23) at 21; NextEra
Comments (RM16–23) at 15–16; Public Interest
Organizations Comments (RM16–23) at 14; R Street
Institute Comments (RM16–23) at 10.
601 Advanced Energy Management Comments
(RM16–23) at 18; R Street Institute Comments
(RM16–23) at 10.
602 Advanced Energy Economy Comments
(RM16–23) at 47.
603 Id. at 48; Advanced Energy Management
Comments (RM16–23) at 17; City of New York
Comments (RM16–23) at 9.
598 MISO
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reliability because equipment would
need to be installed at every distributed
energy resource site to obtain accurate
readings.604 These commenters and
others instead suggest that telemetry
requirements, particularly with respect
to timing granularity, should be
commensurate to the need of the system
and service provided.605 Advanced
Energy Management recommends that
virtual telemetry with after-the-fact
meter data be allowed for aggregators of
small resources.606 Further, Advanced
Energy Management recommends that
the Commission not require that
distributed energy resource aggregators
that participate only in capacity markets
implement new telemetry
requirements.607
251. Several commenters assert that
metering and/or telemetry requirements
are necessary only at the aggregation
level, and that telemetry requirements
on individual distributed energy
resources would be cost prohibitive and
unnecessarily burdensome.608 Public
Interest Organizations, New York State
Entities, and Advanced Energy
Economy state that grid operators do not
need telemetry information about each
distributed energy resource in an
aggregation because the loss of one
would not interfere with system
reliability or with the operation of the
aggregation, and these parties request
clarification that such telemetry is not
required.609 NRG and Advanced Energy
Economy contend that the aggregator
should be responsible for providing
metering and telemetry that meets the
RTO/ISO requirements to ensure that
the aggregated performance of the
distributed energy resources meets the
604 Advanced Energy Economy Comments
(RM16–23) at 48.
605 Id.; Advanced Energy Management Comments
(RM16–23) at 18; City of New York Comments
(RM16–23) at 9; Energy Storage Association
Comments (RM16–23) at 25; Public Interest
Organizations Comments (RM16–23) at 24.
606 Advanced Energy Management Comments
(RM16–23) at 18–19. Advanced Energy
Management describes virtual telemetry as
statistical forecasting of an aggregated resource’s
performance, generally monitored by some form of
communications to confirm aggregated resource
performance, which provides the aggregator or
scheduling coordinator a signal to send to the RTO/
ISO.
607 Id.
608 See, e.g., AES Companies Comments (RM16–
23) at 36; Energy Storage Association Comments
(RM16–23) at 25; New York State Entities
Comments (RM16–23) at 20; Public Interest
Organizations Comments (RM16–23) at 14–15; R
Street Institute Comments (RM16–23) at 10.
609 Advanced Energy Economy Comments
(RM16–23) at 49; New York State Entities
Comments (RM16–23) at 20; Public Interest
Organizations Comments (RM16–23) at 14–15.
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claimed and offered performance.610
Stem asks that each RTO/ISO be
required to justify any metering and
telemetry rules regarding individual
resources in an aggregation.611
252. Other commenters argue that
metering and telemetry requirements are
important for reliability and should be
the same for distributed energy resource
aggregations as for any other resource
type.612 EEI argues that this is important
so the RTO/ISO knows the operating
level of the resource and how much that
resource can ramp up or ramp down
over its full range of capability.613
Energy Storage Association agrees, as
long as the telemetry allows distributed
energy resource aggregations to provide
the same products and services as
traditional generators.614 PJM also
agrees, but notes that smaller resources
have lower-cost telemetry requirements
in its market.615 EPSA asserts that
estimation, sampling, and other inexact
methods provide insufficient precision
and, therefore argues that distributed
energy resources should be subject to
the same metering requirements as
traditional supply resources.616 NYISO
Indicated Transmission Owners contend
that the cost of new or additional
communications requirements should
be considered a prerequisite to maintain
the reliability of the system rather than
a barrier to entry.617
253. Some commenters argue that
metering and telemetry requirements
should be placed on individual
distributed energy resources within an
aggregation.618 Multiple commenters
argue that distributed energy resources
need to be directly metered to
distinguish between wholesale and
retail actions.619 MISO believes that it is
610 Advanced Energy Economy Comments
(RM16–23) at 49–50; NRG Comments (RM16–23) at
10.
611 Stem Comments (RM16–23) at 14.
612 See, e.g., EEI Comments (RM16–23) at 34;
Energy Storage Association Comments (RM16–23)
at 25; ISO–NE Comments (RM16–23) at 48–50; New
York Utility Intervention Unit Comments (RM16–
23) at 3–5; TAPS Comments (RM16–23) at 23.
613 EEI Comments (RM16–23) at 34.
614 Energy Storage Association Comments (RM16–
23) at 25.
615 PJM Comments (RM16–23) at 22.
616 EPSA Comments (2018 RM18–9) at 10, 13.
617 NYISO Indicated Transmission Owners
Comments (RM16–23) at 19.
618 See, e.g., DER/Storage Developers Comments
(RM16–23) at 4; Independent Energy Producers
Association Comments (RM16–23) at 8; ISO–NE
Comments (RM16–23) at 48–50; NYISO Indicated
Transmission Owners Comments (RM16–23) at 19;
Organization of MISO States Comments (RM16–23)
at 9.
619 Avangrid Comments (RM16–23) at 15;
Independent Energy Producers Association
Comments (RM16–23) at 8; ISO–NE Comments
(RM16–23) at 48–50; Organization of MISO States
Comments (RM16–23) at 9.
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appropriate for the Commission to
identify the criteria and process for
differentiating retail versus wholesale
transactions of distributed energy
resources.620 TAPS states that RTOs/
ISOs should require telemetry on
individual distributed energy resources
for situational awareness and so that
facilities are not inadvertently directed
to operate beyond physical
capabilities.621 Moreover, ISO–NE
argues that statistical estimation of an
aggregation’s output rather than direct
metering and telemetry of individual
distributed energy resources introduces
error and that the impact of using
estimation to determine distribution
factors is not clear.622 PJM and the IRC
request that the Commission establish
that RTOs/ISOs have the right to require
metering and telemetry for individual
distributed energy resources comparable
to traditional resources in order to avoid
seams issues and inconsistent industry
roll-out.623 Avangrid cautions that even
with separate metering, ownership and
reconciliation of the data for retail
billing and wholesale settlement may be
impractically complex.624 NYISO
Indicated Transmission Owners assert
that resources above a certain size and
within an aggregation may require
additional metering to mitigate issues
on a utility’s distribution system.625
254. Several commenters agree with
the Commission that telemetry system
requirements may need to be in place at
different locations for geographically
dispersed distributed energy resource
aggregations that have to provide
distribution factors.626 PJM Market
Monitor argues that meter and telemetry
information should be disaggregated at
each node and that the RTO/ISO should
provide nodal settlement.627 MISO
Transmission Owners argue that it is not
clear how multi-node aggregations
would be settled.628 AES Companies
contend that the Commission should
permit the aggregation to include more
than one metering point where the
system characteristics indicate more are
needed.629 Duke Energy maintains that
RTOs/ISOs should have access to
620 MISO
Comments (RM16–23) at 25.
621 TAPS Comments (RM16–23) at 23.
622 ISO–NE Comments (RM16–23) at 51.
623 PJM Comments (RM16–23) at 22.
624 Avangrid Comments (RM16–23) at 15.
625 NYISO Indicated Transmission Owners
Comments (RM16–23) at 7.
626 AES Comments (RM16–23) at 36; Duke Energy
Comments (RM16–23) at 5; EEI Comments (RM16–
23) at 34; MISO Transmission Owners Comments
(RM16–23) at 24.
627 PJM Market Monitor Comments (RM16–23) at
15.
628 MISO Transmission Owners Comments
(RM16–23) at 24.
629 AES Companies Comments (RM16–23) at 37.
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telemetry information at individual
points of interconnection and that the
distribution utility may need to access
similar data.630
255. Most commenters support the
proposal in the NOPR that, when
existing distribution utility metering
requirements for distributed energy
resources are sufficient, RTOs/ISOs
should rely on that technology rather
than impose new requirements.631
Avangrid argues that the distribution
utility might be able to provide the
necessary data to the RTO/ISO on behalf
of the distributed energy resource
aggregator via a third-party
agreement.632
256. APPA/NRECA express concern
that the proposal to rely on meter data
from the distribution utility would place
significant burdens on distribution
utilities and introduce new
cybersecurity and privacy implications,
issues which will require significant
time and resources for utilities to
address.633 APPA asserts that such costs
could undermine the benefits of
distribution utilities’ existing retail
distributed energy resource programs,
effectively imposing costs on retail
customers to subsidize wholesale
market participation.634 Advanced
Energy Management asserts that
telemetry requirements to participate in
a wholesale program should be driven
by the RTO/ISO system needs, which
are less granular than at the distribution
level.635 Advanced Energy Management
adds that a distributed energy resource
that only seeks participation in the
wholesale market should only be
required to fulfill the RTO’s/ISO’s
metering requirements. Advanced
Energy Economy states that RTOs/ISOs
should adopt procedures that provide
for regular information and
communications flows to occur from the
aggregator, to the RTO/ISO, and then to
distribution utilities.636
257. Several commenters generally
agree with the Commission that
individual distributed energy resources
in an aggregation will need to be
630 Duke
Energy Comments (RM16–23) at 5.
e.g., Advanced Energy Management
Comments (RM16–23) at 18–19; EEI Comments
(RM16–23) at 33; Mosaic Power Comments (RM16–
23) at 5–6; SoCal Edison Comments (RM16–23) at
14–15; TAPS Comments (RM16–23) at 24.
632 Avangrid Comments (RM16–23) at 15.
Avangrid adds that the electric distribution
companies should be allowed to charge for this
service.
633 APPA Comments (2018 RM18–9) at 9–10;
NRECA Comments (2018 RM18–9) at 11–12, 30.
634 APPA Comments (2018 RM18–9) at 10.
635 Advanced Energy Management Comments
(2018 RM18–9) at 22–23.
636 Advanced Energy Economy Comments (2018
RM18–9) at 9 n.11.
631 See,
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directly metered. These commenters
argue that behind-the-meter distributed
energy resources should be metered
separately from the host site’s load due
to the need to distinguish between
wholesale and retail actions.637 DER/
Storage Developers ask the Commission
to direct all RTOs/ISOs to allow direct
metering of resources as an optional
alternative to traditional baselines to
determine performance.638 Independent
Energy Producers Association notes that
dual-metering can serve other
Commission goals such as minimizing
cost shifts, ensuring reliability, and
ensuring market integrity.639 MISO
states that visibility at the point of
injection is needed to mitigate
transmission risks and ensure that a
distributed energy resource is following
dispatch instructions, particularly as the
volume of distributed energy resources
grows.640 EPSA argues that netting retail
and wholesale services reduces RTO/
ISO visibility which makes it difficult
for RTOs/ISOs to efficiently dispatch
resources, measure and verify resource
performance, calculate baseline load
levels, and support the reliability,
planning, and modeling of system
capabilities.641 Avangrid cautions that
even with separate metering, ownership
and reconciliation of the data for retail
billing and wholesale settlement may be
impractically complex.642
258. Some commenters question the
authority of the Commission or the
RTOs/ISOs to impose specific metering
and telemetry requirements on
distributed energy resources. AES
Companies argue that the only metering
and telemetry requirements that the
Commission or the RTOs/ISOs can
dictate are for the aggregator’s node or
point of interconnection to the
transmission system under RTO/ISO
control.643 IRC asks the Commission to
acknowledge in any final rule that the
RTOs/ISOs have no jurisdiction to
require state-regulated utilities to install
specific retail metering technology, but
that wholesale metering rules for
distributed energy resources must be
637 Avangrid Comments (RM16–23) at 15;
Independent Energy Producers Association
Comments (RM16–23) at 8; Microsoft Comments
(2018 RM18–9) at 17; Organization of MISO States
Comments (RM16–23) at 9; Stem Comments (2018
RM18–9) at 3, 19.
638 DER/Storage Developers Comments (RM16–
23) at 4.
639 Independent Energy Producers Association
Comments (RM16–23) at 8.
640 MISO Comments (2018 RM18–9) at 19.
641 EPSA Comments (2018 RM18–9) at 10–13
(citing Distributed Energy Resources Roadmap at
29–30).
642 Avangrid Comments (RM16–23) at 15.
643 AES Companies Comments (RM16–23) at 47.
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met.644 California Energy Storage
Alliance recommends that local
regulatory authorities develop and
implement metering and telemetry
requirements to avoid the Commission
imposing any requirements outside the
Commission’s jurisdiction.645 The
Delaware Commission recommends that
the Commission require distributed
energy resources to employ separate
metering and telemetry capability if
they are providing both wholesale and
retail services.646
259. Some state regulators,
distribution utilities, and their
representatives note that upgrades may
be needed to current metering
technology and associated networking
and cyber security in order to support
RTO/ISO needs 647 and argue that
associated costs must be borne by the
distributed energy resources or their
aggregators or through wholesale level
cost allocation, and not by distribution
utilities.648
260. Several commenters discuss the
relationship between RTOs/ISOs and
distribution utilities and their respective
metering and telemetry requirements.
Fresh Energy/Sierra Club/Union of
Concerned Scientists encourage the
development of a framework to share
metering data between the RTO/ISO,
distribution utility, and distributed
energy resource aggregator.649 Duke
Energy recommends that the final rule
not preclude the transfer of telemetry
data between the RTO/ISO and the
electric distribution utility.650 Similarly,
EEI asserts that both the RTO/ISO and
the distribution utility should be
provided telemetry information,651
while IRC states that wholesale and
retail metering requirements need to be
harmonized to prevent undue barriers to
participation.652 Xcel Energy Services
recommends that the RTOs/ISOs and
distribution utilities should define the
644 IRC
Comments (RM16–23) at 6.
Energy Storage Alliance Comments
(RM16–23) at 9.
646 Delaware Commission Comments (RM16–23)
at 5–7 (citing FPC v. Fla. Power & Light Co., 404
US 461, 463 (1972)), 8.
647 See, e.g., Avangrid Comments (RM16–23) at
15; Dominion Comments (RM16–23) at 12; EEI
Comments (RM16–23) at 13; NARUC Comments
(RM16–23) at 6; SoCal Edison Comments (RM16–
23) at 14.
648 See, e.g., Delaware Commission Comments
(RM16–23) at 7; EEI Comments (RM16–23) at 33–
34; IRC Comments (RM16–23) at 6; Massachusetts
Municipal Electric Comments (RM16–23) at 4; Six
Cities Comments (RM16–23) at 3; TAPS Comments
(RM16–23) at 24.
649 Fresh Energy/Sierra Club/Union of Concerned
Scientists Comments (RM16–23) at 3.
650 Duke Energy Comments (RM16–23) at 5.
651 EEI Comments (RM16–23) at 34.
652 IRC Comments (RM16–23) at 6.
645 California
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role of a meter data management agent
to provide needed meter data.653
261. NARUC, EEI, and MISO argue
that, before metering and telemetry
requirements can be established,
additional information must be gathered
about the type and purpose of metering
and telemetry data needed, the access to
and provision of this data, and the cost
allocation involved.654 On the other
hand, Fresh Energy/Sierra Club/Union
of Concerned Scientists ask the
Commission to not let this debate
hinder progress on establishing
necessary distributed energy resource
requirements.655
c. Commission Determination
262. We adopt the NOPR proposal
and add § 35.28(g)(12)(ii)(f) to the
Commission’s regulations to require
each RTO/ISO to revise its tariff to
establish market rules that address
metering and telemetry hardware and
software requirements necessary for
distributed energy resource aggregations
to participate in RTO/ISO markets.
263. We understand the need to
balance, on one hand, the RTO’s/ISO’s
need for metering and telemetry data for
settlement and operational purposes,
and, on the other hand, not imposing
unnecessary burdens on distributed
energy resource aggregators. Therefore,
we will not prescribe the specific
metering and telemetry requirements
that each RTO/ISO must adopt; rather,
we provide the RTOs/ISOs with
flexibility to establish the necessary
metering and telemetry requirements for
distributed energy resource
aggregations, and require that each
RTO/ISO explain in its compliance
filing why such requirements are just
and reasonable and do not pose an
unnecessary and undue barrier to
individual distributed energy resources
joining a distributed energy resource
aggregation.
264. To implement this requirement,
we direct each RTO/ISO to explain, in
its compliance filing, why its proposed
metering requirements are necessary
(e.g., for the distributed energy resource
aggregator to provide the settlement and
performance data to the RTO/ISO
discussed in Section IV.F or to prevent
double counting of services as discussed
in Section IV.C.3) and why its proposed
telemetry requirements are necessary
(e.g., for the RTO/ISO to have sufficient
situational awareness to dispatch the
653 Xcel
Energy Services Comments (RM16–23) at
27.
654 EEI Comments (RM16–23) at 33; MISO
Comments (RM16–23) at 25; NARUC Comments
(RM16–23) at 7.
655 Fresh Energy/Sierra Club/Union of Concerned
Scientists Comments (RM16–23) at 3.
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aggregation and the rest of the system
efficiently). This explanation should
also include a discussion about
whether, for example, the proposed
requirements are similar to
requirements already in existence for
other resources and steps contemplated
to avoid imposing unnecessarily
burdensome costs on the distributed
energy resource aggregators and
individual resources in distributed
energy resource aggregations that may
create an undue barrier to their
participation in RTO/ISO markets. We
find that this approach will provide
each RTO/ISO with the flexibility to
develop metering and telemetry
requirements appropriate for the needs
of its systems.
265. Given the variety of potential
aggregation business models, as well as
the variety of existing distribution
utility requirements to which the
distributed energy resources
participating in aggregations will be
subject, we find that imposing standard
requirements is unwarranted. Standard
metering and telemetry requirements
could run the risk of imposing
unnecessary costs on RTOs/ISOs,
distributed energy resource aggregators,
and the individual distributed energy
resources. For example, imposing
standard requirements could impede
RTOs/ISOs from adequately
incorporating metering and telemetry
requirements already imposed on
distributed energy resources by local
regulatory authorities and thereby create
a barrier to the participation of
distributed energy resources in RTO/
ISO markets. We find that adopting the
NOPR proposal minimizes these risks
and the costs associated with
implementing these requirements
because it allows RTOs/ISOs to propose
metering and telemetry requirements in
addition to those already in place only
when they determine that such
additional requirements are needed.
266. As clarified in Section IV.F, the
distributed energy resource aggregator,
not the individual distributed energy
resources in the aggregation, is the
single point of contact with the RTO/
ISO, responsible for managing,
dispatching, metering, and settling the
individual distributed energy resources
in its aggregation. We further clarify
here that the distributed energy resource
aggregator is also the entity responsible
for providing any required metering and
telemetry information to the RTO/ISO.
267. We decline the requests of some
commenters to explicitly limit metering
and/or telemetry requirements to the
distributed energy resource aggregation
level, or to require telemetry of
individual distributed energy resources
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participating in an aggregation. Rather,
consistent with the flexibility provided
in Section IV.F, we will not require
uniform metering requirements across
all RTOs/ISOs, nor will we require each
RTO/ISO to impose uniform metering
requirements on individual distributed
energy resources. Rather, we provide
flexibility to RTOs/ISOs to propose
specific metering requirements,
including any that may apply to
individual distributed energy resources
that the RTO/ISO demonstrates are
needed to obtain any required
performance data for auditing purposes
and to address double compensation
concerns. Similarly, we provide
flexibility to the RTO/ISO as to whether
to propose specific telemetry
requirements for individual distributed
energy resources in an aggregation. The
need for such requirements may
depend, for example, on whether the
RTO/ISO allows multi-node
aggregations or how multi-node
aggregations are implemented. By
providing flexibility while also
requiring that the RTO/ISO explain why
any proposed metering and telemetry
requirements are necessary, we allow
the RTO/ISO to obtain the metering and
telemetry information it needs without
burdening the distributed energy
resource aggregator to provide data that
may not be necessary.
268. We also clarify that, consistent
with this flexible approach, we are not
requiring RTOs/ISOs to establish
metering and telemetry hardware and
software requirements for distributed
energy resource aggregations that are
identical to those placed on existing
resources, or to establish different or
additional metering and telemetry
requirements for distributed energy
resource aggregations. Rather, we expect
that RTOs/ISOs will base any proposed
metering and telemetry hardware and
software requirements for distributed
energy resource aggregations on the
information needed by the RTO/ISO
while avoiding unnecessary
requirements that may act as a barrier to
individual distributed energy resources
joining distributed energy resource
aggregations or to distributed energy
resource aggregations participating in
the wholesale markets. However, as
explained in Section IV.F, we require
that metering data for settlement
purposes at the distributed energy
resource aggregation level be consistent
with settlement data requirements for
other resource types. We recognize that
metering and telemetry requirements
may vary depending on the types of
distributed energy resources
participating in an aggregation, the size
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of the individual distributed energy
resources or aggregated resource, or the
particular service provided. For
example, more granular or precise
telemetry may be necessary for a
distributed energy resource aggregation
that is participating in the frequency
regulation market than one that is
exclusively providing energy or
capacity. To ensure that the flexible
approach outlined here provides the
RTO/ISO with sufficient information to
administer the wholesale markets and
ensure reliability of the transmission
system while not unduly burdening
distributed energy resources and
distributed energy resource
aggregations, we require that each RTO/
ISO explain in its compliance filing why
its proposed metering and telemetry
requirements for distributed energy
resource aggregations are just and
reasonable and do not pose an
unnecessary and undue barrier to
individual distributed energy resources
joining a distributed energy resource
aggregation.
269. We also adopt the NOPR
proposal that each RTO’s/ISO’s
proposed metering requirements should
rely on meter data obtained through
compliance with distribution utility or
local regulatory authority metering
system requirements whenever possible
for settlement and auditing purposes.
We further clarify that this requirement
also applies to existing telemetry
infrastructure. By using existing
infrastructure whenever possible, RTOs/
ISOs should be able to obtain the data
they need and avoid proposing new
metering and telemetry requirements
that would be duplicative and could
erect unnecessary barriers to entry for
distributed energy resource aggregators
and individual distributed energy
resources participating in an
aggregation. With respect to
jurisdictional concerns raised by some
commenters, we note that any
additional RTO/ISO metering and
telemetry requirements would not
change those required by state or local
regulatory authorities and would be
required solely to assist with
settlements and audits of activity in
RTO/ISO markets, or to provide RTOs/
ISOs with the real-time information
needed to reliably and efficiently
dispatch their systems.
270. In response to concerns about the
potential costs and burdens that could
be imposed on distribution utilities as a
result of the requirement that RTOs/
ISOs rely on metering and telemetry
data obtained through compliance with
distribution utility or local regulatory
authority metering system requirements
whenever possible, we expect that in
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general, this information will be
provided by individual distributed
energy resources to distributed energy
resource aggregators, and from
distributed energy resource aggregators
to RTOs/ISOs. However, to the extent
that the RTO/ISO proposes that such
information come from or flow through
distribution utilities, we require that
RTOs/ISOs coordinate with distribution
utilities and relevant electric retail
regulatory authorities to establish
protocols for sharing metering and
telemetry data, and that such protocols
minimize costs and other burdens and
address concerns raised with respect to
privacy and cybersecurity.
271. In response to IRC’s request for
flexibility to define metering and
telemetry requirements outside the
RTO/ISO tariffs, we find that the RTO/
ISO tariffs should include a basic
description of the metering and
telemetry practices for distributed
energy resource aggregations as well as
references to specific documents that
will contain further technical details.
Decisions as to whether an item should
be placed in a tariff or in a business
practice manual are guided by the
Commission’s rule of reason policy,656
under which provisions that
‘‘significantly affect rates, terms, and
conditions’’ of service, are readily
susceptible of specification, and are not
generally understood in a contractual
agreement must be included in the
tariff, while items better classified as
implementation details may be included
only in the business practice manual.
We find that metering and telemetry
requirements significantly affect the
terms and conditions of the
participation of distributed energy
resource aggregations in RTO/ISO
markets and, therefore, must be
included in the RTO/ISO tariffs.
656 See, e.g., Energy Storage Ass’n v. PJM
Interconnection, L.L.C., 162 FERC ¶ 61,296, at P 103
(2018) (Energy Storage Ass’n v. PJM) (citing
Midcontinent Indep. Sys. Operator, Inc., 158 FERC
¶ 61,003, at P 69 (2017); PacifiCorp, 127 FERC
¶ 61,144, at P 11 (2009); City of Cleveland v. FERC,
773 F.2d 1368, 1376 (D.C. Cir. 1985) (finding that
utilities must file ‘‘only those practices that affect
rates and service significantly, that are reasonably
susceptible of specification, and that are not so
generally understood in any contractual
arrangement as to render recitation superfluous’’);
Pub. Serv. Comm’n of N.Y. v. FERC, 813 F.2d 448,
454 (D.C. Cir. 1987) (holding that the Commission
properly excused utilities from filing policies or
practices that dealt with only matters of ‘‘practical
insignificance’’ to serving customers)).
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H. Coordination Between the RTO/ISO,
Aggregator, and Distribution Utility
1. Market Rules on Coordination
a. NOPR Proposal
272. In the NOPR, the Commission
noted that the market rules that each
RTO/ISO adopts to facilitate the
participation of distributed energy
resource aggregations must address
coordination between the RTO/ISO, the
distributed energy resource aggregator,
and the distribution utility to ensure
that the participation of these resources
in RTO/ISO markets does not present
reliability or safety concerns for the
distribution or transmission system.657
Thus, the Commission proposed to
require each RTO/ISO to revise its tariff
to provide for coordination among the
RTO/ISO, a distributed energy resource
aggregator, and the relevant distribution
utilities with respect to (1) the
registration of new distributed energy
resource aggregations; and (2) ongoing
coordination, including operational
coordination, between the RTO/ISO, a
distributed energy resource aggregator,
and the relevant distribution utility or
utilities.
273. After the April 2018 technical
conference, the Commission sought
further information on certain proposals
regarding detailed aspects of the
coordination requirements.658
b. Comments
274. Many commenters support the
coordination processes proposed in the
NOPR because it will ensure that
participation of distributed energy
resource aggregations in RTO/ISO
markets does not compromise these
markets or the reliability or safety of the
transmission and distribution
systems.659 For example, based on its
experience with implementing CAISO’s
Distributed Energy Resource Provider
framework, Pacific Gas & Electric states
that it is vitally important that RTOs/
ISOs coordinate with distribution
utilities with respect to both registration
of distributed energy resource
aggregations and their ongoing
operation.660
275. Advanced Energy Economy
states that it recognizes that the RTOs/
ISOs need visibility into distributed
energy resource operations and that
657 NOPR,
157 FERC ¶ 61,121 at P 153.
Inviting Post-Technical Conference
Comments at 7–11.
659 See, e.g., CAISO Comments (RM16–23) at 39;
Connecticut State Entities Comments (RM16–23) at
6; Dominion Comments (RM16–23) at 13; Institute
for Policy Integrity Comments (RM16–23) at 9;
NYISO Comments (RM16–23) at 19.
660 Pacific Gas & Electric Comments (RM16–23) at
21.
658 Notice
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coordination among the RTO/ISO, the
distribution utility, and distributed
energy resource aggregators is necessary
to ensure reliable operations.661
Advanced Energy Economy asserts that
these visibility and operational issues
are surmountable and that certain
RTOs/ISOs (particularly CAISO and
ISO–NE) have made great progress in
developing standards and rules to
address these issues. Advanced Energy
Economy states that fully integrating
advanced energy technologies that are
already available and growing rapidly
will only enhance the ability to quickly
address visibility and operational
issues.
276. Commenters note that
coordination would be further enhanced
with the development of distribution
system operators.662 PJM believes that
value may be added if an RTO/ISO were
to coordinate with a distribution system
operator, but states that without a true
distribution system operator operating
in the PJM region (or anywhere else in
the country) it cannot opine on the
specific benefits that such coordination
could achieve.663 SoCal Edison notes
that, in California, distribution utilities
are already performing the initial
functions of a distribution system
operator and that the utility is uniquely
situated to provide this role in the
future.664
277. While supportive of the
coordination requirements in the NOPR,
Mensah argues that the cost of
registering an aggregation as well as
ongoing operational coordination
should not place any unnecessary
burden on distributed energy resource
aggregations.665
c. Commission Determination
278. We adopt the NOPR proposal, as
modified and clarified below, and add
§ 35.28(g)(12)(ii)(g) to the Commission’s
regulations to require each RTO/ISO to
revise its tariff to establish market rules
that address coordination between the
RTO/ISO, the distributed energy
resource aggregator, the distribution
utility, and the relevant electric retail
regulatory authorities.
661 Advanced Energy Economy Comments
(RM16–23) at 13.
662 De Martini and Kristov define a distribution
system operator as ‘‘the entity responsible for
planning and operational functions associated with
a distribution system that is modernized for high
levels of [distributed energy resources].’’ Paul De
Martini and Lorenzo Kristov, ‘‘Distribution Systems
in a High DER Future: Planning, Market Design,
Operation and Oversight,’’ Future Electric Utility
Regulation Series, Lawrence Berkeley National
Laboratory, October 2015, p. vi.
663 PJM Comments (RM16–23) at 28.
664 SoCal Edison Comments (RM16–23) at 8.
665 Mensah Comments (RM16–23) at 4.
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279. We agree with commenters that
coordination requirements should not
create undue barriers to entry for
distributed energy resource
aggregations. However, we must also
consider the substantial role of
distribution utilities and state and local
regulators in ensuring the safety and
reliability of the distribution system. We
believe that the reforms adopted herein
appropriately balance those needs.
280. Further, as discussed in Section
IV.H.4 below,666 although the NOPR did
not discuss the role of state and local
regulatory authorities in coordination
efforts, we recognize that state and local
regulatory authorities have a key role to
play in such coordination efforts.
Therefore, we have modified the NOPR
proposal to ensure that the RTO/ISOs
also coordinate with these entities.
2. Role of Distribution Utilities
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a. NOPR Proposal
281. In the NOPR, the Commission
proposed that the market rules on
coordination provide the relevant
distribution utility or utilities with the
opportunity to review the list of
individual resources that are located on
their distribution systems and that
enroll in a distributed energy resource
aggregation before those resources may
participate in RTO/ISO markets through
the aggregation.667 The Commission
explained that the purpose of this
coordination would be to ensure that all
of the individual resources in the
distributed energy resource aggregation
are technically capable of providing
services to the RTO/ISO through the
aggregator and are eligible to be part of
the aggregation.668 The Commission
further explained that the opportunity
for the relevant distribution utility to
review the list of these resources would
allow them to assess whether the
resources would be able to respond to
RTO/ISO dispatch instructions without
posing any significant risk to the
distribution system and to ensure these
resources are not participating in any
other retail compensation programs. The
Commission proposed to give the
relevant distribution utility or utilities
the opportunity to report such concerns
or issues to the RTO/ISO for its
consideration prior to the RTO/ISO
allowing the new or modified
distributed energy resource aggregation
to participate in the organized
wholesale electric market.
666 See infra Section IV.H.4 (Role of Relevant
Electric Retail Regulatory Authorities).
667 NOPR, 157 FERC ¶ 61,121 at PP 149, 154.
668 Id. P 154.
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b. Comments
282. Numerous commenters generally
support the NOPR proposal for
distribution utility review,669 but differ
about the scope and the timing of this
review.
283. While generally supportive of the
NOPR proposal, several distribution
utilities voice a broad range of concerns
about their role in coordination and the
impact of distributed energy resource
aggregations on their distribution
systems. In particular, distribution
utilities generally argue for an even
greater and decision-making role in
reviewing distributed energy resource
registrations.670 NRECA argues for
distribution utility review of individual
distributed energy resource
participation in distributed energy
resource aggregations before the
resources participate in RTO/ISO
markets.671 Additional commenters
argue that distribution utilities and
RTOs/ISOs must be afforded enough
time to perform impact studies,
preferably using study parameters
adopted and implemented by state and
local regulators, for each distributed
energy resource and for the aggregation
to ensure safe and reliable grid
operation,672 and other commenters
specifically request that the Commission
address the timing of the distribution
utility review in the final rule.673 MISO
Transmission Owners request that any
final rule require distribution utility
approval of any aggregation arrangement
to ensure that all of the appropriate
distribution utility requirements for
interconnection and other relevant
regulations and processes have been
met.674 NRECA asserts that distribution
utilities need detailed information in
order to assess whether distributed
energy resource participation is
beneficial.675
669 See, e.g., Avangrid Comments (RM16–23) at
16; Pacific Gas & Electric Comments (RM16–23) at
21; PJM Comments (2018 RM18–9) at 19; Robert
Borlick Comments (RM16–23) at 5–7; SoCal Edison
Comments (RM16–23) at 6; TAPS Comments (2018
RM18–9) at 27.
670 See, e.g., Dominion Comments (RM16–23) at
10; EEI Comments (RM16–23) at 35–36; MISO
Transmission Owners Comments (RM16–23) at 19;
SoCal Edison Comments (RM16–23) at 11–12; Xcel
Energy Services Comments (RM16–23) at 28.
671 NRECA Comments (2018 RM18–9) at 29.
672 See, e.g., Dominion Comments (RM16–23) at
10; EEI Comments (RM16–23) at 35–36; PJM
Utilities Coalition Comments (2018 RM18–9) at 14–
15.
673 See, e.g., Advanced Energy Economy
Comments (RM16–23) at 40; Advanced Energy
Management Comments (RM16–23) at 21; NextEra
Comments (RM16–23) at 17.
674 MISO Transmission Owners Comments
(RM16–23) at 19.
675 NRECA Comments (2018 RM18–9) at 29.
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284. Moreover, several distribution
utilities seek more than review
capability and assert that the
distribution utility’s consent to the
participation of a distributed energy
resource in an aggregation is a necessary
prerequisite before the aggregation may
operate.676 According to these
commenters, distribution utilities, who
have the knowledge and understanding
of distribution system challenges,
should have the authority to make
decisions regarding the participation of
a distributed energy resource
aggregation.677 EEI further argues that
distribution utilities must be able to
restrict participation until the reliability
and/or safety issue is addressed, and
must be notified in real-time if a
resource that is connected to its
distribution system joins a distributed
energy resource aggregation.678
285. Electric storage resource
developers and advocates support the
NOPR proposal, but raise concerns
about the proposed distribution utility
review process.679 They are concerned
that distribution utility review will act
as a barrier by providing the distribution
utility a ‘‘gatekeeper’’ role.680
Furthermore, some commenters argue
that distribution utilities do not have
the right or the jurisdiction to veto what
distributed energy resources may join
aggregations or what aggregations may
participate in organized wholesale
electric markets.681 Advanced Energy
Management states that giving
distribution utilities discretionary
authority to approve distributed energy
resources ‘‘could usurp FERC’s clear
jurisdiction over the conditions for
wholesale market eligibility.’’ 682
Similarly, SEIA suggests that the
discretion of distribution utilities
should be limited to violations of
interconnection agreements and that it
676 See, e.g., EEI Comments (2018 RM18–9) at 10,
13; NRECA Comments (2018 RM18–9) at 29; PJM
Utilities Coalition Comments (2018 RM18–9) at 14;
TAPS Comments (RM16–23) at 25; TAPS
Comments (2018 RM18–9) at 28.
677 See, e.g., EEI Comments (2018 RM18–9) at 13;
TAPS Comments (2018 RM18–9) at 28.
678 EEI Comments (2018 RM18–9) at 13.
679 See, e.g., Advanced Energy Economy
Comments (RM16–23) at 39, 40; Advanced Energy
Management Comments (RM16–23) at 21, 22;
Center for Biological Diversity Comments (RM16–
23) at 3; Stem Comments (RM16–23) at 15.
680 See, e.g., Advanced Energy Economy
Comments (RM16–23) at 39, 40; Advanced Energy
Management Comments (RM16–23) at 21, 22; Stem
Comments (RM16–23) at 14–15.
681 See, e.g., Advanced Energy Economy
Comments (2018 RM18–9) at 11; Advanced Energy
Management Comments (2018 RM18–9) at 18; SEIA
Comments (2018 RM18–9) at 16; Stem Comments
(2018 RM18–9) at 15; Sunrun Comments (2018
RM18–9) at 6.
682 Advanced Energy Management Comments
(2018 RM18–9) at 18.
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would be inappropriate for distribution
utilities to have veto rights over
distributed energy resource
participation.683 SEIA further draws a
distinction between existing and new
distributed energy resources. For
existing distributed energy resources
that are already operating on the grid, so
long as the distributed energy resource
does not modify the generation system
outside of what has already been
approved, SEIA recommends that the
Commission ensure that there is a
streamlined process to ensure that the
existing distributed energy resources
can participate through a distributed
energy resource aggregator participation
model.
286. Commenters in support of the
NOPR proposal urge the Commission to
include limits on the scope of this
review or adopt specific parameters for
this review. Global Cold Chain Alliance
and Viking Cold Solutions raise
concerns about distribution review
processes that prevent development and
adoption of new technologies.684
Advanced Energy Management and
Advanced Energy Economy further
argue that distribution utilities should
(1) be required to identify to RTOs/ISOs
specific areas of their network where
they have limited ability to
accommodate additional distributed
energy resource registrations, with a
notification requirement only when the
local ability has been exceeded; (2)
allow customers and their distributed
energy resource aggregators to see
information provided by the utility if
the RTO/ISO uses that information in a
decision to prohibit a distributed energy
resource registration, and provide the
ability to appeal such a rejection; and
(3) be prohibited from registering
customers in their own distributed
energy resource aggregations that they
had previously disqualified for
reliability reasons.685 Advanced Energy
Management also recommends that
there should be no requirement for
distribution utilities to review
distributed energy resource registrations
unless the customers are exporting to
the grid.686 After a specific timeline of
review, Advanced Energy Management
and Tesla recommend that the
distribution utility still be given the
opportunity to notify the RTO/ISO if the
distributed energy resource does not
683 SEIA
Comments (2018 RM18–9) at 16.
Cold Chain Alliance Comments (2018
RM18–9) at 2–3; Viking Cold Solutions Comments
(2018 RM18–9) at 3.
685 Advanced Energy Economy Comments
(RM16–23) at 39, 40; Advanced Energy
Management Comments (RM16–23) at 21, 22.
686 Advanced Energy Management Comments
(RM16–23) at 21.
684 Global
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have the necessary interconnection
agreements or is participating in a retail
tariff that did not allow wholesale
participation.687 In these limited
‘‘exception only’’ models, distribution
utilities are not provided the ability to
approve distributed energy resource
participation in Commissionjurisdictional markets, but may review
and raise objections.688 Advanced
Energy Management and Stem state that
distribution utilities should exercise
their authority prior to a distributed
energy resource’s registration in a RTO/
ISO by defining non-discriminatory
interconnection procedures that ensure
the distribution grid can accommodate
distributed energy resources, whether or
not a distributed energy resource
aggregation participated in a wholesale
transaction.689
287. Multiple commenters suggest
specific review criteria that the
distribution utilities should adhere to.
Several commenters assert that any
denial of participation in distributed
energy resource aggregation should only
be based on specified operational
coordination and reliability concerns,
such as violation of state-regulated
interconnection protocols and
agreements that address binding
distribution system constraints and
reflect non-discriminatory agreements
on exporting energy to the grid, or
reflect customers who already
participate in tariffs or other agreements
that disallow wholesale participation.690
NRECA offers the following criteria:
That the participation of a distributed
energy resource in an aggregation will
not create any safety, reliability or
power quality concerns on their
systems, and that implementation of
distributed energy resource aggregation
will conform to the requirements of the
IEEE standards.691 NYISO Indicated
Transmission Owners suggest that any
interconnection agreement for a
distributed energy resource
participating in an aggregation must
demonstrate the ability of an individual
distributed energy resource to (1)
participate in an aggregation; (2)
687 Advanced Energy Management Comments
(2018 RM18–9) at 19; Tesla Comments (2018
RM18–9) at 10.
688 See, e.g., Advanced Energy Management
Comments (2018 RM18–9) at 17; Icetec Comments
(2018 RM18–9) at 17–18; Sunrun Comments (2018
RM18–9) at 7; Tesla Comments (2018 RM18–9) at
9–10.
689 Advanced Energy Management Comments
(2018 RM18–9) at 18; Stem Comments (2018 RM18–
9) at 15.
690 See, e.g., Advanced Energy Economy
Comments (2018 RM18–9) at 11; Icetec Comments
(2018 RM18–9) at 16; SEIA Comments (2018 RM18–
9) at 16; Stem Comments (2018 RM18–9) at 14–15;
Tesla Comments (2018 RM18–9) at 9.
691 NRECA Comments (2018 RM18–9) at 30.
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communicate essential information to
the distribution system operator and
RTO/ISO using RTO/ISO
communication and operating protocols,
as appropriate; and (3) meet RTO/ISO
performance standards.692 Pacific Gas &
Electric recommends that an individual
distributed energy resource wishing to
participate in an aggregation (1) will not
cause voltage problems or overload
existing equipment; (2) is able to
comply with requirements in its
individual interconnection agreement
when operated in the aggregate; and (3)
is not already participating in another
distributed energy resource
aggregation.693 EEI argues that the
criteria to determine distributed energy
resource participation should be ‘‘good
utility practice.’’ 694 In a similar vein,
several commenters request clear
standards or guidelines for distribution
utility review, while APPA conversely
urges the Commission to allow for
flexibility in the criteria adopted by
distribution utilities.695
288. Stem and Tesla/SolarCity do not
support the NOPR proposal on
distribution utility review and
recommend that limits be placed on this
review if the Commission chooses to
include the requirement in a final rule.
Stem argues that the Commission
should not give local distribution
utilities carte blanche to deny a
distributed energy resource eligibility to
participate in a distributed energy
resource aggregation, RTO/ISO markets,
or other participation model.696 Stem
recommends an alternative default
approach that allows participation
unless the local utility provides a
specific, credible safety or reliability
risk.697 Tesla/SolarCity argue that
having an appropriate level of
communication between the RTO/ISO
and distribution utility eliminates the
need for distribution utility review.698
289. Commenters also express
differing opinions on the length of time
required to conduct the review of
distributed energy resource
participation. Several distribution
utilities recommend that a reasonable
timetable or no time limits be
established for review, and argue that
sufficient time is needed for review and/
692 NYISO Indicated Transmission Owners
Comments (2018 RM18–9) at 15, 17.
693 Pacific Gas & Electric Comments (2018 RM18–
9) at 17–18.
694 EEI Comments (2018 RM18–9) at 14.
695 See, e.g., Advanced Energy Economy
Comments (RM16–23) at 39; APPA Comments
(2018 RM18–9) at 27; Center for Biological Diversity
Comments (RM16–23) at 3.
696 Stem Comments (RM16–23) at 4, 15.
697 Id. at 4.
698 Tesla/SolarCity Comments (RM16–23) at 30.
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or consultation between the distributed
energy resource aggregator and
distribution utility to ensure the
distribution grid can be operated in a
safe and reliable manner during the
aggregated distributed energy resource
operating conditions.699 Distributed
energy resource providers, such as
Stem, take the opposite view and assert
that RTOs and ISOs are not obligated to
wait for the distribution utility to review
the registration of a distributed energy
resource if the distributed energy
resource can prove it has completed an
applicable state-level interconnection
process.700 Nevertheless, several
commenters agree that it would be
reasonable for an RTO/ISO to pause
registration of a distributed energy
resource to provide time (e.g., 10 days
or CAISO’s 30-day timeline) for the
distribution utility to ensure that
sufficient interconnection procedures
have been followed and approved
interconnection agreements are in place,
but they do not recommend the
Commission require a specific
timeline.701 Icetec specifically requests
that RTO/ISO rules be developed on the
procedures and timelines for
distribution-level studies if there is no
state and local regulatory tariff
governing these studies.702
290. RTOs/ISOs support the NOPR
proposal but raise questions about their
role in aggregation approvals and
dispute resolution, communication
system requirements, and the extent of
the coordination proposed by the
Commission.703 PJM argues that the
registration process and timing needed
to participate in an RTO/ISO market
should be straight forward, predictable,
and transparent, and that any basis for
the RTO/ISO to prohibit wholesale
market participation should be set forth
in its tariff.704 CAISO, IRC, and PJM
would also like the Commission to
provide guidance on how and where
disputes between the RTO/ISO and
distribution utilities regarding
coordination of distributed energy
resources are to be resolved.705 CAISO
requests additional processes beyond
699 See, e.g., NRECA Comments (2018 RM18–9) at
29; Pacific Gas & Electric Comments (2018 RM18–
9) at 13.
700 Stem Comments (2018 RM18–9) at 15.
701 See, e.g., Icetec Comments (2018 RM18–9) at
17–18; Stem Comments (2018 RM18–9) at 15;
Sunrun Comments (2018 RM18–9) at 7.
702 Icetec Comments (2018 RM18–9) at 9.
703 CAISO Comments (RM16–23) at 39, 41–43, 46;
IRC Comments (RM16–23) at 9; ISO–NE Comments
(RM16–23) at 54–55; PJM Comments (RM16–23) at
8, 26; SPP Comments (RM16–23) at 24.
704 PJM Comments (2018 RM18–9) at 19.
705 CAISO Comments (RM16–23) at 41; IRC
Comments (RM16–23) at 9; PJM Comments (RM16–
23) at 8.
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sharing information, arguing that
processes are needed to resolve or
mitigate any problems the distribution
utility may find during its review,
including developing a solution with
the distributed energy resource
provider.706
291. Finally, while most comments
focus on initial registration, TAPS states
that a distribution utility should also be
able to reopen the approval of an
individual distributed energy resource’s
enrollment in a distributed energy
resource aggregation if the distribution
system is reconfigured.707
c. Commission Determination
292. To implement § 35.28(g)(12)(ii)(g)
of the Commission’s regulations, we
adopt the NOPR proposal to require
each RTO/ISO to modify its tariff to
incorporate a comprehensive and nondiscriminatory process for timely review
by a distribution utility of the
individual distributed energy resources
that comprise a distributed energy
resource aggregation, which is triggered
by initial registration of the distributed
energy resource aggregation or
incremental changes to a distributed
energy resource aggregation already
participating in the markets. As
described below, each RTO/ISO must
coordinate with distribution utilities to
develop a distribution utility review
process that includes criteria by which
the distribution utilities would
determine whether (1) each proposed
distributed energy resource is capable of
participation in a distributed energy
resource aggregation; and (2) the
participation of each proposed
distributed energy resource in a
distributed energy resource aggregation
will not pose significant risks to the
reliable and safe operation of the
distribution system. To support this
review process, RTOs/ISOs must share
with distribution utilities any necessary
information and data collected under
Section IV.F of this final rule about the
individual distributed energy resources
participating in a distributed energy
resource aggregation. In addition, the
results of a distribution utility’s review
must be incorporated into the
distributed energy resource aggregation
registration process.
293. To balance the need for
distribution utility review with the need
to avoid creating potential barriers to
distributed energy resource aggregation,
as noted by commenters, we require
each RTO/ISO to demonstrate on
compliance with this final rule, as
706 CAISO
707 TAPS
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Comments (2018 RM18–9) at 28.
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67143
discussed further below,708 that its
proposed distribution utility review
process is transparent, provides specific
review criteria that the distribution
utilities should use, and provides
adequate and reasonable time for
distribution utility review.709 A
transparent review process with specific
review criteria will allow distribution
utilities to review and identify concerns
regarding the ability of distributed
energy resources to participate in a
distributed energy resource aggregation
without posing significant reliability
risk to the distribution system. We also
find that allowing an RTO/ISO to design
this new process allows regional
flexibility in developing review
procedures appropriate for each
particular RTO/ISO.
294. As explained above,710 we
decline to exercise jurisdiction over the
interconnection of an individual
distributed energy resource seeking to
participate in RTO/ISO markets
exclusively as part of an aggregation. We
expect that the state and local
interconnection processes for
distributed energy resources will
provide the appropriate platform to
address and study potential distribution
system impacts and provide the
necessary information to inform
distribution utility review during
distributed energy resource aggregation
registration. However, to the extent that
some existing state and local
interconnection processes do not
already capture such information, this
final rule in no way prevents state and
local regulators from amending their
interconnection processes to address
potential distribution system impacts
that the participation of distributed
energy resources through distributed
energy resource aggregations may cause.
In addition, coordination between
RTOs/ISOs, distributed energy resource
aggregators, relevant electric retail
regulatory authorities, and distribution
utilities during the registration and
distribution utility review processes
should provide RTOs/ISOs with the
information they need to study the
impact of distributed energy resource
aggregations on the transmission
system.
295. We agree with commenters 711
that a lengthy review time or the lack of
a deadline could erect a barrier to
distributed energy resource
708 See
infra PP 295–297.
example, the approach used in the CAISO
Distributed Energy Resource Provider program.
710 See supra Section IV.A.3 (Interconnection).
711 See, e.g., Advanced Energy Management
Comments (2018 RM18–9) at 19; Stem Comments
(2018 RM18–9) at 15; Tesla Comments (2018
RM18–9) at 9.
709 For
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participation in the RTO/ISO markets
and may unduly delay participation. In
response to these concerns, we clarify
that any distribution utility review must
be completed within a limited, but
reasonable amount of time.712 We
expect a reasonable amount of time may
vary among RTOs/ISOs but should not
exceed 60 days. An RTO/ISO, on
compliance, should propose a timeline
that reflects its regional needs. In
compliance with this final rule, we
require each RTO/ISO to revise its tariff
to specify, as part of its proposed
distribution utility review process, the
time that a distribution utility has to
identify any concerns regarding a
distributed energy resource seeking to
participate in the RTO/ISO markets
through an aggregation.
296. In addition, we agree with
commenters that argue for specific
standards and criteria to guide and
govern the distribution utility review
process. However, we are not
standardizing the criteria that the RTOs/
ISOs must adopt. We believe there are
sufficient differences among the regions,
such as their rules limiting participation
in different programs, to warrant
flexibility in determining specific
standardized criteria. On compliance
with this final rule, we require that each
RTO/ISO revise its tariff to include, as
part of its proposed distribution utility
review processes, the distribution utility
review criteria by which distribution
utilities can determine that a distributed
energy resource (1) is capable of
participating in an aggregation, e.g., the
distributed energy resource is not
already participating in a retail
distributed energy resource program in
which the relevant electric retail
regulatory authority conditioned the
resource’s participation on not
participating in RTO/ISO markets; and
(2) does not pose significant risks to the
reliable and safe operation of the
distribution system.
297. We agree with multiple
commenters, such as EEI and Advanced
Energy Economy, that the RTOs/ISOs
must include potential impacts on
distribution system reliability as a
criterion in the distribution utility
review process. For example, if a
distribution utility determines during
the distribution utility review process
that a distributed energy resource
operated as part of an aggregation may
increase voltage above acceptable limits
or create potential equipment overloads,
the distribution utility should have the
opportunity to alert the RTO/ISO and
712 For
instance, CAISO utilizes a 30-day review
period in its Distributed Energy Resource Provider
program.
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recommend removal of that distributed
energy resource from the distributed
energy resource aggregation. In addition,
the distribution utility should have the
opportunity to request that the RTO/ISO
place operational limitations on an
aggregation or removal of a distributed
energy resource from an aggregation
based on specific significant reliability
or safety concerns that it clearly
demonstrates to the RTO/ISO and
distributed energy resource aggregator
on a case-by-case basis. For example,
the RTOs/ISOs may consider requiring a
signed affidavit or other evidence from
the distribution utility that a distributed
energy resource’s participation in RTO/
ISO markets would pose a significant
risk to the safe and reliable operation of
the distribution system, and processes
to contest the distribution utility’s
recommendation for removal or for
operational limitations to be placed on
the aggregation.
298. In response to comments from
EEI, TAPS, and multiple distribution
utilities that argue for a larger and
decision-making role for the distribution
utilities during the review of distributed
energy resource registrations, we
decline to provide such a role. We find
that requiring or permitting distribution
utilities to authorize the participation of
distributed energy resources in RTO/
ISO markets directly or as part of an
aggregation could create a barrier to
distributed energy resource
aggregation.713 The distribution utility
review processes and interconnection
protocols discussed above should
address and resolve the key distribution
reliability concerns raised by these
commenters. We find that the ability of
distribution utilities to review and
comment on distributed energy resource
participation in aggregations, as well as
the Commission’s finding that
individual distributed energy resources
that will participate in aggregations will
interconnect under state and local
interconnection protocols, represents a
balanced approach to removing barriers
to the participation of distributed energy
resource aggregations in RTO/ISO
markets, while protecting reliability and
the fundamental role of distribution
utilities in operating their distribution
systems.
299. In response to concerns raised by
IRC and PJM regarding disputes about
distribution utility review,714 we find
that any disputes over the application of
coordination and distribution utility
review processes between the RTO/ISO,
713 See supra Section IV.A.2 (Opt-Out) for further
discussion.
714 See, e.g., IRC Comments (RM16–23) at 9; PJM
Comments (2018 RM18–9) at 8.
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the distribution utilities, and the
distributed energy resource aggregators
must be subject to a process for
resolving disputes in the RTO/ISO tariff.
Therefore, we require each RTO/ISO to
revise its tariff to incorporate dispute
resolution provisions as part of its
proposed distribution utility review
process. In its compliance filing, each
RTO/ISO should describe how existing
dispute resolution procedures are
sufficient or, alternatively, propose
amendments to its procedures or new
dispute resolution procedures specific
to this subject. Ensuring that disputes
regarding the distribution utility review
process are subject to dispute resolution
provisions in RTO/ISO tariffs provides a
formal mechanism for the interested
party to attempt to resolve the issue
with the RTO/ISO. Any parties in
conflict over the distribution utility
review processes may also bring such
disputes to the Commission’s Dispute
Resolution Service, or file complaints
pursuant to FPA section 206 at any
time.715
3. Ongoing Operational Coordination
a. NOPR Proposal
300. In the NOPR, the Commission
proposed to require that each RTO/ISO
revise its tariff to establish a process for
ongoing coordination, including
operational coordination, among itself,
the distributed energy resource
aggregator, and the distribution utility to
maximize the availability of the
distributed energy resource aggregation
consistent with the safe and reliable
operation of the distribution system.716
The Commission explained that the
purpose of this ongoing coordination
would be to ensure that the distributed
energy resource aggregator disaggregates
dispatch signals from the RTO/ISO and
dispatches individual resources in a
distributed energy resource aggregation
consistent with the limitations of the
distribution system. To account for the
possibility that distribution facilities
may be out of service and impair the
operation of certain individual
resources in a distributed energy
resource aggregation, the Commission
also proposed to require each RTO/ISO
to revise its tariff to require the
distributed energy resource aggregator to
report to the RTO/ISO any changes to its
offered quantity and related distribution
715 For example, a dispute over how the RTO/ISO
managed and implemented the distribution review
process during a distributed energy resource
aggregation registration could be brought to the
Commission.
716 NOPR, 157 FERC ¶ 61,121 at P 155.
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factors that result from distribution line
faults or outages.
301. In addition, the Commission
sought comment on any related
reliability, safety, and operational
concerns and how they may be
effectively addressed.
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b. Comments
302. Several commenters express their
support for ongoing coordination and
emphasize the importance of real-time
coordination to ensure safe and reliable
operation of the transmission and
distribution systems.717 Many
distribution utilities in support of the
NOPR proposal suggest specific roles or
priorities for distribution utilities as part
of ongoing coordination. Pacific Gas &
Electric states that services in support of
distribution system safety and reliability
must be prioritized, as determined by
the distribution company, over
wholesale market participation when
distributed energy resources are
providing multiple services.718 NYISO
Indicated Transmission Owners and
Xcel Energy Services request that the
Commission permit distribution utilities
to limit the energy injections and
ancillary services from specific
distributed energy resources with
advanced notice.719 Other commenters
argue that distribution utilities must
have the ability to limit distributed
energy resource generation in order to
ensure safety and reliability because
RTOs/ISOs do not have sufficient
information to maintain the safety and
reliability of the distribution grid.720
303. Several commenters provide
input on the processes needed to alert
distributed energy resource aggregators
about problems on distribution systems.
Dominion agrees with the NOPR
requirement that a distributed energy
resource aggregator should be
responsible for reporting to the RTO/
ISO when its offered quantity changes
due to distribution facilities being out of
service.721 SPP notes it will require
significant effort to coordinate with
entities with which the RTO/ISO has
not previously had two-way
communications.722 CAISO
717 See, e.g., APPA/NRECA Comments (RM16–23)
at 45; Duke Energy Comments (RM16–23) at 7; EEI
Comments (RM16–23) at 37; Exelon Comments
(RM16–23) at 2, 11; Guannan He Comments (RM16–
23) at 2; NYISO Comments (RM16–23) at 19.
718 Pacific Gas & Electric Comments (RM16–23) at
21.
719 NYISO Indicated Transmission Owners
Comments (RM16–23) at 15–16; Xcel Energy
Services Comments (RM16–23) at 28.
720 Organization of MISO States Comments (2018
RM18–9) at 5; SoCal Edison Comments (RM16–23)
at 7–8.
721 Dominion Comments (RM16–23) at 13–14.
722 SPP Comments (RM16–23) at 24.
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recommends that the approach being
developed for its Distributed Energy
Resource Provider program be used as a
means to allow distribution utilities to
identify problems on their distribution
systems.723 CAISO believes that a
process is needed for distribution
utilities to notify a distributed energy
resource aggregator of changes to
distribution system conditions that will
affect the aggregated resource’s ability to
perform to its maximum capability,
such as a red/green traffic signal.724 The
Organization of MISO States argues that
distribution system operators must have
the ability to communicate information
on topology changes in real-time which
may impact the ability of aggregations to
participate in the wholesale market.725
Several commenters indicate that the
current data acquisition technologies are
largely manual, but will be adequate
initially for ongoing coordination.726
304. Multiple commenters state that,
at higher distributed energy resource
penetrations, enhanced equipment and
information to increase coordination
and communication between the
distribution utility, distributed energy
resource aggregator, and the RTO/ISO
will be necessary and are still in the
process of being developed.727 TAPS
and EEI argue that distribution utilities
will need timely information on
planned dispatch, and that there must
be a realistic timeline for preventing a
dispatch and notifying the distributed
energy resource aggregator or the RTO/
ISO if a dispatch would adversely affect
retail service.728
305. Some commenters address the
role of the distribution utility in ongoing
operational coordination. Advanced
Energy Economy and EEI state that the
distribution utility should be made
aware of all information collected by the
aggregator.729 More fundamentally, EEI
comments that the distribution utility is
in the best position to serve as the
coordinator of distribution operations to
ensure the complete provision of
723 CAISO
Comments (RM16–23) at 42–43.
at 42–44.
725 Organization of MISO States Comments (2018
RM18–9) at 5.
726 See, e.g., NYISO Indicated Transmission
Owners Comments (2018 RM18–9) at 22; PJM
Comments (2018 RM18–9) at 27.
727 See, e.g., Advanced Energy Management
Comments (2018 RM18–9) at 21–22; NYISO
Indicated Transmission Owners Comments (2018
RM18–9) at 23; Pacific Gas & Electric Comments
(2018 RM18–9) at 22–23; PJM Comments (2018
RM18–9) at 27; TAPS Comments (2018 RM18–9) at
14.
728 EEI Comments (2018 RM18–9) at 12; TAPS
Comments (2018 RM18–9) at 14.
729 Advanced Energy Economy Comments (2018
RM18–9) at 11; EEI Comments (2018 RM18–9) at 17.
724 Id.
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67145
information is being provided to all
parties.730
306. Several commenters offer
suggestions or request guidance on
aspects of ongoing coordination.
Avangrid advocates that all
communication during ongoing
coordination be channeled through
distributed energy resource
aggregators.731 Furthermore, Avangrid
states that distributed energy resource
aggregators should assume the
responsibility for the performance of
their aggregated resource and be
responsible for any costs incurred by
distribution utilities to mitigate and
resolve power quality issues caused by
distributed energy resources. TeMix
states that dispatch of end customer
load, distributed generation, and storage
must be coordinated with the operators
of the distribution grid circuits, which
can be complex.732
307. Several commenters claim that
the RTO/ISO tariffs should be less
specific about what is required for
ongoing coordination processes and
rules. ISO–NE states that the
Commission should not be overly
prescriptive regarding the level of detail
required in each RTO/ISO tariff
regarding coordination among these
entities on operational coordination,
and requests that the Commission allow
each RTO/ISO to develop these
requirements in conjunction with
stakeholders.733 Pacific Gas & Electric
states that it may be appropriate to
include high-level requirements for
information sharing and operational
coordination, but more technical issues
associated with distributed energy
resource aggregation implementation are
fluid and evolving, and thus tariff
language may not be flexible or
adaptable enough to account for needed
useful, timely changes.734 Advanced
Energy Economy and Union of
Concerned Scientists emphasize that
ongoing coordination already occurs
with other resources, such as remote
and dispersed hydroelectric generation,
and argue that existing protocols are
sufficient.735
308. Most commenters agree that
distribution utilities should have the
right to override RTO/ISO dispatch
instructions for distributed energy
resources located on their distribution
systems to resolve or avoid distribution
730 EEI
Comments (2018 RM18–9) at 17.
Comments (RM16–23) at 17.
732 TeMix Comments (RM16–23) at 4.
733 ISO–NE Comments (RM16–23) at 55.
734 Pacific Gas & Electric Comments (RM16–23) at
22.
735 Advanced Energy Economy Comments
(RM16–23) at 38; Union of Concerned Scientists
Comments (RM16–23) at 9.
731 Avangrid
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reliability issues.736 Lorenzo Kristov
indicates that the manner in which a
distribution utility can override a
dispatch instruction should be clarified
so that distributed energy resource
providers will be better able to estimate
their risk of being curtailed due to
distribution system conditions.737
NYISO Indicated Transmission Owners
state that the distribution utility should
communicate potential issues with
dispatch schedules to the distributed
energy resource aggregators to provide
them with an opportunity to re-adjust
the distributed energy resource
aggregation dispatch schedule.738
Conversely, Stem argues that, because a
distribution utility does not have
visibility into the exact distribution
level impacts of a wholesale market
dispatch, the distribution utility should
not be able to override a dispatch.739
309. Commenters disagree about how
performance penalties should be
applied in the event that a distribution
utility overrides an RTO/ISO dispatch.
Several commenters generally argue that
distributed energy resource aggregators
should be subject to performance
penalties, like all other resources.740
PG&E and PJM assert that nondeliverability penalties are subject to
bilateral and contractual agreement
between the distributed energy resource
aggregator and the RTO/ISO.741
Developers argue that the aggregator
should not be assessed penalties due to
an outage caused by the distribution
system operator’s controls.742
Distribution utilities argue that, in the
event of a curtailment, they must have
protection from liability.743
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c. Commission Determination
310. We agree with commenters that
emphasize the importance of real-time
coordination to ensure safe and reliable
operation of the transmission and
736 See, e.g., California Commission Comments
(2018 RM18–9) at 18; Duquesne Comments (2018
RM18–9) at 7; NYISO Indicated Transmission
Owners Comments (2018 RM18–9) at 23; Pacific
Gas & Electric Comments (2018 RM18–9) at 24;
SunRun Comments (2018 RM18–9) at 5–6; TAPS
Comments (2018 RM18–9) at 29.
737 Lorenzo Kristov Comments (2018 RM18–9) at
17.
738 NYISO Indicated Transmission Owners
Comments (2018 RM18–9) at 23.
739 Stem Comments (2018 RM18–9) at 17.
740 Monitoring Analytics Comments (2018 RM18–
9) at 13; NYISO Indicated Transmission Owners
Comments (2018 RM18–9) at 23; PJM Comments
(2018 RM18–9) at 27–28.
741 Pacific Gas & Electric Comments (2018 RM18–
9) at 24; PJM Comments (2018 RM18–9) at 27–28.
742 Microgrid Resources Coalition Comments
(2018 RM18–9) at 15; Stem Comments (2018 RM18–
9) at 17; SunRun Comments (2018 RM18–9) at 6.
743 Eversource Comments (2018 RM18–9) at 11;
SoCal Edison Comments (2018 RM18–9) at 10;
TAPS Comments (2018 RM18–9) at 29.
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distribution systems. Consequently, to
implement § 35.28(g)(12)(ii)(g) of the
Commission’s regulations, we adopt the
NOPR proposal to require each RTO/
ISO to revise its tariff to (1) establish a
process for ongoing coordination,
including operational coordination, that
addresses data flows and
communication among itself, the
distributed energy resource aggregator,
and the distribution utility; and (2)
require the distributed energy resource
aggregator to report to the RTO/ISO any
changes to its offered quantity and
related distribution factors that result
from distribution line faults or outages.
Further, we require each RTO/ISO to
revise its tariff to include coordination
protocols and processes for the
operating day that allow distribution
utilities to override RTO/ISO dispatch
of a distributed energy resource
aggregation in circumstances where
such override is needed to maintain the
reliable and safe operation of the
distribution system. These processes
that allow distribution utilities to
override RTO/ISO dispatch must be
contained in the tariff and must be nondiscriminatory and transparent but still
address distribution utility reliability
and safety concerns. We find these
operational coordination requirements
will maximize the availability of the
distributed energy resource aggregation
consistent with the reliable and safe
operation of the distribution system.
311. Commenters disagree over the
level of specificity needed in RTO/ISO
tariffs and describe different approaches
to ongoing coordination. To account for
different regional approaches and to
provide flexibility, we are not
prescribing specific protocols or
processes for the RTOs/ISOs to adopt as
part of the operational coordination
requirements, but rather we will allow
each RTO/ISO to develop an approach
to ongoing operational coordination in
compliance with this final rule.
312. We also require each RTO/ISO to
revise its tariff to apply any existing
resource non-performance penalties to a
distributed energy resource aggregation
when the aggregation does not perform
because a distribution utility overrides
the RTO’s/ISO’s dispatch. We find that
this requirement will ensure that
distributed energy resource aggregations
are subject to non-performance penalties
similarly to other resources
participating in RTO/ISO markets. We
note that this requirement will incent
distributed energy resource aggregators
to register individual distributed energy
resources on less-constrained portions
of distribution networks in order to
minimize the likelihood of incurring
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non-performance penalties from the
RTO/ISO.
313. We acknowledge that the timing
and location of distribution utility
overrides of dispatch instructions are
outside of the control of distributed
energy resource aggregators, and that
aggregators may not have advance
notice of overrides during an operating
day. In response to commenters who
state that distribution utilities must
have protection from liability in the
event of a curtailment or an outage
caused by the distribution system
operator’s actions to preserve the safety
and reliability of the distribution
system,744 we decline to impose any
specific liability provisions. Given the
arguments advanced by commenters, we
are not persuaded that all distribution
providers face similar liability concerns
and that these concerns should be
addressed through standardized liability
provisions in RTO/ISO tariffs.
Accordingly, we decline to establish a
generic requirement for RTOs/ISOs with
respect to liability provisions.
4. Role of Relevant Electric Retail
Regulatory Authorities
a. NOPR Proposal
314. The NOPR did not directly
address the role of relevant electric
retail regulatory authorities in
coordination with the RTO/ISO, the
distributed energy resource aggregator,
and the distribution utility when a
distributed energy resource aggregation
seeks to participate in an RTO/ISO
market. However, after the April 2018
technical conference, the Commission
sought comment on the role of relevant
electric retail regulatory authorities in
coordination.
b. Comments
315. Most commenters assert that
relevant electric retail regulatory
authorities have a central and key role
in coordination and that the
responsibilities of such authorities
should be focused on setting rules and
supervising distribution utility review
of distributed energy resource
participation in aggregations.
316. Some relevant electric retail
regulatory authorities argue that they
must have a central role in coordination
to ensure that their jurisdiction is
preserved as it relates to market
activities on the distribution system by
distributed energy resources
participating in RTO/ISO markets.745
744 See, e.g., Eversource Comments (2018 RM18–
9) at 11; SoCal Edison Comments (2018 RM18–9)
at 10; TAPS Comments (2018 RM18–9) at 29.
745 See, e.g., Vice Chairman Place Comments
(2018 RM18–9) at 8; Organization of MISO States
Comments (2018 RM18–9) at 9–10.
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Vice Chairman Place requests that the
Commission require the role of relevant
electric retail regulatory authorities be
reflected in RTO/ISO rules, and that, if
the Commission sets roles and
responsibilities in RTO/ISO rules,
relevant electric retail regulatory
authorities should participate in setting
these rules.746 In addition, the
Organization of MISO States contends
that relevant electric retail regulatory
authorities will need to be aware of
coordination efforts and be able to
participate in, and in some cases lead,
these efforts based on jurisdictional
scope, prevalence of distributed energy
resource penetration, and state and local
policy.747 Vice Chairman Place requests
that the relevant electric regulatory
authority’s ability to restrict distributed
energy resource participation in the
wholesale market be maintained.748
317. Distribution utilities generally
agree with the comments from relevant
electric retail regulatory authorities and
support a central and key role for
relevant electric retail regulatory
authorities in coordinating the
participation of aggregated distributed
energy resource in RTO/ISO markets.749
Specific roles and responsibilities for
relevant electric retail regulatory
authorities identified by distribution
utility commenters include: Supervision
of distribution utility review of
distributed energy resource
participation in aggregations; evaluation
of distributed energy resources
interconnection to distribution facilities;
overseeing issues regarding distribution
system operation and reliability; data
sharing; and setting of metering
requirements and related mechanisms to
distinguish wholesale and retail
transactions.750 Moreover, APPA
requests that the Commission be explicit
that nothing in the final rule preempts
or otherwise limits the ability of
relevant electric retail regulatory
authorities to adopt rules or tariffs, and
to set rates to recover and allocate the
costs associated with facilitating
wholesale market participation by
746 Vice Chairman Place Comments (2018 RM18–
9) at 8.
747 Organization of MISO States Comments (2018
RM18–9) at 9.
748 Vice Chairman Place Comments (2018 RM18–
9) at 5.
749 See, e.g., APPA Comments (2018 RM18–9) at
2; New York Indicated Transmission Owners
Comments (2018 RM18–9) at 17; Pacific Gas &
Electric Comments (2018 RM18–9) at 16.
750 See, e.g., APPA Comments (2018 RM18–9) at
6; California Commission Comments (2018 RM18–
9) at 1–3, 12; Organization of MISO States
Comments (2018 RM18–9) at 9; Pacific Gas &
Electric Comments (2018 RM18–9) at 16.
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aggregated distributed energy
resources.751
318. CAISO also comments in support
of the role of relevant electric retail
regulatory authorities in facilitating
coordination. Based on its experience in
California, CAISO identifies several
possible coordination roles and
responsibilities for relevant electric
retail regulatory authorities, including:
Establishing metering requirements for
distributed energy resources;
establishing rules for multi-use
applications; providing oversight of
distribution utility review of distributed
energy resource participation in an
aggregation; and resolving distributed
energy resource aggregation
controversies.752 As an example of the
importance of relevant electric retail
regulatory authorities in distributed
energy resource coordination, CAISO
references its Commission-approved
distributed energy resource process that
requires that distributed energy resource
providers comply with applicable utility
distribution company tariffs, and
operating procedures incorporated into
those tariffs, as well as applicable
requirements of the local regulatory
authority.753
319. Conversely, other commenters
argue for a somewhat more limited role
for relevant electric retail regulatory
authorities. Advanced Energy
Management argues that the role of
relevant electric retail regulatory
authorities should be limited to defining
non-discriminatory interconnection
procedures that ensure the distribution
grid can accommodate distributed
energy resources, and ensuring that the
distributed energy resource can safely
deliver energy to the grid.754 Icetec
asserts that the coordination of
distributed energy resource registrations
should not become a vehicle for
distribution utilities or relevant electric
retail regulatory authorities to exercise
improper authority over eligibility to
participate in wholesale markets.755 In
order to forestall this possible
intervention, Icetec recommends
making distribution interconnection and
registration for wholesale markets
entirely separate processes.756
320. Some commenters urge the
Commission to respect state and local
concerns regarding distributed energy
resource aggregations. APPA states that
the Commission should afford
Comments (2018 RM18–9) at 4.
Comments (2018 RM18–9) at 13–14.
753 Id. at 14.
754 Advanced Energy Management Comments
(2018 RM18–9) at 18.
755 Icetec Comments (2018 RM18–9) at 16.
756 Id. at 18–19.
distribution utilities and their relevant
electric retail regulatory authorities a
key role in coordinating the
participation of aggregated distributed
energy resources in RTO/ISO
markets.757 The Indiana Commission
states that distributed energy resource
wholesale participation must work in
tandem with, and not in contravention
of, Indiana’s utility regulatory
framework.758 PJM Utilities Coalition
urges the Commission to defer to
relevant electric retail regulatory
authorities in fashioning programs that
integrate distributed energy resources
into the distribution system, asserting
that states are uniquely positioned to
balance the benefits of distributed
energy resource participation in
wholesale markets with costs and other
adverse impacts on distribution systems
and retail load.759
321. The California Commission
recommends that, given the complexity
of ensuring just compensation for
resources, it is most appropriate for
local regulatory authorities to establish
distinctly defined services and rules to
govern coordination across wholesale
and retail markets.760
c. Commission Determination
322. In consideration of the comments
and to implement § 35.28(g)(12)(ii)(g) of
the Commission’s regulations, we
require each RTO/ISO to specify in its
tariff, as part of the market rules on
coordination between the RTO/ISO, the
distributed energy resource aggregator,
and the distribution utility, how each
RTO/ISO will accommodate and
incorporate voluntary relevant electric
retail regulatory authority involvement
in coordinating the participation of
aggregated distributed energy resources
in RTO/ISO markets. We agree with
commenters that relevant electric retail
regulatory authorities have a role in
coordination, i.e., in setting rules at the
distribution level and in RTO/ISO
stakeholder discussions. Many relevant
electric retail regulatory authorities
indicate strong interest in participating
in such coordination.
323. We note that the roles delineated
in CAISO’s Distributed Energy Resource
Provider tariff provisions may provide
an example of how relevant electric
retail regulatory authorities could be
involved in coordinating the
participation of distributed energy
resource aggregations in RTO/ISO
751 APPA
757 APPA
752 CAISO
758 Indiana
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Comments (2018 RM18–9) at 2.
Commission Comments (2018 RM18–
9) at 2.
759 PJM Utilities Coalition Comments (2018
RM18–9) at 10.
760 California Commission Comments (2018
RM18–9) at 10–11.
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markets. CAISO’s Distributed Energy
Resource Provider model requires that
distributed energy resource providers
comply with applicable utility
distribution company tariffs and
operating procedures incorporated into
those tariffs, as well as applicable
requirements of the local regulatory
authority.761
324. We further note that possible
roles and responsibilities of relevant
electric retail regulatory authorities in
coordinating the participation of
distributed energy resource aggregations
in RTO/ISO markets may include, but
are not limited to: Developing
interconnection agreements and rules;
developing local rules to ensure
distribution system safety and
reliability, data sharing, and/or metering
and telemetry requirements; overseeing
distribution utility review of distributed
energy resource participation in
aggregations; establishing rules for
multi-use applications; and resolving
disputes between distributed energy
resource aggregators and distribution
utilities over issues such as access to
individual distributed energy resource
data. We require that any such role for
relevant electric retail regulatory
authorities in coordinating the
participation of distributed energy
resource aggregations in RTO/ISO
markets be included in the RTO/ISO
tariffs and developed in consultation
with the relevant electric retail
regulatory authorities. Further, as noted
in Section IV.G, to the extent that
metering and telemetry data comes from
or flows through distribution utilities,
we require that RTOs/ISOs coordinate
with distribution utilities and the
relevant electric retail regulatory
authorities to establish protocols for
sharing metering and telemetry data that
minimize costs and other burdens and
address concerns raised with respect to
customer privacy and cybersecurity.
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5. Coordination Frameworks
a. NOPR Proposal
325. As part of its proposal to require
coordination in the NOPR, the
Commission sought comment on the
level of detail necessary in the RTO/ISO
tariffs to establish a framework for
ongoing coordination between the RTO/
ISO, a distributed energy resource
aggregator, and the relevant distribution
utility or utilities.762
b. Comments
326. Several commenters propose that
the Commission take a more proactive
step and require RTOs/ISOs to establish
761 CAISO
762 NOPR,
Comments (2018 RM18–9) at 14.
157 FERC ¶ 61,121 at P 155.
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a broader coordination structure, or
‘‘coordination framework’’ that
addresses all aspects of coordination
(planning, distributed energy resource
registration, and operational
coordination) between distributed
energy resources, distributed energy
resource aggregators, RTOs/ISOs, and
distribution utilities. At the technical
conference, panelist Jeffery Taft, Chief
Architect at Pacific Northwest National
Laboratory, described a coordination
framework as a way to exchange
information and control signals between
the three levels of the U.S. electric
system, namely the bulk power level,
the distribution level, and the
distributed energy resource/customer
level.763 R Street proposes two purposes
for coordination frameworks, namely, to
encourage technological innovation, and
to coordinate policies between retail
and wholesale markets.764 Stem
proposes three coordination frameworks
(1) an operational framework; (2) a
planning framework; and (3) a markets
framework.765 PJM suggests a
framework that focuses on two
components (1) reliability-related items;
and (2) administrative items.766 CAISO
proposes an all-encompassing process
that addresses each element of
distributed energy resource
aggregation.767
327. Several commenters express the
belief that the development of a
coordination framework will ensure that
participation of distributed energy
resource aggregations in RTO/ISO
markets does not compromise the
reliability or safety of the transmission
and distribution systems.768 For
example, based on its experience with
implementing CAISO’s Distributed
Energy Resource Provider framework,
Pacific Gas & Electric states that it is
important that RTOs/ISOs coordinate
with distribution utilities.769
328. R Street Institute argues for a
coordination framework that creates
incentives for innovation and
deployment of advanced active network
management practices (e.g., real-time
operating procedures) and technologies
(e.g., software-enabled communications
among control centers).770 E4TheFuture
notes that data creation,
communications, and analytics are
763 Technical
Conference Transcript at 388.
Street Comments (RM16–23) at 10–11.
765 Stem Comments (2018 RM18–9) at 7–8.
766 PJM Comments (2018 RM18–9) at 19–21, 24.
767 CAISO Comments (RM16–23) at 39–51.
768 See, e.g., id. at 39; Institute for Policy Integrity
Comments (RM16–23) at 9; NYISO Comments
(RM16–23) at 19.
769 Pacific Gas & Electric Comments (RM16–23) at
21.
770 R Street Institute Comments (RM16–23) at 10.
764 R
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fundamental to successfully including
distributed energy resources in the
organized wholesale electric markets,
and that the technologies and services
surrounding these fundamentals and the
standards that will support valuation
and aggregation are evolving rapidly.771
E4TheFuture asks the Commission to
support the RTOs/ISOs in creating
solutions to nimbly address the rapid
development of these technologies over
time.
329. Several commenters recommend
that the Commission not require a
specific coordination framework at this
time. Public Interest Groups argue that
the Commission should not specify a
particular structure for coordination
frameworks but instead allow the
‘‘laboratories of innovation’’ of state and
distribution utilities to develop new
practices and procedures.772 Lorenzo
Kristov emphasizes that these
coordination efforts are at an early stage,
noting that there are no best practices
and no best coordination framework to
adopt.773 The California Commission
asks that the Commission not establish
specific requirements at this time, but
instead to track the development of
frameworks and architectures around
the country and document best
practices.774
c. Commission Determination
330. We believe that, among other
benefits, a broader, holistic approach to
coordination—referred to herein as a
coordination framework—could help
ensure that different elements of
distributed energy resource aggregations
do not work at cross-purposes. Because
the topic of coordination frameworks is
still developing and was not fully
considered in this record, we encourage,
but do not require, each RTO/ISO to
develop a coordination framework that
addresses the needs of its region.
331. We note that it may be beneficial
for the RTOs/ISOs and their
stakeholders to take into consideration
in developing coordination frameworks
the interoperability of new information
technology and communications
systems. Such systems will likely need
to exchange mutually recognizable data,
and will become more important as
distributed energy resource penetration
reaches higher levels. Early
consideration of these issues could help
prevent redundancy and unnecessary
costs later.
771 E4TheFuture
Comments (RM16–23) at 2.
Interest Organizations Comments (2018
RM18–9) at 11–12.
773 Lorenzo Kristov Comments (2018 RM18–9) at
16–17.
774 California Commission Comments (2018
RM18–9) at 12.
772 Public
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I. Modifications to List of Resources in
Aggregation
a. NOPR Proposal
332. In the NOPR, the Commission
proposed that each RTO/ISO revise its
tariff to allow a distributed energy
resource aggregator to modify the list of
resources in its distributed energy
resource aggregation without reregistering all of the resources if the
modification will not result in any
safety or reliability concerns.775 The
Commission emphasized, however, that,
pursuant to other proposed
requirements,776 the relevant
distribution utility or utilities must have
the opportunity to review the list of
individual resources that are located on
their distribution system in a distributed
energy resource aggregation before those
resources may participate in RTO/ISO
markets through the aggregation, so that
they can assess whether the resources
would be able to respond to RTO/ISO
dispatch instructions without posing
any significant risk to the distribution
system.777
b. Comments
333. Many commenters support the
Commission’s proposal to allow a
distributed energy resource aggregator to
modify its list of resources without reregistering all of the resources in the
distributed energy resource
aggregation.778 In support, University of
Delaware’s EV R&D Group states that
within a substantial aggregation, small
residential electric vehicle
interconnection sites might enter and
exit the aggregation even on a daily
basis, as new participants and existing
participants change vehicles, homes, or
preferences.779 However, NYISO asks
the Commission to require the
distributed energy resource aggregator to
advise the RTOs/ISOs of any changes to
the list of resources and changes in the
aggregation’s performance output or
operating characteristics.780
334. Many commenters also generally
support the proposal to allow
distribution utilities to review the list of
resources when it is revised.781 Mensah
P 149.
supra Section IV.H.2 (Role of Distribution
Utilities).
777 NOPR, 157 FERC ¶ 61,121 at P 154.
778 See, e.g., Advanced Microgrid Solutions
Comments (RM16–23) at 8; Avangrid Comments
(RM16–23) at 13; CAISO Comments (RM16–23) at
35–37; City of New York Comments (RM16–23) at
9–10; EEI Comments (RM16–23) at 32–33.
779 University of Delaware’s EV R&D Group
Comments (2018 RM18–9) at 2.
780 NYISO Comments (RM16–23) at 18.
781 See, e.g., APPA/NRECA Comments (RM16–23)
at 45; EEI Comments (RM16–23) at 32–33; Mensah
Comments (RM16–23) at 4; MISO Transmission
states that any review should be
streamlined as much as possible.782
Stem stresses the importance of
transparent standards of review and
argues that opaque review
methodologies create an unreasonable
barrier to participation of distributed
energy resources.783 Additionally, many
commenters emphasize the need to
determine whether any changes in the
list of resources affect safety and
reliability at both the transmission and
distribution levels.784 Dominion adds
that the review process to determine the
impacts of a change in the list of
resources on safety and reliability must
be established in a final rule.785
c. Commission Determination
335. We adopt the NOPR proposal, as
modified below, and add
§ 35.28(g)(12)(ii)(e) to the Commission’s
regulations to require each RTO/ISO to
establish market rules that address
modification to the list of resources in
a distributed energy resource
aggregation.
336. We require each RTO/ISO to
revise its tariff to specify that
distributed energy resource aggregators
must update their lists of distributed
energy resources in each aggregation
(i.e., reflect additions and subtractions
from the list) and any associated
information and data,786 but that, when
doing so, distributed energy resource
aggregators will not be required to reregister or re-qualify the entire
distributed energy resource aggregation.
We note that any modification triggers
the distribution utility review process
(discussed in Section IV.H.2 above).
This requirement is necessary to ensure
that the RTOs/ISOs have accurate and
current information about the
individual distributed energy resources
that make up a distributed energy
resource aggregation and to allow
distribution utilities the opportunity to
review those modifications.787 We find
that this requirement will ensure
minimal administrative burden, while
protecting safety and reliability at both
the transmission and distribution levels.
337. While any modification of a
distributed energy resource aggregation
775 Id.
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776 See
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Owners Comments (RM16–23) at 23; NYISO
Comments (RM16–23) at 18.
782 Mensah Comments (RM16–23) at 4.
783 Stem Comments (RM16–23) at 15.
784 Avangrid Comments (RM16–23) at 12–13;
CAISO Comments (RM16–23) at 34–35; Dominion
Comments (RM16–23) at 11; Mensah Comments
(RM16–23) at 4; Pacific Gas & Electric Comments
(RM16–23) at 20.
785 Dominion Comments (RM16–23) at 11.
786 See supra Section IV.F (Information and Data
Requirements).
787 See supra Section IV.H.2 (Role of Distribution
Utilities).
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67149
will trigger distribution utility review,
we clarify that it may be appropriate for
each RTO/ISO to abbreviate the
distribution utility’s review of
modifications to the distributed energy
resource aggregations. As the
Commission explained in the NOPR, the
requirements for modifying the list of
resources in a distributed energy
resource aggregation can present a
barrier to the participation of distributed
energy resource aggregations in RTO/
ISO markets.788 We find that the
incremental impacts on RTO/ISO
markets and operations that would
result from the addition or removal of
individual distributed energy resources
from a distributed energy resource
aggregation, after the initial registration,
are likely to be minimal and thus
individual distributed energy resources
should generally be able to enter and
exit distributed energy resource
aggregations participating in RTO/ISO
markets without impairing safety and
reliability. Because the impacts of
modifications may often be minimal, an
abbreviated review process should be
sufficient for the distribution utility to
identify the cases where an addition to
the list of resources might pose a safety
or reliability concern. As stated in
Section IV.A.3, modifications to the list
of resources in a distributed energy
resource aggregation, and the resulting
distribution utility and RTO/ISO review
of those changes, could occasionally
indicate changes to the electrical
characteristics of the distributed energy
resource aggregation that are significant
enough to potentially adversely impact
the reliability of the distribution or
transmission systems and justify restudy
of the full distributed energy resource
aggregation.789 However, even in such
circumstances, we do not believe that
participation of the distributed energy
resource aggregation will need to be
paused during the review of
modifications or restudy. Aggregators
should be able to continue to bid the
unmodified portion of their aggregation
into RTO/ISO markets. For example, in
the event that a resource withdraws
from an aggregation, the aggregator
could continue to participate in the
market by modifying its bidding
parameters to reflect the aggregation’s
changed capability to perform.
338. Finally, to the extent that an
RTO/ISO requires distributed energy
resource aggregators to provide
information on the physical or
operational characteristics of its
distributed energy resource aggregation
(pursuant to Section IV.F), we require
788 NOPR,
789 See
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each RTO/ISO to revise its tariff to
ensure that distributed energy resource
aggregators must update such
information if any modification to the
list of resources participating in the
aggregation results in a change to the
aggregation’s performance. We find that
this requirement will ensure that the
RTOs/ISOs have accurate and current
information about the physical and
operational characteristics of the
distributed energy resource aggregations
that are participating in their markets,
with minimal administrative burden.
J. Market Participation Agreements
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1. NOPR Proposal
339. In the NOPR, the Commission
stated that, in order to ensure that a
distributed energy resource aggregator
complies with all relevant provisions of
the RTO/ISO tariffs, it must execute an
agreement with the RTO/ISO that
defines its roles and responsibilities and
its relationship with the RTO/ISO before
it can participate in RTO/ISO
markets.790 The Commission explained
that, because the individual resources in
these distributed energy resource
aggregations will likely fall under the
purview of multiple organizations (e.g.,
the RTO/ISO, state regulatory
commissions, relevant distribution
utilities, and local regulatory
authorities), these agreements must also
require that the distributed energy
resource aggregator attest that its
distributed energy resource aggregation
is compliant with the tariffs and
operating procedures of the distribution
utilities and the rules and regulations of
any other relevant regulatory
authority.791 The Commission therefore
proposed that each RTO/ISO revise its
tariff to include a market participation
agreement for distributed energy
resource aggregators. The Commission
did not propose specific requirements
for such agreements in the NOPR;
instead, the Commission sought
comment on the information these
agreements should contain.
340. The Commission also explained
that, while these agreements will define
the roles and responsibilities of the
distributed energy resource aggregator,
they should not limit the business
models under which distributed energy
resource aggregators can operate.792
Therefore, the Commission proposed
790 NOPR,
157 FERC ¶ 61,121 at P 157.
Commission explained that this may
include any laws or regulations of the relevant retail
regulatory authority that do not permit demand
response resources to participate in RTO/ISO
markets as the Commission considered in Order No.
719. Id. n.238 (citing Order No. 719, 125 FERC
¶ 61,071 at P 154).
792 Id. P 158.
791 The
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that the market participation agreement
for distributed energy resource
aggregators that each RTO/ISO must
include in its tariff may not restrict the
business models that distributed energy
resource aggregators may adopt. The
Commission stated that market
participation agreements for distributed
energy resource aggregators should not
preclude distribution utilities,
cooperatives, or municipalities from
aggregating distributed energy resources
on their systems or even microgrids
from participating in the RTO/ISO
markets as a distributed energy resource
aggregation.
341. After the April 2018 technical
conference, the Commission sought
comment on whether the proposed use
of market participation agreements
addresses state and local regulator
concerns about the role of distribution
utilities in the coordination and
registration of distributed energy
resources in aggregations. The
Commission further asked whether the
proposed provisions in the market
participation agreements that require
that distributed energy resource
aggregators attest that they are
compliant with the tariffs and operation
procedures of distribution utilities and
state and local regulators are sufficient
to address such concerns.793
2. Comments
342. All commenters that address this
topic agree that market participation
agreements between RTOs/ISOs and
distributed energy resource aggregators
are necessary. However, commenters
disagree on the structure of these
agreements.
343. Many commenters support the
NOPR proposal to require a market
participation agreement for distributed
energy resource aggregators.794 ISO–NE,
however, urges the Commission to
exclude from a final rule any specific
directives regarding market
participation agreements for
aggregations of distributed energy
resources, including requiring
attestation from the aggregator.795 ISO–
NE states that such directives are not
needed because its current generic
market participant agreement is
sufficient as a ‘‘simple and proven’’
approach to accommodate distributed
energy resource aggregations and
793 See Notice Inviting Post-Technical Conference
Comments at 6.
794 See, e.g., APPA/NRECA Comments (RM16–23)
at 46; California Commission Comments (2018
RM18–9) at 7; Mensah Comments (RM16–23) at 4;
NYISO Comments (RM16–23) at 20; PJM Comments
(RM16–23) at 28–29; SoCal Edison Comments (2018
RM18–9) at 2, 10–11.
795 ISO–NE Comments (RM16–23) at 56–57.
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because other coordination processes,
including the asset registration process,
may be preferable mechanisms for
gathering and verifying information
related to a participant’s assets.
344. Some commenters express
concerns about the sufficiency of market
participation agreements to address
state and local regulatory concerns. The
New York Commission, for example,
cautions that a rule addressing the
nature and use of market participation
agreements should not create barriers
that hinder a state regulator’s ability to
guide the ways that distributed energy
resource aggregations can be formed,
registered, managed, and operated,
including the role of a distribution
utility in the coordination and
registration of distributed energy
resource aggregations.796 Organization
of MISO States asserts that concerns
remain about the ability to effectively
police compliance with participation
agreements, and that in order to comply,
new lines of communication between
distribution utilities, distributed energy
resource aggregators, and the RTO/ISO
will need to be developed.797
345. Organization of MISO States
asserts that further participation
agreements will need to be crafted to
accommodate ever-evolving technology
changes and to avoid such initial
agreements becoming barriers to
innovation. It asserts that the RTO/ISO
stakeholder process is the appropriate
place for these modifications to
participation agreements to occur.798
346. Commenters express varying
recommendations for the structure of an
agreement or agreements and the parties
required to enter them. AES Companies
suggest a three-party agreement between
the aggregator, distribution utility, and
RTO/ISO is appropriate,799 while
Pacific Gas & Electric suggests two twoparty agreements (one agreement
between aggregator and RTO/ISO, and
another between aggregator and
distribution utility).800 APPA/NRECA
and MISO Transmission Owners favor
the utilities being party to the
agreements and argue that the
agreement should demonstrate that the
aggregation has been authorized by the
utility or its relevant regulatory
authority.801 CAISO also suggests that
796 New York Commission Comments (2018
RM18–9) at 13.
797 Organization of MISO States Comments (2018
RM18–9) at 4.
798 Id. at 4–5.
799 AES Companies Comments (RM16–23) at 12–
13, 49.
800 Pacific Gas & Electric Comments (RM16–23) at
24–26.
801 APPA/NRECA Comments (RM16–23) at 46–
47; MISO Transmission Owner Comments (RM16–
23) at 26–27.
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the Commission consider whether a
separate Commission-jurisdictional
agreement should apply between a
distribution utility and a distributed
energy resource aggregator.802
347. Some commenters request
flexibility, further guidance from the
Commission, and/or the participation of
other parties in crafting market
participation agreements. Most RTOs/
ISOs suggest that some of their existing
agreements may be applicable but argue
for flexibility in establishing appropriate
agreements.803 Pacific Gas & Electric
also argues that each RTO/ISO should
be allowed to craft agreements
appropriate for its markets.804 NARUC
requests that, for states that do allow
third party aggregations, the
Commission only provide broad policy
direction in a final rule and allow the
RTOs/ISOs to develop with state input
the necessary details for
implementation.805 EEI similarly argues
that RTOs/ISOs and distribution
utilities should develop market
participation agreements in conjunction
with their stakeholders.806 Xcel Energy
Services goes further, stating that the
details of market participation
agreements will need to be addressed by
states.807 PJM asserts that further
clarification as to the role of electric
distribution companies and other
relevant regulatory authorities is needed
for PJM to finalize the appropriate
market participant agreement design.808
Massachusetts Municipal Electric
requests sufficient flexibility for the
agreement to accommodate different
conditions at different distribution
utilities.809 Mensah, however, states that
the participation agreement, and any
necessary amendments, should be
standardized, streamlined, and
automated as much as possible to avoid
unnecessary costs.810
348. Some commenters advocate for
specific requirements in market
participation agreements. EEI argues
that the agreements should ensure that
distributed energy resource aggregators
are subject to comparable requirements
as other resources.811 AES Companies
802 CAISO
Comments (RM16–23) at 51–52.
ISO–NE Comments (RM16–23) at 56–57;
MISO Comments (RM16–23) at 26–27; NYISO
Comments (RM16–23) at 20; PJM Comments
(RM16–23) at 28–29.
804 See Pacific Gas & Electric Comments (RM16–
23) at 24.
805 NARUC Comments (RM16–23) at 5.
806 EEI Comments (RM16–23) at 39.
807 Xcel Energy Services Comments (RM16–23) at
29.
808 PJM Comments (RM16–23) at 29.
809 Massachusetts Municipal Electric Comments
(RM16–23) at 5.
810 Mensah Comments (RM16–23) at 4.
811 EEI Comments (RM16–23) at 39.
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803 Id.;
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assert that an agreement should only
obligate the aggregator to conform to the
appropriate tariff rules and a
proportionate share of essential
reliability services as determined by
each RTO/ISO and its stakeholders.812
Pacific Gas & Electric states that an
agreement between the aggregator and
the distribution utility should include
detailed requirements regarding
operational coordination, mitigation of
system impacts, cost allocation, and
notification of changes to the
aggregation.813
349. Avangrid emphasizes that the
market participation agreement should
be explicit that the aggregator is a
wholesale market participant required
to comply with the provisions in the
tariff, including operational
requirements.814 MISO Transmission
Owners and TAPS support requiring the
distributed energy resource aggregator to
attest to compliance with distribution
utility tariffs and operating procedures
and with the rules and regulations of
any other relevant regulatory
authority.815 APPA/NRECA support
requiring aggregators to demonstrate,
rather than simply attest, that the
relevant electric retail regulatory
authority has authorized wholesale
market participation by the resources in
the aggregation, and to include in the
market participation agreement
requirements for notice to distribution
utilities of any changes in resources and
for compliance by the aggregator and its
resources with the tariffs and operating
procedures of the relevant distribution
utilities.816 MISO Transmission Owners
make similar arguments in their
comments.817
350. On the other hand, Tesla/
SolarCity contend that, because many
individual distributed energy resources
may not be new nor installed by the
aggregator, any attestation requirement
should only require aggregators to state
that, ‘‘to the best of their knowledge,’’
the distributed energy resources in the
aggregation are compliant with
distribution company tariffs and
operating procedures and relevant
regulatory authority rules and
regulations.818
812 AES
Companies Comments (RM16–23) at 12–
13.
813 Pacific Gas & Electric Comments (RM16–23) at
24–25.
814 Avangrid Comments (RM16–23) at 18.
815 MISO Transmission Owners Comments
(RM16–23) at 19 (citing NOPR, 157 FERC ¶ 61,121
at P 157); TAPS Comments (RM16–23) at 13–14.
816 APPA/NRECA Comments (RM16–23) at 47.
817 MISO Transmission Owners Comments
(RM16–23) at 19, 26–27.
818 Tesla/SolarCity Comments (RM16–23) at 31.
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67151
351. APPA/NRECA, Open Access
Technology, MISO Transmission
Owners, and NARUC support the NOPR
proposal that market participation
agreements should not restrict the
business models for distributed energy
resource aggregators, though the latter
two commenters condition their support
on the distributed energy resource
aggregation having been permitted by
the state regulatory body and, if
applicable, the distribution utility.819
NARUC supports the NOPR language
that allows a scenario in which
distribution utilities can act as
aggregators so that the states can
provide oversight of the terms and
conditions of their relationship with
distributed energy resources and
customers, while allowing participation
of the aggregator in RTO/ISO
markets.820 On the other hand, Xcel
Energy Services asserts that the NOPR
language may be too vague to protect
yet-to-be-designed aggregator business
models and also could inappropriately
limit the ability of RTOs/ISOs to prevent
business models that could threaten grid
reliability.821
3. Commission Determination
352. We add § 35.28(g)(12)(ii)(h) to the
Commission’s regulations and adopt the
NOPR proposal to require each RTO/
ISO to establish market rules that
address market participation agreements
for distributed energy resource
aggregators. Specifically, we require
each RTO/ISO to revise its tariff to
include a standard market participation
agreement that defines the distributed
energy resource aggregator’s role and
responsibilities and its relationship with
the RTO/ISO and that an aggregator is
required to execute before it can
participate in the RTO/ISO markets. We
also adopt the NOPR proposal that this
market participation agreement must
include an attestation that the
distributed energy resource aggregator’s
aggregation is compliant with the tariffs
and operating procedures of the
distribution utilities and the rules and
regulations of any relevant electric retail
regulatory authority. As the Commission
explained in the NOPR, these
requirements are necessary to ensure
that a distributed energy resource
aggregator complies with all relevant
819 APPA/NRECA Comments (RM16–23) at 47–
48; MISO Transmission Owners Comments (RM16–
23) at 26 (citing NOPR, 157 FERC ¶ 61,121 at P 158);
NARUC Comments (RM16–23) at 5 (citing NOPR,
157 FERC ¶ 61,121 at P 158); Open Access
Technology Comments (RM16–23) at 4.
820 NARUC Comments (RM16–23) at 5 (citing
NOPR at P158).
821 Xcel Energy Services Comments (RM16–23) at
29.
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provisions of the RTO/ISO tariffs, the
tariffs and operating procedures of the
distribution utilities, and the rules and
regulations of any other relevant electric
retail regulatory authority.822 These
requirements are also supported by a
general consensus among commenters
that market participation agreements are
necessary and, as expressed by some
commenters, that the use of market
participation agreements could help
address state and local regulatory
concerns.
353. Also, as proposed in the NOPR,
we require that the market participation
agreements that the RTOs/ISOs include
in their tariffs not limit the business
models under which distributed energy
resource aggregators can operate.
Allowing distributed energy resource
aggregators with varying business
models to be included in such
agreements should increase the ability
of the distributed energy resource
aggregators, and resources within such
aggregations, to participate in the RTO/
ISO markets.
354. With the exception of the
attestation requirement and prohibition
of business model limitations described
above, we will not specify the exact
terms and conditions of the market
participation agreements. This approach
will give the RTOs/ISOs and
stakeholders flexibility to develop
appropriate agreements, and increase
the ability of the distributed energy
resource aggregators, and resources
within such aggregations, to participate
in RTO/ISO markets by better tailoring
agreements to the operating conditions
and needs of those markets, and thereby
help to enhance competition in the
markets. Commenters, including the
RTOs/ISOs, express a variety of views
about the specific requirements that
should be included in such agreements
and the potential need for additional
agreements, and most commenters
request flexibility in ability to design
these agreements. We believe that this
flexibility will provide RTOs/ISOs
working with their stakeholders the
ability to design the appropriate
agreements for their regions and the
reasonableness of such proposals will be
evaluated in each RTO/ISO-specific
compliance proceeding.
355. We also are not persuaded by the
suggestion of some commenters that we
require additional agreements to help
facilitate participation by distributed
energy resource aggregations in RTO/
ISO markets, or that we require
additional entities, such as distribution
utilities, distribution system operators,
or relevant regulatory authorities, to be
822 See
NOPR, 157 FERC ¶ 61,121 at P 157.
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parties to the market participation
agreements that we are requiring. We
believe that the attestation requirement
that we adopt in this final rule will help
ensure distributed energy resource
aggregator compliance with the tariffs
and operating procedures of distribution
utilities and the rules and regulations of
other relevant regulatory authorities.
RTOs/ISOs and their stakeholders are
best equipped to determine the nature
and composition of, and counterparties
to, additional agreements. We note that
RTOs/ISOs and stakeholders may
choose to include additional parties or
incorporate related agreements in the
proposed market participation
agreements. Moreover, as discussed
above in Sections IV.H.2 and IV.I, our
directive to RTOs/ISOs to establish
market rules on coordination will
address coordination among any parties
not included as parties to the market
participation agreements (i.e., the
distribution utility and the relevant state
and local regulators), including the
ability of distribution utilities to review
modifications.823
356. In response to Xcel Energy
Services’ assertion that the NOPR
proposal to prohibit RTOs/ISOs from
limiting the business models under
which distributed energy resource
aggregators can operate does not protect
future business models and may allow
other business models that threaten grid
reliability, we disagree. Instead, it is
responsive to many commenters’
requests to avoid undue Commission
specificity with respect to the required
contents of market participation
agreements to allow RTOs/ISOs
sufficient regional flexibility in
developing these agreements, including
to address any business model
challenges and any implications for grid
reliability. Further, we note that Xcel
Energy Services does not provide
examples or support for its concerns
that certain business models could
threaten grid reliability or future
business models. We think permitting
RTO/ISO prohibitions against certain
business models in their market
participation agreements is not
necessary given a distributed energy
resource aggregator’s duty to adhere to
RTO/ISO market rules, the attestation
requirement that we require to be
included in the market participation
agreements, as well as the ability of
RTOs/ISO to craft any necessary
safeguards short of business model
prohibitions within these agreements. In
response to PJM’s assertion that further
clarification about the role of
823 See supra Section IV.H.1 (Market Rules on
Coordination).
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distribution utilities and other relevant
regulatory authorities is needed for PJM
to finalize the appropriate market
participant agreement design, we
believe that we have provided such
clarification to the extent possible,
elsewhere within this final rule.824
K. Compliance
357. In the NOPR, the Commission
proposed to require each RTO/ISO to
submit a compliance filing within six
months of the date the final rule in this
proceeding is published in the Federal
Register. The Commission stated that it
believed that six months is sufficient for
each RTO/ISO to develop and submit its
compliance filing, but recognized that
implementation of the reforms proposed
in the NOPR could take more time due
to the changes that may be necessary to
each RTO’s/ISO’s modeling and
dispatch software. Therefore, the
Commission proposed to allow 12
months from the date of the compliance
filing for implementation of the
proposed reforms to become effective.
1. Comments
358. Most RTO/ISO commenters, with
the exception of PJM, indicate that they
would need to modify their existing
rules to appropriately integrate
distributed energy resource
aggregations.825 PJM states that it does
not require significant modifications to
dispatch software, communication
platforms, or automation tools, as PJM
already has developed many tools that
can be adapted for distributed energy
resource aggregations, but that improved
coordination with electric distribution
providers may be a challenge.826
359. Eversource recommends that the
Commission provide sufficient time for
proposals to be developed through the
stakeholder process on this complex
issue.827 Dominion suggests a pilot
project should be undertaken first.828
Duquesne Light notes that distributed
energy resource integration should
proceed in a ‘‘measured’’ way to assess
operational, reliability, safety and cost
implications, noting that some new
technologies may require observation
and testing before being deemed capable
of providing expanded services such as
being deemed a capacity resource.829
Distributed energy resource developers
and their advocates, as well as some
824 See supra Section IV.C.3 (Double Counting of
Services).
825 See CAISO Comments (2018 RM18–9) at 4;
PJM Comments (2018 RM18–9) at 8–9.
826 PJM Comments (2018 RM18–9) at 8–9.
827 Eversource Comments (2018 RM18–9) at 11.
828 Dominion Comments (RM16–23) at 9.
829 Duquesne Light Company Comments (2018
RM18–9) at 3–4.
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state commissions, believe that the
proposal is timely and should not be
delayed, especially given the rapid pace
of technological advancement.830
2. Commission Determination
360. After consideration of the
comments submitted, we find that it is
reasonable to provide RTOs/ISOs with
additional time to submit their proposed
tariff revisions in response to the final
rule, given that the changes could
require significant work on the part of
RTOs/ISOs. Consequently, after
consideration of the comments
submitted, we will require each RTO/
ISO to file the tariff changes needed to
implement the requirements of this final
rule within 270 days of the publication
date of this final rule in the Federal
Register. To the extent that an RTO/ISO
proposes to comply with any or all of
the requirements in this final rule using
its currently effective requirements for
distributed energy resources, it must
demonstrate on compliance that its
existing approach meets the
requirements in this final rule.
361. Based on comments submitted
about the complexity of changes to
RTO/ISO market rules and systems, we
will not require the implementation of
the tariff provisions within 12 months
from the date of the compliance filing,
as proposed in the NOPR. Instead, we
will require each RTO/ISO to propose a
reasonable implementation date,
together with adequate support
explaining how the proposal is
appropriately tailored for its region and
implements this final rule in a timely
manner. The Commission will establish
on compliance the effective date for
each RTO’s/ISO’s compliance filing.
L. Issues Beyond the Scope of This
Rulemaking
1. Comments
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362. Some commenters raise issues
that were not addressed in the NOPR.
For instance, commenters raise issues
regarding how the deduction of behindthe-meter resources from reserve margin
requirements affects price formation; 831
impacts of subsidizing resources on
functioning of RTO/ISO markets; 832
capacity market mitigation policies for
distributed energy resources; 833 impacts
on system variability and unpredictable
operation due to RTO/ISO market
830 See, e.g., AWEA Comments (RM16–23) at 4;
Delaware Commission Comments (RM16–23) at 4;
Fresh Energy/Sierra Club/Union of Concerned
Scientists Comments (RM16–23) at 1.
831 See, e.g., NRG Comments (RM16–23) at 6.
832 See, e.g., PJM Market Monitor Comments
(RM16–23) at 10.
833 See, e.g., NRG Comments (RM16–23) at 6.
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participation of distributed energy
resources; 834 impacts of distributed
energy resource aggregations on
distribution system operations and
reliability, and necessary distribution
system adjustments; 835 reflecting
distribution system benefits associated
with distributed energy resource
aggregations into RTO/ISO market
operation; 836 distribution system
configuration issues; 837 need for
modernizing distribution system
equipment, such as the deployment of
distributed energy resource management
systems (DERMS); 838 privacy and
cybersecurity concerns; 839 data
collection practices during distributed
energy resource registration focused on
attributes available for essential grid
services, but not necessarily in support
of a market product; 840 differing
compensation for short-duration
resources to account for reduced run
times in the capacity market; 841 and
clarification that the term electric
storage resource as defined in Order No.
841 may include an aggregation of
distributed electric storage resources.842
2. Commission Determination
363. The NOPR did not propose
reforms related to these issues raised by
commenters. Therefore, these issues are
outside the scope of this proceeding and
will not be addressed here.
V. Information Collection Statement
364. The information collection (IC)
contained in this final rule is being
834 See, e.g., Advanced Energy Economy
Comments (2018 RM18–9) at 24; NYISO Indicated
Transmission Owners Comments (2018 RM18–9) at
20; Organization of MISO States Comments (2018
RM18–9) at 10.
835 See, e.g., Advanced Energy Management
Comments (2018 RM18–9) at 24; Vice Chairman
Place Comments (2018 RM18–9) at 2–3; EEI
Comments (2018 RM18–9) at 8–9, 19–21; Pacific
Gas & Electric Comments (2018 RM18–9) at 20–21,
24–25; PJM Comments (2018 RM18–9) at 28; TAPS
Comments (2018 RM18–9) at 7–11.
836 See, e.g., Stem Comments (2018 RM18–9) at
11.
837 See, e.g., NRECA Comments (2018 RM18–9) at
8.
838 See, e.g., CAISO Comments (2018 RM18–9) at
7; EPSA Comments (2018 RM18–9) at 9–13;
Eversource Comments (2018 RM18–9) at 10–11.
839 See, e.g., California Commission Comments
(2018 RM18–9) at 18; NRECA Comments (2018
RM18–9) at 11.
840 See, e.g., Union of Concerned Scientists
Comments (RM16–23) at 10–11 (citing J. Nelson,
Ph.D. and L.M. Wisland, Achieving 50 Percent
Renewable Electricity in California—The Role of
Non-Fossil Flexibility in a Cleaner Electricity Grid
(2015), https://www.ucsusa.org/sites/default/files/
attach/2015/08/Achieving-50-Percent-RenewableElectricity-In-California.pdf).
841 See, e.g., Advanced Energy Economy
Comments (RM16–23) at 42–43.
842 See, e.g., University of Delaware’s EV R&D
Group Comments (2018 RM18–9) at 1.
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67153
submitted to the Office of Management
and Budget (OMB) for review under
section 3507(d) of the Paperwork
Reduction Act of 1995.843 OMB’s
regulations,844 in turn, require approval
of certain information collection
requirements imposed by agency rules.
Respondents subject to the filing
requirements of a rule will not be
penalized for failing to respond to the
collection of information unless the
collection of information displays a
valid OMB control number.
365. The Commission has submitted
this IC to OMB as a revision of FERC–
516H. OMB has assigned control
number 1902–0303 to FERC–516H. The
Commission is not asking OMB to
change the expiration date of control
number 1902–0303 (May 31, 2021).
A. Summary of This IC
Title: FERC–516H (Electric Rate
Schedules and Tariff Filings, in Docket
No. RM18–9–000).
OMB Control No. 1902–0303.
Type of Request: Revision of FERC–
516H.
Abstract: This final rule, at 18 CFR
35.28(g)(12), includes two IC activities.
Each RTO and ISO must have tariff
provisions that allow DER aggregations
to participate directly in the organized
wholesale electric markets. In addition,
each RTO and ISO must update the
economic dispatch software
accordingly.
Types of Respondent: RTOs and ISOs.
Frequency of Collection: One time.
Estimate of Annual Burden 845: The
Commission estimates the total annual
burden and cost 846 for this IC in the
following table:
In response to comments on the
NOPR, we have increased the estimated
burden and cost for the requirements of
the final rule from those originally
proposed in the NOPR. The estimated
burden and cost for the requirements
contained in this final rule follow.
843 See
44 U.S.C. 3507(d).
CFR pt. 1320 (2020).
845 ‘‘Burden’’ is the total time, effort, or financial
resources expended by persons to generate,
maintain, retain, or disclose or provide information
to or for a Federal agency. For further explanation
of what is included in the information collection
burden, refer to Title 5 Code of Federal Regulations
1320.3.
846 Commission staff believes that industry is
similarly situated in terms of cost for wages and
benefits. Therefore, we are using the FERC 2020
average cost (for wages plus benefits) for one FERC
full-time equivalent (FTE) of $172,329 ($83.00 per
hour).
844 5
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ADDITIONS TO FERC–516H, AS IMPLEMENTED IN THE FINAL RULE IN DOCKET NO. RM18–9–000
A
Types of response
B
C
D
E
F
G
Number of
respondents
Avg.
number of
responses
per
respondent
Total
number of
responses
Average
burden (hours)
and cost per
response
Total annual
burden hours
and total
annual cost
Cost per
respondent
(col. D ×
col. E)
(col. F ÷
col. B)
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(col. B ×
col. C)
One-Time Tariff Filing Due to RM18–9
Final Rule.
Software Update ........................................
6
1
6
1,529 hrs; $126,907 ..............
9,174 hrs; $761,442 ..............
$126,907
6
1
6
1,500 hrs; $124,500 ..............
9,000 hrs; $747,000 ..............
124,500
Total Burden .......................................
....................
....................
....................
3029 hrs; $251,407 ...............
18,174 hrs; $1,508,442 .........
251,407
B. Discussion
366. The Commission implements
this final rule and FERC–516H to
remove barriers to the participation of
distributed energy resource aggregations
in the capacity, energy, and ancillary
service markets operated by RTOs and
ISOs. This IC in this final rule conforms
to the Commission’s need for efficient
information collection, communication,
and management within the energy
industry.
367. In this final rule, we are
requiring each RTO/ISO to propose
revisions to its tariff that (1) allow
distributed energy resource aggregations
to participate directly in RTO/ISO
markets and establish distributed energy
resource aggregators as a type of market
participant; (2) allow distributed energy
resource aggregators to register
distributed energy resource aggregations
under one or more participation models
that accommodate the physical and
operational characteristics of the
distributed energy resource
aggregations; (3) establish a minimum
size requirement for distributed energy
resource aggregations that does not
exceed 100 kW; (4) address locational
requirements for distributed energy
resource aggregations; (5) address
distribution factors and bidding
parameters for distributed energy
resource aggregations; (6) address
information and data requirements for
distributed energy resource
aggregations; (7) address metering and
telemetry requirements for distributed
energy resource aggregations; (8)
address coordination between the RTO/
ISO, the distributed energy resource
aggregator, the distribution utility, and
the relevant electric retail regulatory
authorities; (9) address modification to
the list of resources in a distributed
energy resource aggregation; and (10)
address market participation agreements
for distributed energy resource
aggregators.
368. Interested persons may obtain
information on the reporting
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requirements by contacting Ellen
Brown, Office of the Executive Director,
Email: DataClearance@ferc.gov; Phone:
(202) 502–8663.
VI. Environmental Analysis
369. The Commission is required to
prepare an Environmental Assessment
or an Environmental Impact Statement
for any action that may have a
significant adverse effect on the human
environment.847 We conclude that
neither an Environmental Assessment
nor an Environmental Impact Statement
is required for this final rule under
§ 380.4(a)(15) of the Commission’s
regulations, which provides a
categorical exemption for approval of
actions under sections 205 and 206 of
the FPA relating to the filing of
schedules containing all rates and
charges for the transmission or sale of
electric energy subject to the
Commission’s jurisdiction, plus the
classification, practices, contracts, and
regulations that affect rates, charges,
classifications, and services.848
VII. Regulatory Flexibility Act
Certification
370. The Regulatory Flexibility Act of
1980 (RFA) 849 generally requires a
description and analysis of rules that
will have a significant economic impact
on a substantial number of small
entities. The RFA mandates
consideration of regulatory alternatives
that accomplish the stated objectives of
a rule and that minimize any significant
economic impact on a substantial
number of small entities. The SBA
Office of Size Standards develops the
numerical definition of a small
business.850 The small business size
847 Regulations Implementing the Nat’l Envt’l
Policy Act of 1969, Order No. 486, 52 FR 47,897
(Dec. 17, 1987), FERC Stats. & Regs., ¶ 30,783 (1987)
(cross-referenced at 41 FERC ¶ 61,284).
848 18 CFR 380.4(a)(15) (2020).
849 5 U.S.C. 601–12.
850 13 CFR 121.101 (2020).
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standards are provided in 13 CFR
121.201.
371. Under the SBA classification, the
six RTOs/ISOs would be considered
electric bulk power transmission and
control, for which the small business
size threshold is 500 or fewer
employees.851 Because each RTO/ISO
has more than 500 employees, none are
considered small entities.
372. Furthermore, because of their
pivotal roles in wholesale electric power
markets in their regions, none of the
RTOs/ISOs meet the last criterion of the
two-part RFA definition of a small
entity: ‘‘not dominant in its field of
operation.’’ 852
373. The estimated cost related to this
final rule includes: (a) Preparing and
making a one-time tariff filing ($126,907
per entity, as detailed in the Information
Collection section above), and (b)
updating the economic dispatch
software. We estimate the one-time
software work will take 1,500 hours
with an approximate cost of $124,500
per entity. Therefore, the total estimated
one-time cost for the tariff filing and
software work is $251,407 per entity (or
$126,907 + $124,500); the total
estimated one-time industry cost is
$1,508,442.
374. As a result, we certify that the
reforms required by this final rule
would not have a significant economic
impact on a substantial number of small
entities, and therefore no regulatory
flexibility analysis is required.
VIII. Document Availability
375. In addition to publishing the full
text of this document in the Federal
851 13
CFR 121.201 (Sector 22, Utilities).
RFA definition of ‘‘small entity’’ refers to
the definition provided in the Small Business Act,
which defines a ‘‘small business concern’’ as a
business that is independently owned and operated
and that is not dominant in its field of operation.
The SBA’s regulations at 13 CFR 121.201 define the
threshold for a small Electric Bulk Power
Transmission and Control entity (NAICS code
221121) to be 500 employees. See 5 U.S.C. 601(3)
(citing to section 3 of the Small Business Act, 15
U.S.C. 632).
852 The
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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). At this time, the
Commission has suspended access to
the Commission’s Public Reference
Room due to the President’s March 13,
2020 proclamation declaring a National
Emergency concerning the Novel
Coronavirus Disease (COVID–19).
376. From FERC’s Home Page on the
internet, this information is available on
eLibrary. The full text of this document
is available on eLibrary in PDF and
Microsoft Word format for viewing,
printing, and/or downloading. To access
this document in eLibrary, type the
docket number excluding the last three
digits of this document in the docket
number field.
377. User assistance is available for
eLibrary and the FERC’s website during
normal business hours from FERC
Online Support at (202) 502–6652 (toll
free at 1–866–208–3676) or email at
ferconlinesupport@ferc.gov, or the
Public Reference Room at (202) 502–
8371, TTY (202) 502–8659. Email the
Public Reference Room at
public.referenceroom@ferc.gov.
IX. Effective Date and Congressional
Notification
378. These regulations are effective
December 21, 2020. The Commission
has determined, with the concurrence of
the Administrator of the Office of
Information and Regulatory Affairs of
OMB, that this rule is not a ‘‘major rule’’
as defined in section 351 of the Small
Business Regulatory Enforcement
Fairness Act of 1996.
List of Subjects in 18 CFR Part 35
Electric power rates, Electric utilities.
By the Commission. Commissioner Danly
is dissenting with a separate statement
attached.
Issued: September 17, 2020.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
In consideration of the foregoing, the
Commission amends part 35, chapter I,
title 18, Code of Federal Regulations, as
follows:
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PART 35—FILING OF RATE
SCHEDULES AND TARIFFS
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.
2. Amend § 35.28 by adding
paragraphs (b)(10) and (11) and (g)(12)
as follows.
■
§ 35.28 Non-discriminatory open access
transmission tariff.
*
*
*
*
*
(b) * * *
(10) Distributed energy resource as
used in this section means any resource
located on the distribution system, any
subsystem thereof or behind a customer
meter.
(11) Distributed energy resource
aggregator as used in this section means
the entity that aggregates one or more
distributed energy resources for
purposes of participation in the
capacity, energy and/or ancillary service
markets of the regional transmission
organizations and/or independent
system operators.
*
*
*
*
*
(g) * * *
(12) Distributed energy resource
aggregators. (i) Each independent
system operator and regional
transmission organization must have
tariff provisions that allow distributed
energy resource aggregations to
participate directly in the organized
wholesale electric markets. Each
regional transmission organization and
independent system operator must
establish distributed energy resource
aggregators as a type of market
participant. Additionally, each regional
transmission organization and
independent system operator must
allow distributed energy resource
aggregators to register distributed energy
resource aggregations under one or more
participation models in the regional
transmission operator’s or the
independent system operator’s tariff that
accommodate the physical and
operational characteristics of the
distributed energy resource aggregation.
(ii) Each regional transmission
organization and independent system
operator, to accommodate the
participation of distributed energy
resource aggregations, must establish
market rules that address:
(A) Eligibility to participate in the
independent system operator or regional
transmission organization markets
through a distributed energy resource
aggregation;
Advanced Energy Buyers ...................................
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(B) Locational requirements for
distributed energy resource
aggregations;
(C) Distribution factors and bidding
parameters for distributed energy
resource aggregations;
(D) Information and data requirements
for distributed energy resource
aggregations;
(E) Modification to the list of
resources in a distributed energy
resource aggregation;
(F) Metering and telemetry system
requirements for distributed energy
resource aggregations;
(G) Coordination between the regional
transmission organization or
independent system operator, the
distributed energy resource aggregator,
the distribution utility, and the relevant
electric retail regulatory authorities; and
(H) Market participation agreements
for distributed energy resource
aggregators.
(iii) Each regional transmission
organization and independent system
operator must establish a minimum size
requirement for distributed energy
resource aggregations that does not
exceed 100 kW.
(iv) Each regional transmission
organization and independent system
operator must accept bids from a
distributed energy resource aggregator if
its aggregation includes distributed
energy resources that are customers of
utilities that distributed more than 4
million megawatt-hours in the previous
fiscal year. An independent system
operator or regional transmission
organization must not accept bids from
a distributed energy resource aggregator
if its aggregation includes distributed
energy resources that are customers of
utilities that distributed 4 million
megawatt-hours or less in the previous
fiscal year, unless the relevant electric
retail regulatory authority permits such
customers to be bid into RTO/ISO
markets by a distributed energy resource
aggregator.
Note: The following appendix will not
appear in the Code of Federal Regulations.
Appendix A: Abbreviated Names of
Commenters
The following table contains the
abbreviated names of all commenters in
this docket.
Commenter
(full name)
Abbreviation
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Advanced Energy Buyers.
Advanced Energy Economy.
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Abbreviation
Commenter
(full name)
Advanced Energy Management .........................
Advanced Microgrid Solutions ............................
Advanced Rail Energy Storage ..........................
AES Companies .................................................
Alevo ...................................................................
Altametric ............................................................
Amanda Drabek ..................................................
American Petroleum Institute .............................
Vice Chairman Place ..........................................
APPA ..................................................................
APPA/NRECA .....................................................
Arkansas Commission ........................................
Avangrid ..............................................................
AWEA .................................................................
Beacon Power ....................................................
Benjamin Kingston ..............................................
Bonneville ...........................................................
Brookfield Renewable .........................................
CAISO .................................................................
California Commission ........................................
California Energy Storage Alliance .....................
California Municipals ...........................................
Calpine ................................................................
Center for Biological Diversity ............................
City of New York .................................................
Connecticut Department of Energy ....................
Connecticut State Entities ..................................
Advanced Energy Management Alliance.
Advanced Microgrid Solutions, Inc.
Advanced Rail Energy Storage, LLC.
AES Companies.
Alevo USA Inc.
Altametric LLC.
Amanda Drabek, Pantsuit Nation of East Texas.
American Petroleum Institute.
Vice Chairman Andrew Place of the Pennsylvania Public Utilities Commission.
American Public Power Association.
American Public Power Association and National Rural Electric Cooperative Association.
Arkansas Public Service Commission.
AVANGRID, Inc.
American Wind Energy Association.
Beacon Power, LLC.
Benjamin D. Kingston.
Bonneville Power Administration.
Brookfield Renewable.
California Independent System Operator Corporation.
Public Utilities Commission of the State of California.
California Energy Storage Alliance.
California Municipal Utilities Association.
Calpine.
Center for Biological Diversity.
City of New York.
Connecticut Department of Energy and Environmental Protection.
Bureau of Energy and Technology Policy of the Connecticut Department of Energy and Environmental Protection and the Connecticut Public Utilities Regulatory Authority.
Delaware Public Service Commission.
DER and Storage Developers.
Direct Energy.
Dominion Resources Services, Inc.
DTE Electric Company and Consumers Energy Company.
Duke Energy Corporation.
E4TheFuture.
Eagle Crest Energy Company.
Edison Electric Institute.
Efficient Holdings, LLC.
Electricity Consumers Resource Council.
Energy Storage Association.
Electric Power Research Institute.
Electric Power Supply Association.
Electric Power Supply Association and PJM Power Providers Group.
Eversource Energy Service Company.
Exelon Corporation.
FirstEnergy.
FirstLight Power Resources, Inc.
Fluidic Energy.
Fresh Energy, the Sierra Club, and the Union of Concerned Scientists.
Delaware Commission ........................................
DER/Storage Developers ...................................
Direct Energy ......................................................
Dominion .............................................................
DTE Electric/Consumers Energy ........................
Duke Energy .......................................................
E4TheFuture .......................................................
Eagle Crest .........................................................
EEI ......................................................................
Efficient Holdings ................................................
ELCON ................................................................
Energy Storage Association ...............................
EPRI ....................................................................
EPSA ..................................................................
EPSA/PJM Power Providers ..............................
Eversource ..........................................................
Exelon .................................................................
FirstEnergy ..........................................................
FirstLight .............................................................
Fluidic ..................................................................
Fresh Energy/Sierra Club/Union of Concerned
Scientists.
Genbright ............................................................
Global Cold Chain Alliance .................................
GridWise .............................................................
Guannan He .......................................................
Harvard Environmental Policy Initiative ..............
Icetec ..................................................................
Imperial Irrigation District ....................................
Independent Energy Producers Association ......
Indiana Commission ...........................................
Institute for Policy Integrity .................................
IPKeys/Motorola ..................................................
IRC ......................................................................
ISO–NE ...............................................................
Kansas Commission ...........................................
Kathy Seal ..........................................................
Leadership Group ...............................................
Liza White ...........................................................
Lorenzo Kristov ...................................................
Lyla Fadali ..........................................................
Magnum ..............................................................
Maryland and New Jersey Commissions ...........
Massachusetts Commission ...............................
Massachusetts State Entities .............................
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Genbright LLC.
Global Cold Chain Alliance.
GridWise Alliance.
Guannan He.
Harvard Environmental Policy Initiative.
Icetec.
Imperial Irrigation District.
Independent Energy Producers Association.
Indiana Utility Regulatory Commission.
Institute for Policy Integrity.
IPKeys Technologies and Motorola Solutions.
ISO–RTO Council.
ISO New England Inc.
Kansas Corporation Commission.
Kathy Seal.
Leadership Group.
Liza C. White.
Lorenzo Kristov.
Lyla Fadali.
Magnum CAES, LLC.
Maryland Public Service Commission and New Jersey Board of Public Utilities.
Massachusetts Department of Public Utilities.
Massachusetts Department of Public Utilities and Massachusetts Department of Energy Resources.
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Abbreviation
Commenter
(full name)
Massachusetts Municipal Electric .......................
Matthew d’Alessio ...............................................
Mensah ...............................................................
Microgrid Resources Coalition ............................
Microsoft .............................................................
Minnesota Energy Storage Alliance ...................
MISO ...................................................................
MISO Transmission Owners ...............................
Mosaic Power .....................................................
NARUC ...............................................................
National Hydropower Association .......................
NEPOOL .............................................................
NERC ..................................................................
NESCOE .............................................................
New Jersey Board ..............................................
New York Commission .......................................
New York State Entities ......................................
Massachusetts Municipal Wholesale Electric Company.
Matthew d’Alessio.
AF Mensah Inc.
Microgrid Resources Coalition.
Microsoft Corporation.
Minnesota Energy Storage Alliance.
Midcontinent Independent System Operator, Inc.
MISO Transmission Owners.
Mosaic Power, LLC.
National Association of Regulatory Utility Commissioners.
National Hydropower Association.
New England Power Pool.
North American Electric Reliability Corporation.
New England States Committee on Electricity.
New Jersey Board of Public Utilities.
New York Public Service Commission.
New York Public Service Commission and New York State Energy Research and Development Authority.
Utility Intervention Unit of the New York State Department of State.
NextEra Energy Resources, LLC.
National Rural Electric Cooperative Association.
NRG Energy, Inc.
New York Independent System Operator, Inc.
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.
New York Power Authority.
Public Utilities Commission of Ohio.
Open Access Technology International, Inc.
OpenADR Alliance.
Organization of MISO States.
Pacific Gas and Electric Company.
PJM Interconnection, L.L.C.
Monitoring Analytics, LLC.
American Electric Power Service Corporation, East Kentucky Power Cooperative, Inc., and
FirstEnergy Service Company, on behalf of its affiliates.
Power Applications and Research Systems, Inc.
Protect Sudbury.
Clean Wisconsin, Environmental Defense Fund, Environmental Law & Policy Center, Fresh
Energy, GridLab, Natural Resources Defense Council, Northwest Energy Coalition, Sierra
Club, Southern Environmental Law Center, Union of Concerned Scientists, Vote Solar,
Western Grid Group.
R Street Institute.
Renewable Energy Systems Americas Inc.
Drs. Audun Botterud, Apurba Sakti, and Francis O’Sullivan.
Robert L. Borlick.
San Diego Gas & Electric.
San Diego County Water Authority.
Schulte Associates LLC.
Solar Energy Industries Association.
Silicon Valley Leadership Group.
Cities of Anaheim, Azusa, Banning, Colton, Pasadena, and Riverside, California.
Southern California Edison Company.
Southern Company Services, Inc.
Southwest Power Pool, Inc.
Starwood Energy Group Global, L.L.C.
Stem, Inc.
Sunrun Inc.
Transmission Access Policy Study Group.
TechNet.
TeMix Inc.
Tesla, Inc.
Tesla, Inc. and SolarCity Corporation.
Trans Bay Cable LLC.
Union of Concerned Scientists.
EV R&D Group, University of Delaware.
EV R&D Group, University of Delaware and AF Mensah Inc.
Viking Cold Solutions.
Xcel Energy Services Inc.
New York Utility Intervention Unit .......................
NextEra ...............................................................
NRECA ...............................................................
NRG ....................................................................
NYISO .................................................................
NYISO Indicated Transmission Owners .............
NYPA ..................................................................
Ohio Commission ...............................................
Open Access Technology ...................................
OpenADR ............................................................
Organization of MISO States ..............................
Pacific Gas & Electric .........................................
PJM .....................................................................
PJM Market Monitor ...........................................
PJM Utilities Coalition .........................................
Power Applications .............................................
Protect Sudbury ..................................................
Public Interest Organizations ..............................
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R Street Institute .................................................
RES Americas ....................................................
Research Scientists ............................................
Robert Borlick .....................................................
San Diego Gas & Electric ...................................
San Diego Water ................................................
Schulte Associates .............................................
SEIA ....................................................................
Silicon Valley Leadership Group ........................
Six Cities .............................................................
SoCal Edison ......................................................
Southern Companies ..........................................
SPP .....................................................................
Starwood Energy ................................................
Stem ....................................................................
Sunrun ................................................................
TAPS ...................................................................
TechNet ..............................................................
TeMix ..................................................................
Tesla ...................................................................
Tesla/SolarCity ....................................................
Trans Bay ...........................................................
Union of Concerned Scientists ...........................
University of Delaware’s EV R&D Group ...........
UofD/Mensah ......................................................
Viking Cold Solutions ..........................................
Xcel Energy Services .........................................
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UNITED STATES OF AMERICA—FEDERAL ENERGY REGULATORY COMMISSION
Docket No.
Participation of Distributed Energy Resource Aggregations in Markets Operated by Regional Transmission Organizations and
Independent System Operators.
(Issued September 17, 2020)
DANLY, Commissioner, dissenting:
1. The Commission today approves a
rule requiring Regional Transmission
Organizations (RTO) and Independent
System Operators (ISO) to revise their
tariffs to accommodate distributed
energy resource (DER) aggregators. I
dissent because, regardless of the
benefits promised by DERs, the
Commission goes too far in declaring
the extent of its own jurisdiction and
because the Commission should not
encourage resource development by fiat.
2. The Federal Power Act (FPA)
delineates the respective roles of the
Commission and the States, assigning
powers in accordance with each
sovereigns’ core interests.853 The federal
government is tasked with ensuring just
and reasonable wholesale rates,
prohibiting state action that would
either encumber interstate commerce or
harm other states. The States retain
authority over the most local of
concerns: Choice of generation, siting of
transmission lines, and the entirety of
retail sales and distribution. Each
sovereign has a sphere of authority, and
in each sphere, the relevant sovereign’s
powers are supreme.
3. Respect for the States’ role in our
federal system and under the FPA
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would counsel against even modest,
non-essential declarations of our
authority, if done at the States’ expense.
Why, when issuing a directive to the
RTOs and ISOs (undoubtedly
Commission-jurisdictional entities),
must we also declare that ‘‘retail
regulatory authorit[ies] cannot broadly
prohibit the participation in RTO/ISO
markets of all distributed energy
resources or of all distributed energy
resource aggregators’’? 854 Perhaps the
States should not or cannot prohibit
such participation.855 But it is not for us
to make sweeping declarations
regarding the States’ jurisdiction over
distributed generation. Rather, the
Commission’s jurisdiction over
wholesale rates would ideally be
vindicated, were it to collide with a
state prohibition, through a challenge to
a specific enactment or regulation by
making arguments ‘‘armed with
principles of federal preemption and the
Supremacy Clause.’’ 856
854 Final Rule, Order No. 2222, 172 FERC
¶ 61,247, at P 58 (2020).
855 I acknowledge the legal authority upon which
the majority bases its exercise of jurisdiction.
Compare FERC v. Elec. Power Supply Ass’n, 136 S.
Ct. 760 (2016), with Nat’l Ass’n of Regulatory Util.
Comm’rs v. FERC, 964 F.3d 1177 (D.C. Cir. 2020).
The concern I express is prudential, not legal.
856 Midwest ISO Transmission Owners v. FERC,
373 F.3d 1361, 1372 (D.C. Cir. 2004).
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RM18–9–000.
4. Apart from the Commission’s
injudicious jurisdictional declarations,
today’s order stands as an imprudent
exercise of the Commission’s power.
Why promulgate a rule at all?
Reluctance to govern by fiat is
counseled particularly in a case like this
in which the generation resources the
majority seeks to promote, by their very
nature, inevitably will affect the
distribution system, responsibility for
which is assigned, with no ambiguity, to
the States. We should allow the RTOs
and ISOs (or the States or the utilities)
to develop their own DER programs in
the first instance. If the promises of
DERs are what they purport to be, the
markets will encourage their
development. And if those programs
result in wholesale sales in interstate
commerce, then the question of the
Commission’s jurisdiction will be ripe.
Commission directives are unnecessary
to encourage the development of
economically-viable resources. I have
greater faith in the power of market
forces and in the discernment of the
utilities and the States.
For these reasons, I respectfully
dissent.
James P. Danly,
Commissioner.
[FR Doc. 2020–20973 Filed 10–20–20; 8:45 am]
BILLING CODE 6717–01–P
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Agencies
[Federal Register Volume 85, Number 204 (Wednesday, October 21, 2020)]
[Rules and Regulations]
[Pages 67094-67158]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20973]
[[Page 67093]]
Vol. 85
Wednesday,
No. 204
October 21, 2020
Part II
Department of Energy
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Federal Energy Regulatory Commission
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18 CFR Part 35
Participation of Distributed Energy Resource Aggregations in Markets
Operated by Regional Transmission Organizations and Independent System
Operator; Final Rule
Federal Register / Vol. 85 , No. 204 / Wednesday, October 21, 2020 /
Rules and Regulations
[[Page 67094]]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 35
[Docket No. RM18-9-000; Order No. 2222]
Participation of Distributed Energy Resource Aggregations in
Markets Operated by Regional Transmission Organizations and Independent
System Operators
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Federal Energy Regulatory Commission (Commission) is
amending its regulations to remove barriers to the participation of
distributed energy resource aggregations in the capacity, energy, and
ancillary service markets operated by Regional Transmission
Organizations and Independent System Operators (RTO/ISO).
DATES: This rule is effective December 21, 2020. Each RTO/ISO must file
the tariff changes needed to implement the requirements of this final
rule by September 17, 2021.
FOR FURTHER INFORMATION CONTACT:
David Kathan (Technical Information), Office of Energy Policy and
Innovation, Federal Energy Regulatory Commission, 888 First Street NE,
Washington, DC 20426, (202) 502-6404
Karin Herzfeld (Legal Information), Office of General Counsel--Energy
Markets, Federal Energy Regulatory Commission, 888 First Street NE,
Washington, DC 20426, (202) 502-8459
SUPPLEMENTARY INFORMATION:
Table of Contents
Paragraph Nos.
I. Introduction...................................... 1
II. Procedural History............................... 10
III. Need for Reform................................. 16
A. Comments...................................... 19
B. Commission Determination...................... 26
IV. Discussion....................................... 31
A. Commission Jurisdiction....................... 31
1. Scope of Final Rule....................... 31
a. Comments.............................. 32
b. Commission Determination.............. 38
2. Opt-Out................................... 45
a. Comments.............................. 47
b. Commission Determination.............. 56
3. Interconnection........................... 68
a. Comments and Data Request Responses... 70
b. Commission Determination.............. 90
B. Definitions of Distributed Energy Resource and 105
Distributed Energy Resource Aggregator..........
1. NOPR Proposal............................. 105
2. Comments.................................. 106
3. Commission Determination.................. 114
C. Eligibility To Participate in RTO/ISO Markets 119
Through a Distributed Energy Resource Aggregator
1. Participation Model....................... 119
a. NOPR Proposal......................... 119
b. Comments.............................. 120
c. Commission Determination.............. 129
2. Types of Technologies..................... 133
a. NOPR Proposal......................... 133
b. Comments.............................. 135
c. Commission Determination.............. 141
3. Double Counting of Services............... 147
a. NOPR Proposal......................... 147
b. Comments.............................. 148
c. Commission Determination.............. 159
4. Minimum and Maximum Size of Aggregation... 165
a. NOPR Proposal......................... 165
b. Comments.............................. 167
c. Commission Determination.............. 171
5. Minimum and Maximum Capacity Requirements 175
for Distributed Energy Resources
Participating in an Aggregation.............
a. NOPR Proposal......................... 175
b. Comments.............................. 176
c. Commission Determination.............. 179
6. Single Resource Aggregation............... 182
a. NOPR Proposal......................... 182
b. Comments.............................. 183
c. Commission Determination.............. 185
D. Locational Requirements....................... 187
a. NOPR Proposal......................... 187
b. Comments.............................. 191
c. Commission Determination.............. 204
E. Distribution Factors and Bidding Parameters... 208
a. NOPR Proposal......................... 208
b. Comments.............................. 210
c. Commission Determination.............. 225
F. Information and Data Requirements............. 230
[[Page 67095]]
a. NOPR Proposal......................... 230
b. Comments.............................. 231
c. Commission Determination.............. 236
G. Metering and Telemetry System Requirements.... 241
a. NOPR Proposal......................... 241
b. Comments.............................. 246
c. Commission Determination.............. 262
H. Coordination Between the RTO/ISO, Aggregator, 272
and Distribution Utility........................
1. Market Rules on Coordination.............. 272
a. NOPR Proposal......................... 272
b. Comments.............................. 274
c. Commission Determination.............. 278
2. Role of Distribution Utilities............ 281
a. NOPR Proposal......................... 281
b. Comments.............................. 282
c. Commission Determination.............. 292
3. Ongoing Operational Coordination.......... 300
a. NOPR Proposal......................... 300
b. Comments.............................. 302
c. Commission Determination.............. 310
4. Role of Relevant Electric Retail 314
Regulatory Authorities......................
a. NOPR Proposal......................... 314
b. Comments.............................. 315
c. Commission Determination.............. 322
5. Coordination Frameworks................... 325
a. NOPR Proposal......................... 325
b. Comments.............................. 326
c. Commission Determination.............. 330
I. Modifications to List of Resources in 332
Aggregation.....................................
a. NOPR Proposal......................... 332
b. Comments.............................. 333
c. Commission Determination.............. 335
J. Market Participation Agreements............... 339
1. NOPR Proposal............................. 339
2. Comments.................................. 342
3. Commission Determination.................. 352
K. Compliance.................................... 357
1. Comments.................................. 358
2. Commission Determination.................. 360
L. Issues Beyond the Scope of This Rulemaking.... 362
1. Comments.................................. 362
2. Commission Determination.................. 363
V. Information Collection Statement.................. 364
A. Summary of this IC............................
B. Discussion.................................... 366
VI. Environmental Analysis........................... 369
VII. Regulatory Flexibility Act Certification........ 370
VIII. Document Availability.......................... 375
IX. Effective Date and Congressional Notification.... 378
Appendix A: Abbreviated Names of Commenters..........
I. Introduction
1. In this final rule, the Federal Energy Regulatory Commission
(Commission) is adopting reforms to remove barriers to the
participation of distributed energy resource \1\ aggregations in the
Regional Transmission Organization (RTO) and Independent System
Operator (ISO) markets (RTO/ISO markets).\2\ For the reasons discussed
below, we find that existing RTO/ISO market rules are unjust and
unreasonable in light of barriers that they present to the
participation of distributed energy resource aggregations in the RTO/
ISO markets, which reduce competition and fail to ensure just and
reasonable rates. Therefore, pursuant to the Commission's authority
under Federal Power Act (FPA) section 206,\3\ the Commission modifies
Sec. 35.28 \4\ of its regulations to require each RTO/ISO to revise
its tariff to ensure that its market rules facilitate the participation
of distributed energy resource aggregations, as discussed further
below.
---------------------------------------------------------------------------
\1\ We define a distributed energy resource as any resource
located on the distribution system, any subsystem thereof or behind
a customer meter. These resources may include, but are not limited
to, electric storage resources, distributed generation, demand
response, energy efficiency, thermal storage, and electric vehicles
and their supply equipment. See infra P 114.
\2\ For purposes of this final rule, we define RTO/ISO markets
as the capacity, energy, and ancillary services markets operated by
the RTOs and ISOs. We note that, in the Notice of Proposed
Rulemaking (NOPR) in this proceeding, the Commission used
``organized wholesale electric markets'' and included that term in
the proposed regulatory text. See Electric Storage Participation in
Markets Operated by Regional Transmission Organizations &
Independent System Operators, Notice of Proposed Rulemaking, 81 FR
86522, 157 FERC ] 61,121 (2016) (NOPR). We find that using ``RTO/ISO
markets'' is sufficient to describe the markets at issue in this
final rule and therefore will no longer use ``organized wholesale
electric markets'' here or include that term in the regulatory text.
\3\ 16 U.S.C. 824e.
\4\ 18 CFR 35.28 (2020).
---------------------------------------------------------------------------
2. As the Commission explained in the NOPR, barriers to the
participation of new technologies, such as many types of distributed
energy resources, in the RTO/ISO markets can emerge when the rules
governing participation in those
[[Page 67096]]
markets are designed for traditional resources and in effect limit the
services that emerging technologies can provide.\5\ For example, the
Commission noted in the NOPR that, as a general matter, distributed
energy resources tend to be too small to meet the minimum size
requirements to participate in the RTO/ISO markets on a stand-alone
basis, and may be unable to meet certain qualification and performance
requirements because of the operational constraints they may have as
small resources.\6\ The Commission further stated that existing
participation models \7\ for aggregated resources, including
distributed energy resources, often require those resources to
participate in the RTO/ISO markets as demand response, which limits
their operations and the services that they are eligible to provide.\8\
---------------------------------------------------------------------------
\5\ See NOPR, 157 FERC ] 61,121 at P 2.
\6\ See id. PP 13, 105.
\7\ In addition to tariff provisions that apply to all market
participants, the RTOs/ISOs create tariff provisions for specific
types of resources when those resources have unique physical and
operational characteristics or other attributes that warrant
distinctive treatment from other market participants. The tariff
provisions that are created for a particular type of resource are
what we refer to in this final rule as a participation model.
\8\ NOPR, 157 FERC ] 61,121 at P 106. Demand response means a
reduction in the consumption of electric energy by customers from
their expected consumption in response to an increase in the price
of electric energy or to incentive payments designed to induce lower
consumption of electric energy. 18 CFR 35.28(b)(4).
---------------------------------------------------------------------------
3. Where such barriers exist, resources that are technically
capable of providing some services on their own or through aggregation
are precluded from competing with resources that are already
participating in the RTO/ISO markets.\9\ These restrictions on
competition can reduce the efficiency of the RTO/ISO markets,
potentially leading an RTO/ISO to dispatch more expensive resources to
meet its system needs. By removing barriers to the participation of
distributed energy resource aggregations in the RTO/ISO markets, this
final rule will enhance competition and, in turn, help to ensure that
the RTO/ISO markets produce just and reasonable rates.
---------------------------------------------------------------------------
\9\ In Order No. 841, the Commission clarified that
``technically capable'' of providing a service means meeting all of
the technical, operational, and/or performance requirements that are
necessary to reliably provide that service. Electric Storage
Participation in Markets Operated by Regional Transmission
Organizations & Independent System Operators, Order No. 841, 83 FR
9580, 162 FERC ] 61,127, at P 78 (2018), order on reh'g, Order No.
841-A, 84 FR 23902, 167 FERC ] 61,154 (2019), aff'd sub nom. Nat'l
Ass'n of Regulatory Util. Comm'rs v. FERC, 964 F.3d 1177 (D.C. Cir.
2020).
.
---------------------------------------------------------------------------
4. Facilitating distributed energy resource participation in RTO/
ISO markets will provide a variety of benefits to those markets.
Integrating these resources' capabilities into RTO/ISO planning and
operations will help the RTOs/ISOs account for the impacts of these
resources on installed capacity requirements and day-ahead energy
demand, thereby reducing uncertainty in load forecasts and reducing the
risk of over procurement of resources and the associated costs.\10\
These resources are able to locate where price signals indicate that
new capacity is most needed, potentially helping to alleviate
congestion and congestion costs during peak load conditions and to
reduce costs related to transmitting energy into persistently high-
priced load pockets.\11\ Indeed, in the NOPR, the Commission noted
certain valuable characteristics that distributed energy resources can
offer, including their ability to co-locate with load and provide
associated benefits. Additionally, their relatively short development
lead time allows distributed energy resources to respond rapidly to
near-term generation or transmission reliability-related requirements,
further improving their ability to enhance reliability and reduce
system costs.
---------------------------------------------------------------------------
\10\ NOPR, 157 FERC ] 61,121 at P 129.
\11\ Id. P 130.
---------------------------------------------------------------------------
5. The rules that we adopt in this final rule will help enable the
participation of distributed energy resources in the RTO/ISO markets by
providing a means for these resources to, in the aggregate, satisfy
minimum size and performance requirements that they may not meet on a
stand-alone basis.\12\ The Commission in the NOPR noted that
distributed energy resource aggregations can help to address the
commercial and transactional barriers to distributed energy resource
participation in the RTO/ISO markets, such as sharing the significant
costs of participating in those markets, including the costs of the
necessary metering, telemetry, and communication equipment.\13\
---------------------------------------------------------------------------
\12\ See id. PP 105, 125.
\13\ Id. P 126.
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6. To address barriers to the participation of distributed energy
resource aggregations in the RTO/ISO markets, we require each RTO/ISO
to revise its tariff to establish distributed energy resource
aggregators as a type of market participant that can register
distributed energy resource aggregations under one or more
participation models in the RTO/ISO tariff that accommodate the
physical and operational characteristics of each distributed energy
resource aggregation.
7. Generally, we are adopting the specific reforms proposed in the
NOPR, but with certain revisions based on the record in this
proceeding, including input from the Commission technical conference
convened April 10-11, 2018, responses to a post-technical conference
notice, and responses to the Commission's September 5, 2019 Data
Requests to RTOs/ISOs on policies and procedures that affect the
interconnection of distributed energy resources. In particular, certain
proposals in the NOPR have been altered in this final rule to better
address the needs of different stakeholders, facilitate solutions to
potential technical challenges, and to reflect the substantial efforts
that have already been undertaken by some RTOs/ISOs to incorporate
distributed energy resources into their markets, by providing for
greater regional flexibility with respect to a number of proposed
requirements.
8. For each RTO/ISO, the tariff provisions addressing distributed
energy resource aggregations must (1) allow distributed energy resource
aggregations to participate directly in RTO/ISO markets and establish
distributed energy resource aggregators as a type of market
participant; (2) allow distributed energy resource aggregators to
register distributed energy resource aggregations under one or more
participation models that accommodate the physical and operational
characteristics of the distributed energy resource aggregations; (3)
establish a minimum size requirement for distributed energy resource
aggregations that does not exceed 100 kW; (4) address locational
requirements for distributed energy resource aggregations; (5) address
distribution factors and bidding parameters for distributed energy
resource aggregations; (6) address information and data requirements
for distributed energy resource aggregations; (7) address metering and
telemetry requirements for distributed energy resource aggregations;
(8) address coordination between the RTO/ISO, the distributed energy
resource aggregator, the distribution utility, and the relevant
electric retail regulatory authorities; (9) address modifications to
the list of resources in a distributed energy resource aggregation; and
(10) address market participation agreements for distributed energy
resource aggregators. Additionally, each RTO/ISO must accept bids from
a distributed energy resource aggregator if its aggregation includes
distributed energy resources that are customers of utilities that
distributed more than 4 million megawatt-hours in the previous fiscal
[[Page 67097]]
year. An RTO/ISO must not accept bids from a distributed energy
resource aggregator if its aggregation includes distributed energy
resources that are customers of utilities that distributed 4 million
megawatt-hours or less in the previous fiscal year, unless the relevant
electric retail regulatory authority permits such customers to be bid
into RTO/ISO markets by a distributed energy resource aggregator.
9. As discussed further below in Section IV.K (Compliance), each
RTO/ISO must file the tariff changes needed to implement the
requirements of this final rule within 270 days of the publication date
of this final rule in the Federal Register.
II. Procedural History
10. This final rule arises out of the same Commission inquiry that
led to Order No. 841,\14\ in which the Commission amended its
regulations under the FPA to remove barriers to the participation of
electric storage resources in RTO/ISO markets. The Commission commenced
that inquiry by hosting a panel to discuss electric storage resources
at its November 19, 2015, open meeting. Subsequently, on April 11,
2016, Commission staff issued data requests to each of the six RTOs/
ISOs seeking information about the rules in the RTO/ISO markets that
affect the participation of electric storage resources. Concurrently,
Commission staff issued a request for comments, seeking information
from interested persons on whether barriers exist to the participation
of electric storage resources in the RTO/ISO markets that may
potentially lead to unjust and unreasonable wholesale rates. In
addition to the responses from the RTOs/ISOs, Commission staff received
44 comments. Many of the responses and comments discussed types of
distributed energy resources and general market participation issues
beyond concerns specific to electric storage resources.\15\
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\14\ Order No. 841, 162 FERC ] 61,127.
\15\ See, e.g., CAISO Response (AD16-20) at 2-3; ISO-NE Response
(AD16-20) at 6-7, 26-27; PJM Response (AD16-20) at 20-21; Advanced
Energy Economy Comments (AD16-20) on RTO/ISO Responses (AD16-20) at
16-18; RES Americas Comments (AD16-20) on RTO/ISO Responses (AD16-
20) at 4-5.
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11. On November 17, 2016, the Commission issued the NOPR in that
proceeding. In addition to its proposed reforms to facilitate the
participation of electric storage resources in RTO/ISO markets, the
Commission proposed to amend its regulations under the FPA to remove
barriers in current RTO/ISO market rules that may prevent new, smaller
distributed energy resources that are technically capable of
participating in the RTO/ISO markets from doing so.\16\
---------------------------------------------------------------------------
\16\ NOPR, 157 FERC ] 61,121 at PP 103, 124.
---------------------------------------------------------------------------
12. The Commission received 109 comments on the NOPR from a diverse
set of stakeholders.\17\ On February 15, 2018, the Commission issued
Order No. 841. In that final rule, the Commission noted that more
information was necessary to inform its consideration of its NOPR
proposals regarding facilitating the participation of distributed
energy resource aggregations in RTO/ISO markets and stated that it
would continue to explore the proposed distributed energy resource
aggregation reforms under Docket No. RM18-9-000.\18\
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\17\ See Appendix A for a list of entities that submitted
comments and the shortened names used throughout this final rule to
describe those entities.
\18\ Order No. 841, 162 FERC ] 61,127 at P 5. The Commission
incorporated by reference all comments filed in response to the NOPR
in Docket No. RM16-23-000 into Docket No. RM18-9-000 and directed
any further comments regarding the proposed distributed energy
resource aggregation reforms should be filed henceforth in Docket
No. RM18-9-000.
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13. The Commission also announced that it would hold a technical
conference to gather additional information regarding some distributed
energy resource aggregation issues. The technical conference, which was
held on April 10-11, 2018, addressed five issues related to this
proceeding: Locational requirements, state and local regulator
concerns, compensation for multiple services, coordination of
distributed energy resource aggregations, and ongoing operational
coordination.\19\ During the technical conference, more than 50
individuals and entities offered a broad range of perspectives. The
Commission issued a notice inviting post-technical conference comments
and requesting comments on a number of follow-up questions related to
each panel.\20\ The Commission received 52 post-technical conference
comments from a diverse set of stakeholders.
---------------------------------------------------------------------------
\19\ See Supplemental Notice of Technical Conference, Docket
Nos. RM18-9-000 and AD18-10-000 (Mar. 29, 2018), https://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=14856384.
\20\ See Notice Inviting Post-Technical Conference Comments,
Docket No. RM18-9-000 (Apr. 27, 2018), https://elibrary.ferc.gov/idmws/common/OpenNat.asp?fileID=14 882250.
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14. On September 5, 2019, Commission staff issued data requests to
each of the six RTOs/ISOs seeking information regarding their policies
and procedures that affect the interconnection of distributed energy
resources. In addition to the responses from the RTOs/ISOs, Commission
staff received 11 reply comments.
15. Some RTOs/ISOs in recent years have taken steps to facilitate
the participation of distributed energy resource aggregations in their
markets, and the Commission has approved these proposals. In June 2016
and January 2020, the Commission accepted proposals to allow
distributed energy resource aggregations to participate in certain RTO/
ISO markets.\21\ In addition, RTOs/ISOs have implemented some
participation models for distributed energy resource aggregations to
participate in their markets, often as demand response resources, with
a few exceptions.\22\
---------------------------------------------------------------------------
\21\ See Cal. Indep. Sys. Operator Corp., 155 FERC ] 61,229
(2016); N.Y. Indep. Sys. Operator, Inc., 170 FERC ] 61,033 (2020)
(NYISO Aggregation Order).
\22\ E.g., CAISO Data Request Response (2019 RM18-9) at 6
(citing CAISO Tariff, Section 4.17); ISO-NE Data Request Response
(2019 RM18-9) at 17-18 (stating that distributed energy resources
may participate in wholesale markets as demand resources or
Settlement Only Resources).
---------------------------------------------------------------------------
III. Need for Reform
16. In the NOPR, the Commission stated that its proposal is a
continuation of efforts pursuant to its authority under the FPA to
ensure that the RTO/ISO tariffs and market rules produce just and
reasonable rates, terms, and conditions of service.\23\ Specifically,
the Commission noted that it had observed that market rules designed
for traditional resources can create barriers to entry for emerging
technologies. The Commission expressed its concern that existing RTO/
ISO tariffs impede the participation of distributed energy resources in
the RTO/ISO markets by providing limited opportunities for distributed
energy resource aggregations.\24\
---------------------------------------------------------------------------
\23\ NOPR, 157 FERC ] 61,121 at P 9 (citing Integration of
Variable Energy Resources, Order No. 764, 139 FERC ] 61,246, order
on reh'g and clarification, Order No. 764-A, 141 FERC ] 61,232
(2012), order on clarification and reh'g, Order No. 764-B, 144 FERC
] 61,222 (2013); Wholesale Competition in Regions with Organized
Electric Markets, Order No. 719, 73 FR 64100 (Oct. 28, 2008), 125
FERC ] 61,071 (2008), order on reh'g, Order No. 719-A, 74 FR 37776
(Jul. 29, 2009), 128 FERC ] 61,059 (2009), order on reh'g, Order No.
719-B, 129 FERC ] 61,252 (2009)).
\24\ Id. P 13.
---------------------------------------------------------------------------
17. The Commission acknowledged in the NOPR that distributed energy
resources can at times effectively provide the capacity, energy, and
ancillary services that are purchased and sold in the RTO/ISO
markets.\25\ However, the Commission explained that sometimes these
resources can be too small to participate in these markets
individually. The Commission also noted that current RTO/ISO market
[[Page 67098]]
rules often limit the services that distributed energy resources are
eligible to provide, in many cases only allowing these resources to be
used as demand response or load-side resources when they are located
behind a customer meter or by imposing prohibitively expensive or
otherwise burdensome requirements.
---------------------------------------------------------------------------
\25\ See id.
---------------------------------------------------------------------------
18. The Commission preliminarily found that the barriers to the
participation of distributed energy resources through distributed
energy resource aggregations in the RTO/ISO markets may, in some cases,
unnecessarily restrict competition, which could lead to unjust and
unreasonable rates.\26\ The Commission stated that effective wholesale
competition encourages entry and exit and promotes innovation, incents
the efficient operation of resources, and allocates risk appropriately
between consumers and producers. Thus, the Commission stated that
removing the barriers to participation by distributed energy resource
aggregations will enhance the competitiveness, and in turn the
efficiency, of RTO/ISO markets and thereby help to ensure just and
reasonable and not unduly discriminatory or preferential rates for
wholesale electric services.
---------------------------------------------------------------------------
\26\ See id. P 14.
---------------------------------------------------------------------------
A. Comments
19. Most commenters, including state entities and RTOs/ISOs,
support requiring RTOs/ISOs to remove barriers to the participation of
distributed energy resource aggregations in their markets, subject to
the Commission's adopting certain modifications to the NOPR proposals
and/or allowing for regional flexibility in implementing reforms in any
eventual final rule.\27\ Among other things, these commenters identify
improved competition and reliability as benefits of the proposed
reforms and note that they provide a better way to provide price
signals to distributed energy resources than current retail
programs,\28\ which may reduce the cost of meeting power system
needs.\29\ AWEA notes that participation in wholesale markets allows
distributed energy resources to receive real-time information about
system needs.\30\ Commenters also state that the removal of barriers
to, and integration of, distributed energy resource aggregations could
spur innovation, and allow these aggregations to serve important roles
on the grid.\31\ Several commenters emphasize that a distributed energy
resource aggregation framework must ensure that aggregated distributed
energy resources can provide all the services that they are capable of
providing,\32\ while competing on a level and technology-neutral
playing field with other resources.\33\ Some commenters note that
distributed energy resources do not currently fit within existing
paradigms, which were designed for, and favor, other resources.\34\
Others state that for distributed energy resources and distributed
energy resource aggregations to fairly participate, they must meet the
same technical and commercial requirements as other resources, and pay
equally for ancillary services and use of the transmission system.\35\
---------------------------------------------------------------------------
\27\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
31-32; Connecticut Department of Energy Comments (RM16-23) at 4;
IPKeys/Motorola Comments (RM16-23) at 4; Leadership Group Comments
(RM16-23) at 2; MISO Comments (RM16-23) at 2; Ohio Commission
Comments (RM16-23) at 2-3.
\28\ AWEA Comments (RM16-23) at 1-2; City of New York Comments
(RM16-23) at 3, 5, 7; Maryland and New Jersey Commissions Comments
(RM16-23) at 2; Ohio Commission Comments (RM16-23) at 2; Public
Interest Organizations Comments (RM16-23) at 5-6.
\29\ AWEA Comments (RM16-23) at 2.
\30\ Id.
\31\ California Energy Storage Alliance Comments (RM16-23) at 4;
Microgrid Resources Coalition Comments (RM16-23) at 10; Union of
Concerned Scientists Comments (RM16-23) at 9, 15, 17 (noting the
lack of participation models for potential market service providers
like domestic electric water heaters and distributed solar
resources).
\32\ See, e.g., Advanced Energy Management Comments (2018 RM18-
9) at 3; Direct Energy Comments (2018 RM18-9) at 5, 11-13; Energy
Storage Association Comments (2018 RM18-9) at 2; Microsoft Comments
(2018 RM18-9) at 16-17; NRG Comments (2018 RM18-9) at 5-6.
\33\ Advanced Energy Economy Comments (2018 RM18-9) at 5;
Advanced Energy Management Comments (2018 RM18-9) at 3; Microsoft
Comments (2018 RM18-9) at 15-16; NRG Comments (2018 RM18-9) at 3.
\34\ Fresh Energy/Sierra Club/Union of Concerned Scientists
Comments (RM16-23) at 1; Public Interest Organizations Comments
(RM16-23) at 5-6.
\35\ PJM Market Monitor Comments (RM16-23) at 10-11; New York
Utility Intervention Unit Comments (RM16-23) at 3.
---------------------------------------------------------------------------
20. Several commenters assert that existing participation models
discriminate against distributed energy resources. For instance, Public
Interest Organizations argue that distributed energy resources in PJM
are often forced into participating as demand response, or
interconnecting as generation, which are cost prohibitive.\36\ Stem
asserts that CAISO's Non-Generator Resource and Distributed Energy
Resource Provider models effectively prevent participation of behind-
the-meter resources in CAISO.\37\ Advanced Energy Economy contends
that, despite the benefits that aggregated distributed energy resources
provide,\38\ performance penalties for deviation from the
characteristics of traditional generation effectively preclude
participation in the capacity market.\39\
---------------------------------------------------------------------------
\36\ Public Interest Organizations Comments (RM16-23) at 19.
\37\ Stem Comments (RM16-23) at 12, 16.
\38\ Advanced Energy Economy states that the benefits include
the ability to provide a quick response to system emergencies, which
gives other resources time to ramp up or procure fuel, the ability
of demand response to prevent blackouts during times of peak demand,
and the ability to be dispatched granularly to provide support to
specific parts of the grid. Advanced Energy Economy Comments (RM16-
23) at 42-43.
\39\ Id. (arguing that PJM's capacity performance construct and
ISO-NE's pay-for-performance construct both effectively require
indefinite run times to avoid performance penalties that can amount
to more than a year's worth of capacity revenue).
---------------------------------------------------------------------------
21. Some commenters state that distributed energy resource
aggregation integration can be accomplished in a reliable and cost-
effective manner.\40\ Other commenters argue that allowing distributed
energy resource aggregations to participate in wholesale markets will
create new opportunities and enhance the reliability and resilience of
the grid, leading to benefits such as savings and efficiency.\41\
Advanced Energy Buyers suggest that allowing distributed energy
resources to participate in RTO/ISO markets will also provide such
resources with additional revenue streams, making them more economic
and candidates for greater investment, and provide additional benefit
to the grid as a result of increased market activity.\42\ Commenters
also note that the pairing of dispatchable resources with non-
dispatchable resources in an aggregation could create a portfolio that
overall could be dispatchable to the bulk power system.\43\ Other
commenters assert that, if distributed energy resources are not able to
participate in wholesale markets, it could result in system overbuild,
inaccurate wholesale price formation, and lack of visibility into
system conditions.\44\
---------------------------------------------------------------------------
\40\ Advanced Energy Economy Comments (2018 RM18-9) at 5.
\41\ See, e.g., Advanced Energy Buyers Comments (2018 RM18-9) at
3; CAISO Comments (2018 RM18-9) at 1; Direct Energy Comments (2018
RM18-9) at 11-13; NRG Comments (2018 RM18-9) at 5-6; Tesla Comments
(2018 RM18-9) at 3.
\42\ Advanced Energy Buyers Comments (2018 RM18-9) at 5.
\43\ NYISO Indicated Transmission Owners Comments (2018 RM18-9)
at 4.
\44\ Id.; Microsoft Comments (2018 RM18-9) at 13.
---------------------------------------------------------------------------
22. Certain United States senators express support for the proposed
rule which, they state, would help develop frameworks for how
renewables can aggregate together to more effectively participate in
energy markets, and provide useful guidance on how to better integrate
these resources with existing energy providers. In addition,
[[Page 67099]]
these United States senators maintain that the rulemaking comes at a
critical time for renewable energy because renewables led the way in
2016 for new additions onto the energy grid.\45\ These United States
senators, as well as members of the United States House of
Representatives, urge the Commission to adopt a final rule that
provides all distributed energy resources with the opportunity to
participate in RTO/ISO markets, noting that the changes proposed in the
NOPR will help improve the reliability and resilience of the bulk power
system by providing operators with new local tools to manage
unanticipated events and potentially lower costs for customers. They
state that renewable energy provided 10% of electricity generation in
2018 due to state and federal policies as well as consumer interest in
choosing cost-competitive technologies.\46\
---------------------------------------------------------------------------
\45\ September 22, 2017 Letter to Chairman Neil Chatterjee from
United States Senators Sheldon Whitehouse, Cory A. Booker, Edward J.
Markey, Ron Wyden, Elizabeth Warren and Bernard Sanders (filed Sept.
25, 2017) (September 22 Letter); see also May 23, 2018 Letter to
Chairman Kevin McIntyre from United States Senators Sheldon
Whitehouse, Edward J. Markey, Martin Heinrich, Jeanne Shaheen,
Richard Blumenthal, Margaret Wood Hassan, Angus S. King, Jr., Dianne
Feinstein, Bernard Sanders, Catherine Cortez Masto, Jack Reed, Ron
Wyden, Jeff Merkley, Kamala D. Harris, Cory A. Booker, and Brian
Schatz (filed May 23, 2018) (discussing 2016 estimates from the
Energy Information Administration that distributed energy resources
accounted for about two percent of the installed generation capacity
in the United States). In response to the September 22 Letter,
Chairman Chatterjee stated that the Commission has a role in
fostering resource neutral, non-discriminatory policies with respect
to the wholesale markets, including removing barriers to the
participation of distributed energy resources in the wholesale
markets. Chairman's Response to September 22 Letter (filed Oct. 5,
2017).
\46\ February 11, 2019 Letter to Chairman Neil Chatterjee from
United States Congress members Peter Welch, Mike Levin, Mike
Quigley, Paul D. Tonko, Daniel W. Lipinski, Jerry McNerney, James R.
Langevin, Kathy Castor, Raul M. Grijalva, Mark Pocan, Donald S.
Beyer Jr., Matt Cartwright, Nanette Diaz Barrag[aacute]n, Sean
Casten, Jamie Raskin, James P. McGovern, and Mike Doyle (filed Feb.
11, 2019); February 11, 2019 Letter to Chairman Neil Chatterjee from
United States Senators Sheldon Whitehouse, Edward J. Markey, Cory A.
Booker, Catherine Cortez Masto, Martin Heinrich, Brian Schatz, Ron
Wyden, Jeffrey A. Merkley, Kamala D. Harris, Richard Blumenthal,
Jack Reed, Angus S. King, Jr., Tina Smith, Jacky Rosen, Margaret
Wood Hassan, Jeanne Shaheen, Dianne Feinstein, and Bernard Sanders
(filed Feb. 21, 2019).
---------------------------------------------------------------------------
23. Mensah asserts that one of the biggest limitations that needs
to be addressed is the ability of behind-the-meter distributed energy
resources to inject onto the grid.\47\ Tesla requests the Commission
extend to distributed energy resource aggregations the finding in Order
No. 841 that existing tariffs do not recognize the operational
characteristics of electric storage resources and limit their
participation in the markets.\48\ Tesla urges the Commission to require
that RTO/ISO tariffs allow distributed energy resources, including
those resources physically located behind an end-use customer meter, to
employ their full operational range by injecting energy onto the grid
in order to provide any wholesale service through participation in
distributed energy resource aggregations.\49\
---------------------------------------------------------------------------
\47\ Mensah Comments (RM16-23) at 3.
\48\ Tesla Comments (2018 RM18-9) at 7.
\49\ Id. at 1, 7.
---------------------------------------------------------------------------
24. Some commenters argue that the Commission needs to provide
general guidance on distributed energy resource aggregation, with
straightforward rules, clearly defined responsibilities, and data-
driven market signals.\50\ They explain that distributed energy
resource aggregations must have transparent and predictable parameters
for participation that are not overly restrictive and do not contain
undue administrative delay.\51\ Microsoft suggests that the Commission
provide ``directional guidance'' to RTOs/ISOs to remove barriers.\52\
---------------------------------------------------------------------------
\50\ Advanced Energy Buyers Comments (2018 RM18-9) at 2;
Advanced Energy Economy Comments (2018 RM18-9) at 5.
\51\ Advanced Energy Buyers Comments (2018 RM18-9) at 5.
\52\ Microsoft Comments (2018 RM18-9) at 13.
---------------------------------------------------------------------------
25. In contrast, EEI states that the Commission should defer to
regional stakeholder processes and coordination with state-
jurisdictional entities to formulate the detailed provisions required
to implement distributed energy resource aggregation participation in
the wholesale market.\53\ APPA states that the evidence is thin to show
that there is a great demand for distributed energy resource
aggregation programs or that such programs will bring meaningful
benefits to consumers in the RTO/ISO regions.\54\
---------------------------------------------------------------------------
\53\ EEI Comments (2018 RM18-9) at 3.
\54\ APPA Comments (2018 RM18-9) at 10.
---------------------------------------------------------------------------
B. Commission Determination
26. For the reasons discussed below, in this final rule, we affirm
the preliminary finding in the NOPR that existing RTO/ISO market rules
are unjust and unreasonable because they present barriers to the
participation of distributed energy resource aggregations in the RTO/
ISO markets, and such barriers reduce competition and fail to ensure
just and reasonable rates. Specifically, current RTO/ISO market rules
present barriers that prevent certain distributed energy resources that
are technically capable of participating in the RTO/ISO markets on
their own or through aggregation from doing so.\55\ Permitting
distributed energy resource aggregations to participate in the RTO/ISO
markets may allow these resources, in the aggregate, to meet certain
qualification and performance requirements, particularly if the
operational characteristics of different distributed energy resources
in a distributed energy resource aggregation complement each other.\56\
The reforms adopted in this final rule will remove the barriers that
qualification and performance requirements currently pose to the
participation of distributed energy resources in the RTO/ISO
markets.\57\
---------------------------------------------------------------------------
\55\ See NOPR, 157 FERC ] 61,121 at P 124.
\56\ See id. P 125.
\57\ See infra section IV.C.4 (Minimum and Maximum Size of
Aggregation) (agreeing with commenters that a minimum size
requirement not to exceed 100 kW will help improve competition in
the RTO/ISO markets and avoid confusion about appropriate minimum
size requirements for distributed energy resource aggregations under
existing or new participation models); Section IV.C.6 (Single
Resource Aggregation) (explaining that a consistent minimum size
requirement will minimize barriers in the event that an individual
distributed energy resource ceases to participant in RTO/ISO markets
as a single qualifying distributed energy resource aggregation).
---------------------------------------------------------------------------
27. The reforms adopted in this final rule are timely, as there has
been significant development of distributed energy technologies and
deployment of distributed energy resources in recent years. Moreover,
this development has generated discussions on the potential for such
resources--including new distributed energy resources that are smaller,
interconnected at lower voltages, and geographically dispersed--to
provide grid services through participation in RTO/ISO markets. Wider
scale use of distributed energy resources is enabled by increased
deployment of, and improvements in, metering, telemetry, and
communication technologies. Aggregations of new and existing
distributed energy resources can provide new cost-effective sources of
energy and grid services and enhance competition in wholesale markets
as new market participants.
28. Individual distributed energy resources often do not meet the
minimum size requirements to participate in the RTO/ISO markets under
existing participation models and often cannot satisfy all the
performance requirements of the various participation models due to
their small size. In order to participate in RTO/ISO markets,
distributed energy resources tend to participate in RTO/ISO demand
response programs. While these demand response programs have helped
reduce barriers to load curtailment resources, they often limit the
operations of some
[[Page 67100]]
types of distributed energy resources, such as electric storage or
distributed generation, as well as the services that they are eligible
to provide.\58\
---------------------------------------------------------------------------
\58\ For example, when participating through demand response
programs, distributed energy resources generally can only operate to
reduce customer demand at the meter, and any injection/generation
cannot exceed customer demand. Consequently, these resources are
prevented from injecting additional electricity into the grid to
make sales of electricity in RTO/ISO markets.
---------------------------------------------------------------------------
29. We find that adopting the reforms described below will enhance
the competitiveness, and in turn the efficiency, of RTO/ISO markets and
thereby help to ensure just and reasonable and not unduly
discriminatory or preferential rates for wholesale electric
services.\59\ Further, the reforms required by this final rule will
help the RTOs/ISOs account for the impacts of distributed energy
resources on installed capacity requirements and day-ahead energy
demand, thereby reducing uncertainty in load forecasts and the risk of
over procurement of resources and the associated costs, and provide
numerous other benefits.\60\ Accordingly, as discussed further below,
we adopt the NOPR proposal to add Sec. 35.28(g)(12)(i) to the
Commission's regulations and require each RTO/ISO to have tariff
provisions that allow distributed energy resource aggregations to
participate directly in RTO/ISO markets.\61\ While we agree with
commenters that there are operational, technological, and cost
implications that must be evaluated and addressed, as explained below,
we find that the record in this proceeding provides sufficient basis
for taking action to require the implementation of the generic
requirements discussed herein.
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\59\ See infra Section IV.C.1 (Participation Model); Section
IV.C.2 (Types of Technologies); Section IV.C.3 (Double Counting of
Services); Section IV.H.2 (Role of Distribution Utilities); Section
IV.J (Market Participation Agreements).
\60\ See infra Section IV.C.4 (Minimum and Maximum Size of
Aggregation); Section IV.D (Locational Requirements).
\61\ In addition, we adopt the proposal to add sections
35.28(b)(10) and (11) to the Commission's regulations incorporating
the definitions for distributed energy resource and distributed
energy resource aggregator.
---------------------------------------------------------------------------
30. To the extent that an RTO/ISO proposes to comply with any or
all of the requirements in this final rule using its currently
effective requirements for distributed energy resources, it must
demonstrate on compliance that its existing approach meets the
requirements in this final rule.
IV. Discussion
A. Commission Jurisdiction
1. Scope of Final Rule
31. In the NOPR, the Commission stated that it was proposing
reforms pursuant to its legal authority under section 206 of the FPA to
ensure that the RTO/ISO tariffs are just and reasonable and not unduly
discriminatory or preferential.\62\
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\62\ NOPR, 157 FERC ] 61,121 at P 1.
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a. Comments
32. Several commenters assert that the basis for the Commission's
jurisdiction is straightforward because sales from distributed energy
resource aggregators into wholesale markets are sales at wholesale in
interstate commerce.\63\ Other commenters question the Commission's
authority to implement the proposed reforms, seek clarification of the
NOPR's scope, or ask the Commission to respect existing federal, state,
and local jurisdictional boundaries.\64\
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\63\ See, e.g., Sunrun Comments (2018 RM18-9) at 3-4 (citing 16
U.S.C. 824(b)(1)); Connecticut State Entities Comments (RM16-23) at
7; Stem Comments (2018 RM18-9) at 3.
\64\ See, e.g., APPA/NRECA Comments (RM16-23) at 18-20; MISO
Transmission Owners Comments (RM16-23) at 17-18; NESCOE Comments
(RM16-23) at 16; TAPS Comments (RM16-23) at 4-5; Xcel Energy
Services Comments (RM16-23) at 6-9, 23-24.
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33. Stem asserts that the Commission should clarify that it has
jurisdiction over participation in the wholesale markets and the
associated transactions, while relevant electric retail regulatory
authorities \65\ have jurisdiction over the physical dispatch and the
resulting electrical activity on the distribution system.\66\
Connecticut State Entities argue that, while the management of the
impacts of new generation on the distribution system remains with the
states, the comprehensive and effective integration of these emerging
technologies into the wholesale markets rests with the Commission.\67\
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\65\ The term ``relevant electric retail regulatory authority''
means the entity that establishes the retail electric prices and any
retail competition policies for customers, such as the city council
for a municipal utility, the governing board of a cooperative
utility, or the state public utility commission. See Order No. 719,
125 FERC ] 61,071 at P 158.
\66\ Stem Comments (2018 RM18-9) at 3.
\67\ Connecticut State Entities Comments (RM16-23) at 7.
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34. Harvard Environmental Policy Initiative argues that the
Commission's proposal to assert jurisdiction over a distributed energy
resource aggregator's sale of sink-related services to RTOs/ISOs would
fall under the Commission's jurisdiction under the test applied by the
U.S. Supreme Court in FERC v. Electric Power Supply Ass'n,\68\ and that
the Commission has authority under FPA section 206 to require RTOs/ISOs
to enable the participation of distributed energy resource
aggregators.\69\ Harvard Environmental Policy Initiative further
contends that a company's distribution system investments, even if
motivated by a Commission rule, are not evidence that the Commission
has overstepped its legal authority, and that, even if a change in
state law were necessary to allow consumers to participate, the NOPR
does not force states to do anything and does not require states to
facilitate the development of distributed energy resources.\70\
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\68\ Harvard Environmental Policy Initiative Comments (RM16-23)
at 3 (citing FERC v. Electric Power Supply Ass'n, 136 S. Ct. 760,
776 (2016) (EPSA)).
\69\ Id. at 4-5.
\70\ Id. at 9, 12.
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35. In contrast, some commenters question the Commission's
authority to impose the proposed reforms or seek clarification of
federal and state jurisdictional boundaries.\71\ APPA/NRECA interpret
the NOPR to be limited to reforms to the RTO/ISO tariff rules governing
RTO/ISO markets and they urge the Commission not to expand the scope of
the NOPR beyond RTO/ISO markets and to preserve state and local
authority over retail sales, generation facilities, and local
distribution facilities.\72\ TAPS similarly asserts that any final rule
should be limited to (1) the treatment by RTOs/ISOs of energy and
ancillary services from distributed energy resources after those
resources have already been delivered to the RTO's/ISO's markets; and
(2) assuring that any such participation of distributed energy resource
aggregations in RTO/ISO markets is compatible with the safe and
reliable operation of the distribution system, as well as relevant
electric retail regulatory authority and distribution utility tariffs,
rules, and requirements.\73\ FirstEnergy argues that any rules adopted
by the Commission must preserve state jurisdictional authority over
distribution-level resources.\74\ Similarly, the Maryland and New
Jersey Commissions ask the Commission to confirm that state decisions
on distribution system design, resource interconnection access,
operations, and costs will not be viewed
[[Page 67101]]
as a barrier to wholesale competition or subject to Commission
review.\75\ MISO Transmission Owners assert that any final rule must
not disturb a state's jurisdiction over retail electricity sales and
retail distribution service, including state regulation of retail
rates, net metering programs, and participation in wholesale markets by
resources located behind a retail distribution service meter.\76\
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\71\ See EEI Comments (RM16-23) at 25; Icetec Comments (2018
RM18-9) at 1-2; Maryland and New Jersey Commissions Comments (RM16-
23) at 2-3; Massachusetts Commission Comments (RM16-23) at 10; Stem
Comments (2018 RM18-9) at 3.
\72\ APPA/NRECA Comments (RM16-23) at 18-20.
\73\ TAPS Comments (RM16-23) at 9.
\74\ FirstEnergy Comments (2019 RM18-9) at 5 n.13.
\75\ Maryland and New Jersey Commissions Comments (RM16-23) at
3.
\76\ MISO Transmission Owners Comments (RM16-23) at 5-6.
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36. The Maryland and New Jersey Commissions ask the Commission to
enunciate clear federal and state jurisdictional lines pertaining to
both the distribution system and distributed energy resources, whether
in front of or behind the meter.\77\ The Massachusetts Commission and
EEI ask the Commission to clarify whether distribution system-connected
and behind-the-meter distributed energy resources that participate in
wholesale markets are Commission-jurisdictional facilities.\78\ EEI
notes that the Commission has exclusive jurisdiction over sales for
resale under the FPA.\79\ The Harvard Environmental Policy Initiative
states that EEI confuses Commission jurisdiction over energy sales with
state jurisdiction over generation facilities and argues that states
will retain authority over the resources themselves.\80\
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\77\ Maryland and New Jersey Commissions Comments (RM16-23) at
2.
\78\ Massachusetts Commission Comments (RM16-23) at 11.
\79\ EEI Comments (RM16-23) at 23-24 (citing 16 U.S.C.
824o(a)(1)).
\80\ Harvard Environmental Policy Initiative Comments (RM16-23)
at 12.
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37. Icetec asks the Commission either to (1) clarify that retail
customers transmitting power from distributed energy resources behind
their retail service point to their retail point of interconnection are
not considered public utilities subject to Open Access Transmission
Tariff (OATT) and Open Access Same-Time Information System (OASIS)
requirements, or (2) require RTOs/ISOs to include a pro forma request
for waiver of those requirements in distributed energy resource
participation agreements.\81\ The Harvard Environmental Policy
Initiative states that the Commission should establish a jurisdictional
line that distinguishes between sales by distributed energy resource
aggregators and sales by individual distributed energy resources by
determining that an energy sale from an individual distributed energy
resource is not a ``wholesale sale in interstate commerce'' but is
instead ``any other sale'' under FPA section 201 and therefore not
subject to Commission regulation.\82\
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\81\ Icetec Comments (2018 RM18-9) at 9.
\82\ Harvard Environmental Policy Initiative Comments (RM16-23)
at 13 (quoting 16 U.S.C. 824(b)(1)).
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b. Commission Determination
38. FPA section 201 authorizes the Commission to regulate the
transmission of electric energy in interstate commerce and the
wholesale sale of electric energy in interstate commerce, as well as
all facilities used for such transmission or sale of electric
energy.\83\ FPA section 201 also defines a public utility as a person
who owns or operates facilities subject to the jurisdiction of the
Commission.\84\ FPA sections 205 \85\ and 206 \86\ provide the
Commission with jurisdiction over all rates and charges made, demanded,
or received by any public utility for or in connection with the
transmission or sale of electric energy subject to the Commission's
jurisdiction. Those sections also provide the Commission with
jurisdiction over all rules, regulations, practices, or contracts
affecting jurisdictional rates, charges, or classifications.
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\83\ 16 U.S.C. 824.
\84\ Id. 824(e).
\85\ Id. 824d.
\86\ Id. 824e.
---------------------------------------------------------------------------
39. The Commission's authority to issue regulations pertaining to
distributed energy resource aggregations stems from both the
Commission's jurisdiction over the wholesale sales by distributed
energy resource aggregators into RTO/ISO markets and from its
jurisdiction over practices affecting wholesale rates.\87\
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\87\ See Nat'l Ass'n of Regulatory Util. Comm'rs v. FERC, 964
F.3d at 1186 (``FERC bears the responsibility of regulating the
wholesale market, which encompasses `both wholesale rates and the
panoply of rules and practices affecting them.' '') (quoting EPSA,
136 S. Ct. at 773).
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40. First, we find that the sales of electric energy by distributed
energy resource aggregators for purposes of participating in an RTO/ISO
market are wholesale sales subject to the Commission's jurisdiction. In
Order No. 841, the Commission observed that an electric storage
resource that injects electric energy back to the grid for purposes of
participating in an RTO/ISO market engages in a sale of electric energy
at wholesale in interstate commerce.\88\ Similarly, to the extent that
a distributed energy resource aggregator's transaction in RTO/ISO
markets entails the injection of electric energy onto the grid and a
sale of that energy for resale in wholesale electric markets, we find
that the Commission has jurisdiction over such wholesale sales.\89\
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\88\ Order No. 841, 162 FERC ] 61,127 at P 30.
\89\ See EnergyConnect, Inc., 130 FERC ] 61,031, at P 29 (2010).
We note that injections of electric energy to the grid do not
necessarily trigger the Commission's jurisdiction. See Sun Edison
LLC, 129 FERC ] 61,146 (2009), reh'g granted on other grounds, 131
FERC ] 61,213 (2010) (the Commission's jurisdiction would arise only
when a facility operating under a state net metering program
produces more power than it consumes over the relevant netting
period); MidAmerican Energy Co., 94 FERC ] 61,340 (2001).
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41. Second, we find that RTO/ISO market rules governing sales in
RTO/ISO markets by distributed energy resource aggregators from demand
resources (e.g., demand response and energy efficiency) are practices
affecting wholesale rates. This finding aligns with the decision of the
U.S. Supreme Court in EPSA, which interpreted the FPA as providing the
Commission with jurisdiction over the participation in RTO/ISO markets
of demand response resources: A type of non-traditional resource that,
by definition, is located behind a customer meter and generally is
located on the distribution system.\90\ First, the Court found that the
Commission's regulation of demand response participation in wholesale
markets met the ``affecting'' standard in FPA sections 205 and 206
``with room to spare.'' \91\ Second, the Court found that the
Commission's regulation of demand response resources did not regulate
retail sales in violation of FPA section 201(b).\92\ These holdings
apply equally to RTO/ISO market rules governing sales in RTO/ISO
markets by distributed energy resource aggregators from demand
resources.
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\90\ See Order No. 841-A, 167 FERC ] 61,154 at P 33 (citing
EPSA, 136 S. Ct. 760; 18 CFR 35.28(b)(4)).
\91\ EPSA, 136 S. Ct. at 774 (referring to the Commission's
jurisdiction under FPA sections 205 and 206 to regulate practices
affecting jurisdictional rates).
\92\ Id. at 784.
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42. We clarify that, to the extent a distributed energy resource
aggregator makes sales of electric energy into RTO/ISO markets, it will
be considered a public utility subject to the Commission's
jurisdiction.\93\ Such distributed energy resource aggregators must
fulfill certain responsibilities set forth in the FPA and the
Commission's rules and regulations.\94\ If a distributed
[[Page 67102]]
energy resource aggregator (1) aggregates only demand resources; or (2)
aggregates only customers in a net metering program that are not net
sellers, that distributed energy resource aggregator would not become a
public utility.\95\
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\93\ See EnergyConnect, Inc., 130 FERC ] 61,031 at P 29 (finding
an aggregator of retail customers to be a public utility under FPA
section 201(e) because its agreements to make sales of balancing
energy for resale in RTO/ISO markets would constitute jurisdictional
facilities under FPA section 201(b)).
\94\ Examples of such responsibilities include filing rates
under FPA section 205 (potentially including obtaining market-based
rate authority); filing Electric Quarterly Reports; submitting FPA
sections 203 and 204 filings related to corporate mergers and other
activities; and fulfilling FPA section 301 accounting obligations
and FPA section 305(b) interlocking directorate obligations. See 16
U.S.C. 824b, 824c, 824d, 825, 825d(b).
\95\ See EnergyConnect, Inc., 130 FERC ] 61,031 at P 30 (finding
that ``where an entity is only engaged in the provision of demand
response services, and makes no sales of electric energy for resale,
that entity would not own or operate facilities that are subject to
the Commission's jurisdiction and would not be a public utility that
is required to have a rate on file with the Commission''); Sun
Edison LLC, 129 FERC ] 61,146 (the Commission's jurisdiction would
arise only when a facility operating under a state net metering
program produces more power than it consumes over the relevant
netting period); MidAmerican Energy Co., 94 FERC ] 61,340.
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43. We further clarify that we are only exercising jurisdiction in
this final rule over the sales by distributed energy resource
aggregators into the RTO/ISO markets. Hence, an individual distributed
energy resource's participation in a distributed energy resource
aggregation would not cause that individual resource to become subject
to requirements applicable to Commission-jurisdictional public
utilities.
44. As the Commission stated in Order Nos. 841 and 841-A, the
Commission recognizes a vital role for state and local regulators with
respect to retail services and matters related to the distribution
system, including design, operations, power quality, reliability, and
system costs.\96\ As in Order No. 841, we reiterate that nothing in
this final rule preempts the right of states and local authorities to
regulate the safety and reliability of the distribution system and that
all distributed energy resources must comply with any applicable
interconnection and operating requirements.\97\
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\96\ Order No. 841, 162 FERC ] 61,127 at P 36; Order No. 841-A,
167 FERC ] 61,154 at P 42.
\97\ See Order No. 841-A, 167 FERC ] 61,154 at P 46.
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2. Opt-Out
45. In the NOPR, the Commission proposed to require each RTO/ISO to
revise its tariff as necessary to accommodate the participation of
distributed energy resource aggregations in RTO/ISO markets.\98\ In the
NOPR, the Commission stated that, to the extent existing rules or
regulations explicitly prohibit certain technologies from participating
in RTO/ISO markets, it did not intend to overturn those rules or
regulations.\99\ However, the Commission did not propose a mechanism by
which relevant electric retail regulatory authorities could authorize
or prohibit the participation of distributed energy resources or
distributed energy resource aggregators in RTO/ISO markets. The
Commission also explained that, because the individual resources in
distributed energy resource aggregations likely will fall under the
purview of multiple organizations (e.g., the RTO/ISO, state regulatory
commissions, relevant distribution utilities, and local regulatory
authorities), the proposed market participation agreements \100\ for
distributed energy resource aggregators must require that the
aggregator attest that its distributed energy resource aggregation is
compliant with the tariffs and operating procedures of the distribution
utilities and the rules and regulations of any other relevant
regulatory authority.\101\ The Commission stated that this may include
any laws or regulations of the relevant electric retail regulatory
authority that do not permit demand response resources to participate
in RTO/ISO markets as the Commission considered in Order No. 719.\102\
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\98\ NOPR, 157 FERC ] 61,121 at P 124.
\99\ Id. P 133.
\100\ See Section IV.J (Market Participation Agreements) below
for more discussion of market participation agreements.
\101\ NOPR, 157 FERC ] 61,121 at P 157.
\102\ Id. P 157 n.238 (citing Order No. 719, 125 FERC ] 61,071
at P 154).
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46. After the technical conference, the Commission sought comments
on whether states could require distributed energy resources to choose
to participate in either an RTO/ISO market or retail compensation
program, but not allow participation in both.\103\ The Commission also
sought comments on the benefits and drawbacks of such an approach.
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\103\ Notice Inviting Post-Technical Conference Comments at 6.
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a. Comments
47. As described above,\104\ numerous commenters question the
Commission's authority to require RTOs/ISOs to accommodate the
participation of distributed energy resource aggregations in RTO/ISO
markets. They believe that, to mitigate their jurisdictional concerns,
relevant electric retail regulatory authorities and/or distribution
utilities must be allowed to either authorize or prohibit the
participation of distributed energy resources and/or distributed energy
resource aggregators in the RTO/ISO markets (i.e., to opt in or opt
out, respectively).\105\ Thus, they specifically request that the
Commission adopt an opt-out/opt-in provision similar to that
established in Order No. 719 to allow relevant electric retail
regulatory authorities to decide whether distributed energy resources
may participate in aggregations in RTO/ISO markets.\106\
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\104\ See supra Section IV.A.1 (Scope of Final Rule).
\105\ See, e.g., APPA/NRECA Comments (RM16-23) at 21-22; DTE
Electric/Consumers Energy Comments (RM16-23) at 7; MISO Transmission
Owners Comments (RM16-23) at 6; NARUC Comments (RM16-23) at 4-5;
TAPS Comments (RM16-23) at 10, 16-17.
\106\ See, e.g., AES Companies Comments (RM16-23) at 31; Kansas
Commission Comments (2018 RM18-9) at 4; NRECA Comments (2018 RM18-9)
at 6-7, 27-28; Organization of MISO States Comments (RM16-23) at 4-
5; Southern Companies Comments (2018 RM18-9) at 3-4 (citing Order
No. 719, 125 FERC ] 61,071; Order No. 719-A, 128 FERC ] 61,059); see
discussion of opt-out/opt-in infra PP 59, 64.
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48. Some of these commenters contend that the Commission would be
exceeding its statutory authority if the final rule does not include an
opt-out.\107\ They argue that the Commission may determine how
distributed energy resources participate in RTO/ISO markets, but
whether they participate is the exclusive province of the states.\108\
APPA points to the existing opt-out for demand response resources
established in Order No. 719 to argue that the applicability of
relevant electric retail regulatory authority should not turn on the
wholesale participation model selected by the aggregator.\109\ APPA
asserts that the authority of relevant electric retail regulators over
the terms and conditions of interconnection to the distribution system
includes the authority to limit the manner in which a distributed
energy resource uses the distribution system.\110\ APPA argues that an
opt-out is consistent with the NOPR's proposal that market
participation agreements include an attestation that an aggregation is
compliant with distribution utility tariffs and the rules and
regulations of any other relevant regulatory authority. APPA further
argues that an opt-out conforms with the requirement in Order No. 841
that an electric storage resource must be ``contractually permitted''
to inject electric energy back onto the grid (e.g., per the
interconnection agreement between an electric storage resource that is
interconnected on a distribution system or behind the meter and the
distribution utility to which it is
[[Page 67103]]
interconnected).\111\ Xcel Energy Services argues that, to the extent
distributed energy resource participation in RTO/ISO markets does
occur, the applicable state has the authority to establish the
parameters of the participation model, not the RTO/ISO.\112\ Xcel
Energy Services asserts that the Commission should not usurp the
states' authority to address inappropriate arbitrage between retail and
wholesale consumption.\113\
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\107\ Kansas Commission Comments (2018 RM18-9) at 3; NARUC
Comments (2018 RM18-9) at 2-3; see APPA Comments (2018 RM18-9) at
15.
\108\ Kansas Commission Comments (2018 RM18-9) at 2-3; NARUC
Comments (2018 RM18-9) at 2-3.
\109\ APPA Comments (2018 RM18-9) at 17-18.
\110\ Id. at 15-16 (noting that CAISO's Distributed Energy
Resource Provider program requires compliance with applicable
distribution utility tariffs and operating procedures, as well as
applicable requirements of the relevant electric retail regulatory
authority).
\111\ Id. at 16 (citing NOPR, 157 FERC ] 61,121 at P 157; Order
No. 841, 162 FERC ] 61,127 at P 33).
\112\ Xcel Energy Services Comments (RM16-23) at 23-24.
\113\ Id. at 24.
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49. Multiple United States senators urge the Commission to preserve
the authority of state and local authorities over distribution
utilities with respect to distributed energy resource aggregators. They
express concern that the final rule could have a negative effect on
state and local authorities' ability to regulate retail and
distribution service. They argue that, if the Commission authorizes the
aggregation of distributed energy resources by entities other than the
local distribution utility without authorization by the appropriate
state or local regulator, the Commission would break precedent and
expand Commission regulation into areas that are jurisdictional to
state and localities under the FPA. They maintain that the relevant
electric retail regulatory authority is best positioned to decide
whether to authorize third-party distributed energy resource
aggregators to transact with retail customers.\114\
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\114\ May 7, 2019 Letter to Chairman Neil Chatterjee from United
States Senators John Hoeven, Kevin Cramer, John Barrasso, John
Boozman, Lisa Murkowski, Michael B. Enzi, Joni K. Ernst, Roger F.
Wicker, Shelley Moore Capito, Chuck Grassley, M. Michael Rounds,
Steve Daines, John Thune, Thom Tillis, Mike Crapo, Cindy Hyde-Smith,
Roy Blunt, James E. Risch, James Lankford, Deb Fischer, James M.
Inhofe, and Bill Cassidy. In response to this letter, the Chairman
noted that he asked state regulators participating at the April 2018
technical conference to discuss whether and why they view as
important in the context of this rulemaking the type of flexibility
that the Commission has provided to relevant electric retail
regulatory authorities with respect to participation of demand
response resources in wholesale electric markets. The Chairman also
stated that he recognizes the important role of state and local
regulators with respect to reliability and resilience, particularly
with respect to the distribution system. Chairman's Response to May
7, 2019 Letter (filed June 4, 2019).
---------------------------------------------------------------------------
50. Those commenters advocating for an opt-out also generally
express concerns about the cost, and operational and reliability
impacts, of distributed energy resource aggregations on distribution
utilities and the distribution system.\115\ With regard to cost
impacts, some commenters suggest that costs borne by small utilities
and their customer bases may outweigh the benefits of distributed
energy resource aggregation participation in RTO/ISO markets, and that
small to medium-sized distribution utilities may not have the resources
needed to coordinate with distributed energy resource aggregators and
RTOs/ISOs.\116\ In addition, NRECA argues that opt-out/opt-in
provisions would lessen the compliance burden on smaller entities and
would be consistent with the deference to relevant electric retail
regulatory authorities included in IEEE 1547.\117\ NRECA also raises
concerns that distributed energy resource aggregators may ``cherry-
pick'' the more lucrative resources in a system, undermining
reliability and the ability of utilities to develop and invest in their
own integrated distributed energy resources portfolio.\118\
Organization of MISO States suggests that even a temporary opt-out
would allow for safe and reliable implementation with minimal
disruption to the distribution system.\119\
---------------------------------------------------------------------------
\115\ See, e.g., Vice Chairman Place Comments (2018 RM18-9) at
2-3; EEI Comments (2018 RM18-9) at 19-20; Eversource Comments (2018
RM18-9) at 12-13; NRECA Comments (2018 RM18-9) at 7-10, 12; see also
AMP Comments (2019 RM18-9) at 1.
\116\ APPA Comments (2018 RM18-9) at 7 (asserting that rate
design challenges can be particularly acute for small to medium-
sized distribution utilities), 9-10 (asserting that monitoring and
responding to system impacts associated with distributed energy
resource aggregation activity could be particularly difficult for
small and medium-sized utilities); APPA/NRECA Comments (RM16-23) at
39 (asserting that the costs of installing new meters or new
communication technology to capture wholesale market transactions
would burden smaller distribution utilities in particular); NRECA
Comments (2018 RM18-9) at 14 (asserting that smaller distribution
cooperatives may not have staff or resources needed to conduct
ongoing operational coordination with RTOs/ISOs and distributed
energy resource aggregators), 26 (asserting that the considerable
amount of funding required to potentially benefit a small number of
customers imposes too large of a burden on small utilities); TAPS
Comments (RM16-23) at 15-16 (asserting that, particularly for a
small utility, the costs of ongoing coordination, metering,
settlements, and rate-unbundling needed to support sales to RTO/ISO
markets by distributed energy resources may far exceed the potential
efficiency benefits from their participation in RTO/ISO markets).
\117\ NRECA Comments (2018 RM18-9) at 27-28. IEEE-1547 is a
standard of the Institute of Electrical and Electronics Engineers
(IEEE) that provides a set of criteria and requirements for the
interconnection of distributed energy resources.
\118\ Id. at 22-23.
\119\ Organization of MISO States Comments (2018 RM18-9) at 5-6.
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51. Some commenters argue that, to relieve smaller entities of cost
and coordination burdens, the Commission should at a minimum establish
an express opt-in requirement for small distribution utilities similar
to the one the Commission adopted in Order No. 719.\120\ NRECA asserts
that the distributed energy resource aggregation proposals would be
costly for small cooperatives in rural, remote communities.\121\ NRECA
and TAPS recommend that the Commission require express permission from
the relevant electric retail regulatory authority before the RTO/ISO
may accept bids from distributed energy resource aggregations located
on the system of a utility that distributes 4 million MWh or less,
employing the same size threshold as the small utility opt-in allowed
in Order No. 719-A.\122\
---------------------------------------------------------------------------
\120\ APPA Comments (2018 RM18-9) at 19-20; TAPS Comments (RM16-
23) at 16; TAPS Comments (2018 RM18-9) at 19-21.
\121\ NRECA Comments (2019 RM18-9) at 4-5.
\122\ Id.; TAPS Comments (RM16-23) at 16-17; TAPS Comments (2018
RM18-9) at 19 & n.27.
---------------------------------------------------------------------------
52. In contrast, other commenters caution against adopting the
Order No. 719 construct.\123\ Many of those commenters argue that an
opt-out is not necessary because the Commission has exclusive
jurisdiction over sales from distributed energy resource aggregators
into RTO/ISO markets.\124\ Moreover, several commenters argue that the
responsibility for integrating emerging technologies into RTO/ISO
markets rests with the Commission (while the states are responsible for
managing the impacts on the distribution system) and that the Order No.
719 opt-out provision has effectively prevented the development of
demand response in the Midwest and led to higher wholesale rates.\125\
In addition, some commenters argue that providing states with an opt-
out would be inconsistent with the Commission's denial of such an opt-
out
[[Page 67104]]
from electric storage participation in Order No. 841.\126\
---------------------------------------------------------------------------
\123\ See, e.g., Advanced Energy Buyers Comments (2018 RM18-9)
at 6; Advanced Energy Management Comments (2018 RM18-9) at 7-8, 10-
11; Icetec Comments (2018 RM18-9) at 10-11; SEIA Comments (2018
RM18-9) at 8; Stem Comments (2018 RM18-9) at 4-6.
\124\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 18; Energy Storage Association Comments (2018 RM18-9) at 5;
Icetec Comments (2018 RM18-9) at 11; Stem Comments (2018 RM18-9) at
4-5 (arguing that the FPA does not permit a state to use its
jurisdiction over generation or local distribution facilities to
prevent distributed energy resources or distributed energy resource
aggregators from accessing Commission-jurisdictional markets);
Sunrun Comments (2018 RM18-9) at 3-4 (arguing that whether wholesale
sales originate from facilities on the transmission system, the
distribution system, or behind the meter is immaterial to the
Commission's jurisdiction and that FPA section 201(b) distinguishes
between authority to regulate transactions and authority to regulate
facilities).
\125\ Advanced Energy Economy Comments (RM16-23) at 44-45;
Connecticut State Entities Comments (RM16-23) at 7; Organization of
MISO States Comments (RM16-23) at 5 n.3 (noting concerns of Illinois
Commission).
\126\ E.g., Advanced Energy Management Comments (2018 RM18-9) at
7-8 (citing Order No. 841, 162 FERC ] 61,127 at P 35).
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53. With respect to the Commission's authority, some commenters
assert that only the Commission has jurisdiction to determine
eligibility for wholesale market participation \127\ and that limiting
or conditioning wholesale market participation through retail tariffs
\128\ or distribution interconnection agreements \129\ would interfere
with that jurisdiction. Advanced Energy Management asserts that because
selling injections of electric energy in wholesale markets is governed
under the FPA and distributed energy resources are not always behind
the meter, there should not be a blanket opt-out available to relevant
electric retail regulatory authorities.\130\
---------------------------------------------------------------------------
\127\ Advanced Energy Economy Comments (2018 RM18-9) at 18
(citing Advanced Energy Econ., 161 FERC ] 61,245 (2017) (AEE
Declaratory Order), reh'g denied, 163 FERC ] 61,030 (2018) (AEE
Rehearing Order); Order No. 841, 162 FERC ] 61,127 at P 35);
Advanced Energy Management Comments (2018 RM18-9) at 18; Icetec
Comments (2018 RM18-9) at 11, 16.
\128\ Advanced Energy Economy Comments (2018 RM18-9) at 18.
\129\ Icetec Comments (2018 RM18-9) at 11; see Stem Comments
(2018 RM18-9) at 15.
\130\ Advanced Energy Management Comments (RM16-23) at 7.
Advanced Energy Management states that there should be no
restriction on where distributed energy resource aggregators can
recruit customers to participate in the wholesale market. Advanced
Energy Management Comments (2018 RM18-9) at 11.
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54. However, some commenters recognize that states do have the
right to implement retail tariffs that disqualify a resource from
participating in the state program if the resource elects to
participate in RTO/ISO markets.\131\ Several commenters caution that,
if the Commission does consider an opt-out, it must be narrowly
tailored.\132\ Harvard Environmental Policy Initiative points to the
Commission's proposed coordination provisions to demonstrate that the
Commission will not preempt state authority over distribution system
planning or create new authority for the Commission to allow
distributed energy resources to connect to a distribution system
without a utility's approval or knowledge.\133\
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\131\ See Advanced Energy Management Comments (2018 RM18-9) at
11; Stem Comments (2018 RM18-9) at 11; Sunrun Comments (2018 RM18-9)
at 8.
\132\ See Advanced Energy Economy Comments (2018 RM18-9) at 21;
Public Interest Organizations Comments (2018 RM18-9) at 8-10
(suggesting a Commission waiver process with a notice and comment
period); Stem Comments (2018 RM18-9) at 6 (suggesting, as one basis
to restrict distributed energy resource participation, the
demonstration of a reliability violation that cannot be resolved
through effective distribution system management).
\133\ Harvard Environmental Policy Initiative Comments (RM16-23)
at 12.
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55. In response to concerns about the impact of distributed energy
resource aggregations on the distribution system, several commenters
argue that distributed energy resource aggregation participation in
RTO/ISO markets does not introduce additional reliability or cost
concerns beyond those that are addressed through the interconnection
process.\134\ In contrast with commenters that suggest that distributed
energy resource aggregations introduce reliability or cost concerns,
Advanced Energy Economy argues that an opt-out would limit RTO/ISO
visibility into distributed energy resource operations, thereby
preventing RTO/ISO operators from using them to maintain reliability
and improve resilience, and would limit an RTO's/ISO's ability to
efficiently optimize all of the resources available in its region,
risking increased costs to consumers.\135\
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\134\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 17-18; Advanced Energy Management Comments (2018 RM18-9) at 9-10;
Stem Comments (2018 RM18-9) at 9, 15; Sunrun Comments (2018 RM18-9)
at 6; see also New Jersey Board Comments (2018 RM18-9) at 4.
\135\ Advanced Energy Economy Comments (2018 RM18-9) at 15-16.
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b. Commission Determination
56. We decline to include a mechanism for all relevant electric
retail regulatory authorities to prohibit all distributed energy
resources from participating in the RTO/ISO markets through distributed
energy resource aggregations (i.e., to opt out). However, we modify the
NOPR proposal in recognition of the potential indirect costs borne by
smaller utilities due to this final rule. More specifically, and as
discussed further below, we add Sec. 35.28(g)(12)(iv) to the
Commission's regulations to provide that RTOs/ISOs may not accept bids
from distributed energy resource aggregators aggregating customers of
small utilities \136\ unless the relevant electric retail regulatory
authority allows such customers of small utilities to participate in
distributed energy resource aggregations (i.e., to opt in).
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\136\ As discussed below, we will consider small utilities to be
those with a total electric output for the preceding fiscal year not
exceeding 4 million MWh.
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57. We disagree with the suggestion that the Commission is legally
required to grant an opt-out that enables all relevant electric retail
regulatory authorities to prohibit all distributed energy resources
from participating in the RTO/ISO markets through distributed energy
resource aggregations. The Commission has exclusive jurisdiction over
the wholesale markets and the criteria for participation in those
markets, including the wholesale market rules for participation of
resources connected at or below distribution-level voltages.\137\ As
the Commission previously has found, establishing the criteria for
participation in RTO/ISO markets, including with respect to resources
located on the distribution system or behind the meter, is essential to
the Commission's ability to fulfill its statutory responsibility to
ensure that wholesale rates are just and reasonable.\138\
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\137\ Order No. 841-A, 167 FERC ] 61,154 at P 38; Order No. 841,
162 FERC ] 61,127 at P 35 (citing EPSA, 136 S. Ct. 760; AEE
Declaratory Order, 161 FERC ] 61,245 at PP 59-60; see also Nat'l
Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1187 (``FERC has the
exclusive authority to determine who may participate in the
wholesale markets.''); Nat'l Ass'n of Regulatory Util. Comm'rs v.
FERC, 475 F.3d 1277, 1280-82 (D.C. Cir. 2007); Transmission Access
Policy Study Grp. v. FERC, 225 F.3d 667, 696 (D.C. Cir. 2000).
\138\ Order No. 841-A, 167 FERC ] 61,154 at P 31; see also id. P
38 (citing AEE Rehearing Order, 163 FERC ] 61,030 at P 36). The
Supreme Court also has recognized that the Commission extensively
regulates the structure and rules of wholesale auctions, in order to
ensure that they produce just and reasonable results. See Hughes v.
Talen Energy Mktg., LLC, 136 S. Ct. 1288, 1293-94 (2016) (Hughes);
EPSA, 136 S. Ct. at 769.
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58. This final rule addresses rules for participation in RTO/ISO
markets by distributed energy resource aggregators. Like the
Commission's rules governing demand response and electric storage
resource participation in RTO/ISO markets, this final rule
``addresses--and addresses only--transactions occurring on the
wholesale market.'' \139\ Thus, we continue to find that the FPA and
relevant precedent does not legally compel the Commission to adopt a
relevant electric retail regulatory authority opt-out with respect to
participation in RTO/ISO markets by all resources interconnected on a
distribution system or located behind a retail meter.\140\ As the
United States Court of Appeals for the District of Columbia Circuit
(D.C. Circuit) recently explained, the Commission has jurisdiction to
decide which entities may participate in wholesale markets, which means
that a relevant electric
[[Page 67105]]
retail regulatory authority cannot broadly prohibit the participation
in RTO/ISO markets of all distributed energy resources or of all
distributed energy resource aggregators as doing so would interfere
with the Commission's statutory obligation to ensure that wholesale
electricity markets produce just and reasonable rates.\141\
---------------------------------------------------------------------------
\139\ EPSA, 136 S. Ct. at 776; see also Nat'l Ass'n of
Regulatory Util. Comm'rs, 964 F.3d at 1186, 1189 (finding that
``Order No. 841 solely targets the manner in which an [electric
storage resource] may participate in wholesale markets'' and that
Order Nos. 841 and 841-A ``do nothing more than regulate matters
concerning federal transactions''); Order No. 841-A, 167 FERC ]
61,154 at P 44.
\140\ Order No. 841-A, 167 FERC ] 61,154 at P 32; see also AEE
Declaratory Order, 161 FERC ] 61,245 at P 62 (citing EPSA, 136 S.
Ct. at 776).
\141\ See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at
1187 (``[B]ecause FERC has the exclusive authority to determine who
may participate in the wholesale markets, the Supremacy Clause . . .
requires that [s]tates not interfere. . . . FERC's statement in
Order No. 841-A that [s]tates may not block RTO/ISO market
participation `through conditions on the receipt of retail service,'
or impose any `condition[ ] aimed directly at the RTO/ISO markets,
even if contained in the terms of retail service,' is simply a
restatement of the well-established principles of federal
preemption.'') (quoting Order No. 841-A, 167 FERC ] 61,154 at P 41)
(finding that states cannot intrude on the Commission's jurisdiction
by prohibiting all consumers from selling into the wholesale market)
(citing AEE Rehearing Order, 163 FERC ] 61,030 at P 37; AEE
Declaratory Order, 161 FERC ] 61,245 at P 61); see also Hughes, 136
S. Ct. at 1298 (``States may not seek to achieve ends, however
legitimate, through regulatory means that intrude on FERC's
authority over interstate wholesale rates . . . .''); Oneok, Inc. v.
Learjet, Inc., 575 U.S. 373, 386 (2015) (finding that the proper
test for determining whether a state action is preempted is
``whether the challenged measures are 'aimed directly at interstate
purchasers and wholesalers for resale' or not'') (quoting N. Natural
Gas Co. v. State Corp. Comm'n of Kan., 372 U.S. 84, 94 (1963));
Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1187 (similar).
---------------------------------------------------------------------------
59. As commenters point out, the Commission in Order No. 719
granted relevant electric retail regulatory authorities an opt-out from
allowing retail customers to participate directly in wholesale markets
through aggregations of demand response resources.\142\ As noted above,
the Commission was not obligated to provide such an opt-out, but rather
did so as an exercise of its discretion.\143\ Consistent with that
previous exercise of the Commission's discretion, we clarify that this
final rule does not affect the ability of relevant electric retail
regulatory authorities to prohibit retail customers' demand response
from being bid into RTO/ISO markets by aggregators.\144\
---------------------------------------------------------------------------
\142\ Order No. 719, 125 FERC ] 61,071 at PP 154-55.
\143\ See EPSA, 136 S. Ct. at 779 (describing the opt-out as a
``notable solicitude toward the States,'' in recognition of ``the
linkage between wholesale and retail markets and the States' role in
overseeing retail sales''); Nat'l Ass'n of Regulatory Util. Comm'rs,
964 F.3d at 1190 (``Local Utility Petitioners correctly acknowledge
that EPSA did not condition its holdings on the existence of an opt-
out.'').
\144\ See 18 CFR 35.28(g)(1)(iii). Similarly, we recognize
Kentucky's existing right to exclude energy efficiency resources
from wholesale market participation. AEE Declaratory Order, 161 FERC
] 61,245 at P 66.
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60. However, unlike aggregators of demand response, distributed
energy resource aggregators are capable of engaging in sales for resale
of electricity and those distributed energy resource aggregators making
such sales in the RTO/ISO markets are public utilities subject to the
Commission's jurisdiction.\145\ We recognize that the participation of
distributed energy resource aggregators in RTO/ISO markets necessarily
has effects on the distribution system,\146\ and, as in Order No. 841,
we have considered those effects in evaluating whether to exercise our
discretion to grant an opt-out. Upon such consideration, we find that
the benefits of allowing distributed energy resource aggregators
broader access to the wholesale market outweigh the policy
considerations in favor of an opt-out. Specifically, we find that the
reliability, transparency, and market-related benefits of removing
barriers to the participation of distributed energy resource
aggregators in RTO/ISO markets are significant. Considering those
benefits,\147\ we are not persuaded that concerns about potential
effects on the distribution system justify adopting an opt-out that
could substantially limit that participation.\148\ As discussed below,
there are several ways that relevant electric retail regulatory
authorities may address any such concerns without broadly prohibiting
the participation of distributed energy resources or distributed energy
resource aggregators in RTO/ISO markets. Therefore, we do not find it
appropriate and thus decline to exercise discretion to adopt a broad
opt-out with respect to distributed energy resource aggregations in
this final rule.
---------------------------------------------------------------------------
\145\ See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at
1190 (citing Order No. 841-A, 167 FERC ] 61,154 at PP 51-52
(distinguishing [electric storage resource] participation in
wholesale sales from demand response resources participating in
wholesale bids)).
\146\ See Order No. 841-A, 167 FERC ] 61,154 at P 56 (citing
EPSA, 136 S. Ct. at 776).
\147\ See, e.g., supra PP 4 (explaining that integrating
distributed energy resources' capabilities into RTO/ISO planning and
operations will help the RTOs/ISOs account for the impacts of these
resources on installed capacity requirements and day-ahead energy
demand, thereby reducing uncertainty in load forecasts and reducing
the risk of over procurement of resources), 27 (stating that
distributed energy resource aggregations can provide new grid
services and enhance competition in wholesale markets as new market
participants), 29 (finding that the reforms in this final rule will
enhance the competitiveness, and in turn the efficiency, of RTO/ISO
markets); see, e.g., infra PP 114 (explaining that the revised
definition of distributed energy resource adopted in this final rule
is technology-neutral, thereby ensuring that any resource that is
technically capable of providing wholesale services through
aggregation is eligible to do so, which enhances competition in the
RTO/ISO markets), 142 (stating that requiring RTOs/ISOs to allow
heterogeneous aggregations will further enhance competition in RTO/
ISO markets by ensuring that complementary resources, including
those with different physical and operational characteristics, can
meet qualification and performance requirements), 160, 163
(discussing how the final rule enhances competition and improves
reliability by requiring RTOs/ISOs to allow participation of
distributed energy resources in both wholesale and retail or
multiple wholesale programs), 173 (finding that requiring RTOs/ISOs
to establish a minimum size requirement not to exceed 100 kW will
remove a barrier to distributed energy resource aggregations,
improve competition in RTO/ISO markets, avoid confusion about
appropriate requirements, and help ensure just and reasonable
rates), 205 (discussing the benefits of single-node and multi-node
aggregations).
\148\ The list of benefits catalogued in the preceding footnote
includes many of the same benefits that the D.C. Circuit pointed to
when explaining why the Commission's decision not to provide an opt-
out in Order No. 841 was not an unreasoned departure from Order No.
719. See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1190
(explaining that the Commission's decision to forgo an opt-out was
``neither unexplained nor unsupported'' and pointing to the
Commission's consideration of the benefits of enabling broad
participation of electric storage resources, including on
``competition,'' ``prices,'' and the ``diversity'' of resource types
that can participate in RTO/ISO markets).
---------------------------------------------------------------------------
61. We continue to recognize the important role that state and
local authorities play with respect to distributed energy resources and
their potential aggregation. This final rule does not curtail that
authority. As in Order No. 841, the reforms adopted in this final rule
do not preclude or limit state or local regulation of: Retail rates;
distribution system planning, distribution system operations, or
distribution system reliability; distributed energy resource facility
siting; and interconnection of resources to the distribution system
that are not subject to Commission jurisdiction, as discussed further
below.\149\ In addition, and again as recognized in Order No. 841,
under a relevant electric retail regulatory authority's jurisdiction
over its retail programs, such a regulatory authority is able to
condition a distributed energy resource's participation in a retail
distributed energy resource program on that resource not also
participating in the RTO/ISO markets.\150\ This should allow
[[Page 67106]]
a retail regulatory authority to address any specific concerns.
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\149\ See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at
1188 (noting that the similar decision in ``Order No. 841 does not
`usurp[ ] state power' '' and pointing to the fact that ``States
retain their authority to impose safety and reliability requirements
without interference from FERC, and [electric storage resources]
must still obtain all requisite permits, agreements, and other
documentation necessary to participate in federal wholesale
markets'') (quoting EPSA, 136 S. Ct. at 777).
\150\ See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at
1188 (``States retain their authority to prohibit local [electric
storage resources] from participating in the interstate and
intrastate markets simultaneously, meaning [s]tates can force local
[electric storage resources] to choose which market they wish to
participate in.''); Order No. 841-A, 167 FERC ] 61,154 at P 41
(acknowledging that states have the authority to include conditions
in their own retail distributed energy resource or retail electric
storage resource programs that prohibit any participating resources
from also selling into RTO/ISO markets because, in that scenario,
the owner of a resource has a choice between participating in the
retail market or wholesale market); see also Arkansas Commission
Comments (2019 RM18-9) at 2-4.
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62. As to commenters' concerns regarding cost impacts on the
distribution system, we note that, in Order No. 841, with respect to
concerns about electric storage resources' use of the distribution
system, the Commission observed that, in PJM Interconnection L.L.C.,
the Commission permitted a distribution utility to assess a wholesale
distribution charge to an electric storage resource participating in
the PJM markets. Consistent with this precedent, the Commission found
that it may be appropriate, on a case-by-case basis, for distribution
utilities to assess a charge on electric storage resources similar to
those assessed to the market participant in that proceeding.\151\
Consistent with that conclusion, we find that it may also be
appropriate, on a case-by-case basis, for distribution utilities to
assess a wholesale distribution charge on distributed energy resource
aggregators participating in RTO/ISO markets.
---------------------------------------------------------------------------
\151\ Order No. 841, 162 FERC ] 61,127 at P 296 (citing PJM
Interconnection L.L.C., 149 FERC ] 61,185, at P 12 (2014) (wholesale
distribution charge that ComEd will assess to Energy Vault is a
weighted average carrying charge that is applied on a case-by-case
basis, depending on the distribution facilities expected to be used
in providing wholesale distribution service), order on reh'g, 151
FERC ] 61,231, at PP 16-18 (2015)).
---------------------------------------------------------------------------
63. Moreover, we recognize that, where appropriate, the Commission
previously has taken steps to address a potential burden imposed by a
Commission final rule on smaller entities. For instance, the Commission
has distinguished small utilities whose total electric output for the
preceding fiscal year did not exceed 4 million MWh \152\ for purposes
of granting waivers from Order No. 889's \153\ standards of conduct for
transmission providers \154\ and determining whether a specific
cooperative should be considered a non-public utility outside the scope
of a refund obligation involving the California energy crisis.\155\ In
Order No. 719-A, the Commission provided an opt-in for small utilities,
which requires the relevant electric retail regulatory authority to
give affirmative permission for the demand response of customers of
utilities that distributed 4 million MWh or less in the previous fiscal
year to be bid into RTO/ISO markets by an aggregator of those retail
customers.\156\
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\152\ The 4 million MWh cutoff stems from the Small Business
Size Standards component of the North American Industry
Classification System, which previously defined a small utility as
one that, including its affiliates, is primarily engaged in the
generation, transmission, or distribution of electric energy for
sale, and whose total electric output for the preceding fiscal year
did not exceed 4 million MWh. 13 CFR 121.201 (2013) (Sector 22,
Utilities, North American Industry Classification System (NAICS)).
Currently, the number of employees is the basis used to measure
whether electric power generation, transmission, and distribution
industries are small businesses. 13 CFR 121.201 (2020) (Sector 22,
Utilities, NAICS).
\153\ Open Access Same-Time Information System & Standards of
Conduct, Order No. 889, FERC Stats. & Regs. ] 31,035 (1996) (cross-
referenced at 75 FERC ] 61,078), clarified, 76 FERC ] 61,009 (1996),
order on reh'g, Order No. 889-A, FERC Stats. & Regs. ] 31,049
(cross-referenced at 78 FERC ] 61,221), reh'g denied, Order No. 889-
B, 81 FERC ] 61,253 (1997), aff'd in relevant part sub nom.
Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667 (D.C.
Cir. 2000).
\154\ See Wolverine Power Supply Coop., 127 FERC ] 61,159, at P
15 (2009).
\155\ See San Diego Gas & Elec. Co. v. Sellers of Energy &
Ancillary Servs. in Mkts. Operated by the CAISO, 125 FERC ] 61,297,
at P 24 (2008).
\156\ Order No. 719-A, 128 FERC ] 61,059 at PP 51, 59-60.
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64. Notwithstanding our finding that the benefits of this final
rule outweigh the policy considerations in favor of a broad opt-out, we
acknowledge that this final rule may place a potentially greater burden
on smaller utility systems.\157\ Recognizing this potentially greater
burden on small utility systems, we will exercise our discretion to
include in this final rule an opt-in mechanism for small utilities
similar to that provided in Order No. 719-A. Specifically, we determine
that customers of utilities that distributed 4 million MWh or less in
the previous fiscal year may not participate in distributed energy
resource aggregations unless the relevant electric retail regulatory
authority affirmatively allows such customers to participate in
distributed energy resource aggregations.
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\157\ See supra P 50 (citing APPA Comments (2018 RM18-9) at 7,
9-10; APPA/NRECA Comments (RM16-23) at 39; NRECA Comments (2018
RM18-9) at 14, 26-28; TAPS Comments (RM16-23) at 15-16).
---------------------------------------------------------------------------
65. We therefore direct each RTO/ISO to amend its market rules as
necessary to (1) accept bids from a distributed energy resource
aggregator if its aggregation includes distributed energy resources
that are customers of utilities that distributed more than 4 million
MWh in the previous fiscal year, and (2) not accept bids from
distributed energy resource aggregators if its aggregation includes
distributed energy resources that are customers of utilities that
distributed 4 million MWh or less in the previous fiscal year, unless
the relevant electric retail regulatory authority permits such
customers to be bid into RTO/ISO markets by a distributed energy
resource aggregator. We conclude that this opt-in mechanism
appropriately balances the benefits that distributed energy resource
aggregation can provide to RTO/ISO markets with a recognition of the
burdens that such aggregation may create for small utilities in
particular. Accordingly, we find that adopting this mechanism helps to
ensure that any ``negative effects'' of this final rule are
``outweighed by the benefits,'' \158\ listed above,\159\ that it
provides to RTO/ISO markets.
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\158\ Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1190.
\159\ See supra n.147.
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66. On compliance, we require each RTO/ISO to explain how it will
implement this small utility opt-in. We note that an RTO/ISO may choose
to implement this requirement in a similar manner as it currently
implements the small utility opt-in provision under Order No. 719-A.
67. Although the Small Business Administration (SBA) no longer
defines small utilities based on total electric output for the
preceding fiscal year of 4 million MWh or less,\160\ we use this
standard for purposes of this final rule, as it is consistent with the
Commission's use of this standard for the opt-in adopted in Order No.
719-A,\161\ and is supported by commenters asking the Commission to
include an opt-in as part of this rule.\162\
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\160\ The SBA now defines small utilities based on the number of
employees. 13 CFR 121.201 (establishing a threshold of 1,000
employees for electric power distribution utilities).
\161\ Order No. 719-A, 128 FERC ] 61,059 at PP 51, 59-60.
\162\ NRECA Comments (2019 RM18-9) at 4-5; TAPS Comments (RM16-
23) at 16-17; TAPS Comments (2018 RM18-9) at 19 & n.27.
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3. Interconnection
68. The NOPR did not propose any changes to RTO/ISO policies and
procedures for the interconnection of distributed energy resources.
However, the Commission stated that comments demonstrated that current
RTO/ISO market rules often limit the services that distributed energy
resources are eligible to provide, including by imposing prohibitively
expensive or otherwise burdensome interconnection requirements.\163\
The Commission also recognized that RTO/ISO demand response models
often prohibit distributed energy resources from injecting power back
onto the grid in
[[Page 67107]]
part because they are not studied in the interconnection process.\164\
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\163\ See NOPR, 157 FERC ] 61,121 at P 13 & n.30 (citing Energy
Storage Association's comment that interconnection processes can
pose prohibitively high transaction costs for the small project
sizes that characterize behind-the-meter storage, which creates
undue burdens on behind-the-meter storage participation in most
RTOs/ISOs).
\164\ See id. P 15 & n.32 (citing PJM's response that demand-
side resources are not studied by PJM through the generation
interconnection process and are not allowed to inject energy beyond
the customer's meter and onto the distribution or transmission
system).
---------------------------------------------------------------------------
69. On September 5, 2019, Commission staff issued data requests to
each of the six RTOs/ISOs seeking information regarding their policies
and procedures that affect the interconnection of distributed energy
resources. The RTOs/ISOs filed their responses in October 2019, and
several commenters subsequently submitted reply comments.
a. Comments and Data Request Responses
70. Several commenters state that any final rule should make clear
that the interconnection of resources on a state-jurisdictional
distribution system remains the responsibility of the distribution
utilities and the states.\165\ The Maryland and New Jersey Commissions
seek confirmation that state jurisdiction would remain unchanged as to
the siting and costs associated with interconnecting resources to the
distribution system, and would apply to all resources, including
distributed energy resources, having or seeking interconnection or
access to the wholesale market.\166\ The Maryland and New Jersey
Commissions request that the Commission confirm that, in the context of
interconnection requests for wholesale market access, states will
continue to have discretion to review distribution utility company
tariffs to justify how costs are allocated or how the resources and
their proposed interconnection locations benefit ultimate
ratepayers.\167\ The Massachusetts Commission makes similar
arguments.\168\
---------------------------------------------------------------------------
\165\ See, e.g., IRC Comments (RM16-23) at 9-10; Massachusetts
Municipal Electric Comments (RM16-23) at 4; Massachusetts State
Entities Comments (2019 RM18-9) at 11; NESCOE Comments (RM16-23) at
16; TAPS Comments (RM16-23) at 15.
\166\ Maryland and New Jersey Commissions Comments (RM16-23) at
2-3.
\167\ Id. at 3.
\168\ Massachusetts Commission Comments (RM16-23) at 11.
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71. In order to avoid uncertainty and litigation, Duke Energy and
EEI ask for additional clarity with respect to state-versus-Commission
jurisdiction affecting interconnection, distribution planning, and
investments to enable distributed energy resource aggregation.\169\
TAPS asks that any final rule make clear that, absent proper
application of a Commission-jurisdictional Generator Interconnection
Agreement, the Commission does not seek to alter or preempt local and
state rules governing interconnection to the distribution system.\170\
Furthermore, TAPS asserts that, given the limited circumstances in
which the Commission has the authority to require interconnection to,
or deliveries over, distribution facilities, the NOPR appropriately
does not attempt to establish new rules or requirements governing the
details of interconnection of distributed energy resources.\171\
---------------------------------------------------------------------------
\169\ Duke Energy Comments (RM16-23) at 4; EEI Comments (RM16-
23) at 25.
\170\ TAPS Comments (RM16-23) at 15.
\171\ Id. at 5-9.
---------------------------------------------------------------------------
72. As to their own interconnection procedures and experience with
distributed energy resources, ISO-NE, NYISO, and PJM's data request
responses reference Order Nos. 2003 and 2006 and indicate that they
apply the jurisdictional test for dual-use facilities established in
those orders.\172\ As explained in more detail below, Order Nos. 2003
and 2006 established what some RTOs/ISOs have labeled the ``first use''
test, under which the first interconnection to a distribution facility
for the purpose of making wholesale sales is not subject to Commission
jurisdiction, but triggers jurisdiction for any subsequent wholesale
interconnection requests to the same distribution facility.\173\ MISO
explains that no distributed energy resources have requested to
interconnect to distribution facilities subject to the MISO tariff but
indicates that it would apply the jurisdictional test in Order Nos.
2003 and 2006 in processing subsequent interconnection requests to such
facilities.\174\ SPP states that it would consider an interconnection
to be Commission jurisdictional only if the relevant distribution
facilities were under SPP's functional control, and SPP's data request
response appears to indicate that, even after the first wholesale use,
such distribution facilities would not be subject to its tariff.\175\
CAISO states that, if a distributed energy resource plans to
participate in CAISO's markets, the interconnection is Commission
jurisdictional pursuant to the utility distribution company's Wholesale
Distribution Access Tariff.\176\
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\172\ ISO-NE Data Request Response (2019 RM18-9) at 3-4, 9-10;
NYISO Data Request Response (2019 RM18-9) at 1-2; PJM Data Request
Response (2019 RM18-9) at 2, 5.
\173\ Standardization of Generator Interconnection Agreements &
Procedures, Order No. 2003, 104 FERC ] 61,103, at P 804 (2003),
order on reh'g, Order No. 2003-A, 106 FERC ] 61,220, order on reh'g,
Order No. 2003-B, 109 FERC ] 61,287 (2004), order on reh'g, Order
No. 2003-C, 111 FERC ] 61,401 (2005), aff'd sub nom. Nat'l Ass'n of
Regulatory Util. Comm'rs v. FERC, 475 F.3d 1277 (D.C. Cir. 2007),
cert. denied, 552 U.S. 1230 (2008); Standardization of Small
Generator Interconnection Agreements and Procedures, Order No. 2006,
111 FERC ] 61,220, order on reh'g, Order No. 2006-A, 113 FERC ]
61,195 (2005), order granting clarification, Order No. 2006-B, 116
FERC ] 61,046 (2006), corrected, 71 FR 53,965 (Sept. 13, 2006); see
also Reform of Generator Interconnection Procedures and Agreements,
Order No. 845, 163 FERC ] 61,043 (2018), errata notice, 167 FERC ]
61,123, order on reh'g, Order No. 845-A, 166 FERC ] 61,137 (2019),
errata notice, 167 FERC ] 61,124, order on reh'g, Order No. 845-B,
168 FERC ] 61,092 (2019). We note that Order No. 845 did not make
any changes to the ``first use'' test for distribution
interconnection at issue here.
\174\ See MISO Data Request Response (2019 RM18-9) at 6-7 (``If
the [distributed energy resource] interconnection customer intends
to connect the [distributed energy resource] unit to facilities
listed on [MISO's list of transmission facilities transferred to its
functional control] or a distribution facility that provides
Wholesale Distribution Service, then the Interconnection Customer is
required to follow the Generator Interconnection Procedures
(Attachment X) of MISO Tariff. If [the distributed energy resource]
is not interconnecting to such facilities, then the interconnection
customer is required to follow the interconnection rules of the Host
Distribution Provider.'').
\175\ See SPP Data Request Response (2019 RM18-9) at 2-3, 6
(``Such distribution facilities are not subject to the Tariff in
this situation. The Tariff would not apply to non-jurisdictional
facilities; however, there might be an obligation for the utility to
coordinate with SPP regarding potential impacts to the SPP
Transmission System.'').
\176\ CAISO Data Request Response (2019 RM18-9) at 2-4
(explaining that ``each CAISO transmission owner that is
[Commission] jurisdictional and operates distribution facilities has
a Wholesale Distribution Access Tariff with the express purpose of
enabling [distributed energy resources] to interconnect to the
distribution grid and still participate in the CAISO wholesale
markets'').
---------------------------------------------------------------------------
73. In response to CAISO's data request response, SoCal Edison
clarifies that every SoCal Edison distribution facility with which a
new resource seeks interconnection pursuant to the Wholesale
Distribution Access Tariff is already subject to an OATT for purposes
of making wholesale sales.\177\ Pacific Gas & Electric states that the
Commission-jurisdictional Wholesale Distribution Access Tariff is not
only the primary, but also should be the exclusive, means of
interconnecting certain distributed energy resources that wish to
export energy for purposes of participating in the wholesale
markets.\178\ It states that this is important because California's
Rule 21, a state-jurisdictional tariff, does not currently provide a
methodology to separate wholesale from retail use and
[[Page 67108]]
thus could allow bypass of retail rates for behind-the-meter
distributed energy resources that both consume and export electricity
for both retail and wholesale purposes.\179\
---------------------------------------------------------------------------
\177\ SoCal Edison Comments (2019 RM18-9) at 2.
\178\ Pacific Gas & Electric Comments (2019 RM18-9) at 4. It
states, however, that some wholesale market-participating
distributed energy resources interconnect today under California's
Rule 21, a state-jurisdictional tariff. For instance, it asserts
that Rule 21 applies to Qualifying Facilities (QF) that make net
surplus sales under California's net metering program, which are
considered qualifying sales under the Public Utilities Regulatory
Policy Act (PURPA).
\179\ Id. at 5.
---------------------------------------------------------------------------
74. Pacific Gas & Electric notes that CAISO's existing Demand
Response Provider participation model allows existing retail loads
interconnected under state-approved tariffs to participate in wholesale
markets as non-exporting Proxy Demand Response resources without the
risk of bypassing retail rates.\180\ Pacific Gas & Electric explains
that it and CAISO can avoid the risk of retail bypass by requiring any
individual distributed energy resources in a distributed energy
resource aggregation that had previously interconnected as non-
exporting resources under California's Rule 21 and that now wish to
export electricity to participate in wholesale markets to seek a new
interconnection pursuant to, or to convert their existing
interconnection to an agreement under, the Wholesale Distribution
Access Tariff. Pacific Gas & Electric states that this framework
complies with the Commission's implementation of the jurisdictional
boundaries set forth in federal law.\181\
---------------------------------------------------------------------------
\180\ Id. at 6.
\181\ Id. at app. A.
---------------------------------------------------------------------------
75. AMP asserts that some of the RTO/ISO responses erroneously
state that a distribution facility becomes Commission jurisdictional
when a wholesale sale occurs over that distribution facility. AMP
asserts that it is the wholesale transaction, not the distribution line
itself, that is subject to the Commission's jurisdiction.\182\ AMP also
notes that RTO/ISO processes should refer to local jurisdiction and
interconnection processes in addition to state processes because
decision making is often done at the local level pursuant to local
jurisdictional authority separate and distinct from state regulatory
authority.
---------------------------------------------------------------------------
\182\ AMP Comments (2019 RM18-9) at 2.
---------------------------------------------------------------------------
76. Several commenters request that the Commission revise its
interconnection policy as it applies to distributed energy
resources.\183\ Advanced Energy Economy states that the Commission
could work with relevant electric retail regulatory authorities and
distribution utilities to address interconnection requirements through
standard interconnection tariffs in those states where distributed
energy resources are not classified as QFs under PURPA \184\ and for
which no retail tariff exists.\185\
---------------------------------------------------------------------------
\183\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 19-21; Eversource Comments (2018 RM18-9) at 9-10; Icetec Comments
(2018 RM18-9) at 2-3, 11.
\184\ 16 U.S.C. 796(17)-(18), 824a-3.
\185\ Advanced Energy Economy Comments (2018 RM18-9) at 20-21
(asserting that resources in such states have no clear path to
interconnection to the distribution system and a limited ability to
participate in any wholesale distributed energy resource aggregation
program).
---------------------------------------------------------------------------
77. Eversource argues that, because the participation of
distributed energy resources in RTO/ISO markets could convert a
previously state-jurisdictional distribution facility into a
Commission-jurisdictional distribution facility and potentially
necessitate hundreds or thousands of interconnection agreement filings,
the Commission should revisit the interconnection agreement filing
criteria for distributed energy resources and develop a process that
fairly balances the administrative burden on parties with respect for
Commission and state jurisdictional lines.\186\ Icetec requests that
the Commission reinforce the traditional bright line between Commission
and state jurisdiction at the transmission-distribution boundary by
confirming that relevant electric retail regulatory authorities have
sole jurisdiction over the interconnection of resources to the
distribution system, while ensuring that that jurisdiction may not be
used to discriminatorily restrict or condition distributed energy
resource participation in RTO/ISO markets.\187\
---------------------------------------------------------------------------
\186\ Eversource Comments (2018 RM18-9) at 9-10.
\187\ Icetec Comments (2018 RM18-9) at 2-3, 11.
---------------------------------------------------------------------------
78. Advanced Energy Management requests that the Commission
recognize the clear distinction between the distribution
interconnection process and the wholesale market registration
process.\188\ Advanced Energy Management states that the Commission has
authority over the criteria for wholesale market registration and
participation, and that state and local regulators have authority over
the criteria for a non-discriminatory distribution interconnection
process that ensures that interconnecting distributed energy resources
that wish to participate in the wholesale market do not create
distribution reliability issues.\189\ According to Advanced Energy
Management, if a distributed energy resource imposes costs on the grid
when it interconnects, regardless of reason, those costs can be
recovered as interconnection costs under the authority of state
regulators.\190\
---------------------------------------------------------------------------
\188\ Advanced Energy Management Comments (2018 RM18-9) at 18;
Advanced Energy Management Comments (2019 RM18-9) at 3.
\189\ Advanced Energy Management Comments (2018 RM18-9) at 18-
19; Advanced Energy Management Comments (2019 RM18-9) at 3.
\190\ Advanced Energy Management Comments (2018 RM18-9) at 10.
---------------------------------------------------------------------------
79. Stem recommends that the Commission initiate a process to
revise distribution utilities' interconnection tariffs (e.g., the
Wholesale Distribution Access Tariffs in California) so that (1)
individual distributed energy resources, participating through an
aggregator, are not required to do more than satisfy the local
interconnection requirements in order to offer residual capability
through the RTO/ISO markets, and (2) the tariffs accommodate the
potential for coordinated dispatch of a distributed energy resource
aggregation such as including limitations on aggregated behavior due to
distribution system constraints, which would be communicated to the
RTO/ISO as a reduced size resource during registration as a market
participant.\191\ Microgrid Resource Coalition similarly asserts that a
responsive distributed energy resource needs to specify its expected
modes of operation during the interconnection process by establishing
its physical capabilities subject to any residual distribution system
constraints, which will establish the limits of its ability to provide
services to the grid.\192\
---------------------------------------------------------------------------
\191\ Stem Comments (2018 RM18-9) at 9-10, 15-16.
\192\ Microgrid Resources Coalition Comments (2018 RM18-9) at
12.
---------------------------------------------------------------------------
80. Public Interest Organizations argue that some RTO/ISO tariffs
present significant barriers to distributed energy resource
interconnection, particularly those that require individual distributed
energy resources to complete a wholesale interconnection process.\193\
Therefore, Public Interest Organizations propose that distributed
energy resource interconnection be solely under retail jurisdiction,
and that RTO/ISO purview over distributed energy resource aggregations
be limited to market rules, and where cause is shown, for transmission
system impacts.\194\
---------------------------------------------------------------------------
\193\ Public Interest Organizations Comments (2019 RM18-9) at 3.
\194\ Id. at 3-4.
---------------------------------------------------------------------------
81. Some commenters contend that PJM's interconnection processes
impose significant transaction costs on distributed energy
resources.\195\ Icetec asserts that every distributed energy resource
that wishes to participate in PJM markets, no matter how small, must go
through PJM's interconnection queue; that an individual residential
owner must file an OATT with the Commission registering the 120 volt
wiring in its house as a transmission
[[Page 67109]]
provider before a third party can apply to interconnect distributed
energy resources located behind a residential meter; and that PJM
refers most distribution-connected projects to distribution utilities
for further study, even if the resource is already interconnected and
injecting power under a distribution interconnection tariff.\196\
Icetec claims that, in contrast, distribution utilities may operate
distributed energy resources attached to their systems without going
through RTO/ISO interconnection, which creates partially discriminatory
market access by placing merchant distributed energy resource
developers at a significant disadvantage relative to incumbent
utilities.\197\ Icetec requests that the Commission require RTOs/ISOs
to accept a distributed energy resource as deliverable to the wholesale
transmission system, with further studies limited to the transmission
system, when it is properly connected to the distribution system under
an arrangement approved by the relevant electric retail regulatory
authority.\198\ Icetec also asks the Commission to both allow
distributed energy resources that deliver to the transmission system at
a bus that is primarily load-serving to participate in wholesale
markets without further transmission studies and to direct RTOs/ISOs to
file tariff revisions setting procedures and timelines for
interconnection studies carried out by distribution utilities for
interconnection of distributed energy resources intending to
participate in RTO/ISO markets.\199\
---------------------------------------------------------------------------
\195\ Icetec Comments (2018 RM18-9) at 7-9; UofD/Mensah Comments
(2019 RM18-9) at 2-5.
\196\ Icetec Comments (2018 RM18-9) at 7-8.
\197\ Id. at 8.
\198\ Id. at 8-9.
\199\ Id. at 9.
---------------------------------------------------------------------------
82. UofD/Mensah similarly contend that PJM's existing processes are
unjust and unreasonable in light of barriers that they present to small
resources that interconnect under state or local jurisdiction.\200\
According to UofD/Mensah, PJM imposes a more burdensome market
participation process on resources that interconnect under state or
local jurisdiction than on resources that interconnect under Commission
jurisdiction.\201\ Specifically, they contend that PJM's Small
Generator Interconnection Procedures use screens based only on the
local distribution system rather than studies to assess safety and
reliability, require PJM to provide interconnection customers that pass
the screens an Interconnection Service Agreement within 15-20 days of
the request, and only cost $500--$5,000 depending on the circumstances.
They assert, however, that for non-jurisdictional interconnections,
each resource must wait up to six months for the queue study process to
begin and undergo a Feasibility Study and sometimes a System Impact
Study, expected to take three months each, before approval. They assert
that UofD was required to provide deposits totaling $27,000 for its 933
kW electric vehicle project, which is nine times the deposit that they
would have been charged if the interconnection was Commission
jurisdictional.
---------------------------------------------------------------------------
\200\ UofD/Mensah Comments (2019 RM18-9) at 2, 4.
\201\ Id. at 2.
---------------------------------------------------------------------------
83. UofD/Mensah therefore request that the Commission align the
RTO/ISO market participation process requirements for non-Commission-
jurisdictional interconnections with the Commission's Small Generator
Interconnection Procedures.\202\ UofD/Mensah also recommend that the
current distributed energy resource interconnection process be improved
by permitting a subset of small, behind-the-meter resources that
already have state or local interconnection approval to be
automatically approved to provide wholesale services.\203\ For those
resources not automatically approved, UofD/Mensah recommend that the
Commission limit the allowable cost and time of existing RTO/ISO
processes and allow aggregations to be studied as a group. Finally,
after correcting the non-Commission-jurisdictional interconnection
process, UofD/Mensah recommend that the Commission consider declining
to exercise its authority over the interconnection of distributed
energy resources that seek to provide wholesale services or at least
clarify the ``dual-use doctrine'' in specific cases so that developers
need not rely on RTOs/ISOs to interpret it.\204\ In response to UofD/
Mensah, PJM notes that its stakeholder process is currently considering
reforms designed to provide a ``fast-track'' avenue for processing
energy-only resources under 2 MW.\205\
---------------------------------------------------------------------------
\202\ Id. at 4-5.
\203\ Id. at 5.
\204\ Id. at 5-6.
\205\ PJM Reply Comments (2019 RM18-9) at 4.
---------------------------------------------------------------------------
84. Advanced Energy Economy asserts that the Commission does not
need to address interconnection practices in order to issue a final
rule, and suggests that, if the Commission is interested in exploring a
different approach for interconnection of distributed energy resources,
it should do so in a separate proceeding.\206\ Advanced Energy Economy
also asserts that each of the RTOs/ISOs described processes that are
generally consistent with the Commission's long-standing ``dual use''
policy.\207\
---------------------------------------------------------------------------
\206\ Advanced Energy Economy Comments (2019 RM18-9) at 1-2, 7-
8.
\207\ Id. at 2-3.
---------------------------------------------------------------------------
85. Several commenters argue that distribution interconnection
requirements should address distribution-level reliability concerns
that are raised by the interconnection of distributed energy resources
to distribution systems.\208\ Vice Chairman Place of the Pennsylvania
Public Utilities Commission argues for primacy of a distribution
utility's interconnection requirements in determining the eligibility
of distributed energy resources to participate in distributed energy
resource aggregations, and asserts that distributed energy resource
aggregations may necessitate new interconnection requirements or
study.\209\ Vice Chairman Place asserts that distribution utilities are
authorized by state regulators to protect distribution operations, and
that distributed energy resources participating in aggregations will
need to comply with state-level interconnection agreements.\210\
FirstEnergy argues that states must address the development of
distributed energy resource interconnection standards and technical
requirements, and that distribution utilities are best situated to
identify system issues that may affect ongoing reliable operations on
local systems.\211\
---------------------------------------------------------------------------
\208\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 17; PJM Comments (2018 RM18-9) at 18-19; Stem Comments (2018
RM18-9) at 15.
\209\ Vice Chairman Place Comments (2018 RM18-9) at 2.
\210\ Id. at 2-3.
\211\ FirstEnergy Comments (2019 RM18-9) at 4-5.
---------------------------------------------------------------------------
86. Several commenters argue that the RTOs/ISOs should perform some
sort of study of a distributed energy resource aggregation because
distribution-level interconnection reviews are only a reliability and
safety check for individual resources, and do not evaluate the combined
impact that an aggregation would have on the system or the impact that
the distributed energy resource will have on the system if it chooses
to participate in an aggregation.\212\ EEI, PJM Utilities Coalition,
and San Diego Gas & Electric recommend that an aggregation study be
done if a distributed energy resource joins an aggregation and if the
composition of an aggregation changes
[[Page 67110]]
after registration.\213\ TAPS agrees, and notes that, even for
distribution utilities with robust generation interconnection processes
that include rigorous modeling and studies, it may be impossible to
anticipate and fully evaluate every possible combination of loads,
resources, and distribution system configurations to determine in
advance whether potential RTO/ISO and distributed energy resource
aggregator dispatch decisions might have adverse impacts.\214\
Similarly, NRECA asserts that an interconnection agreement with the
distributed energy resource is necessary but not sufficient; NRECA
argues that distribution utilities need to be able to conduct an
integration study within a reasonable timeline that considers grid
topology, as well as to modify their interconnection procedures to
ensure third-party distributed energy resource participation in RTO/ISO
markets will not create any safety, reliability or power quality
concerns, and that implementation will conform with IEEE standards
(such as IEEE 1547).\215\ Pacific Gas & Electric concurs with the need
to modify existing processes and protocols for distribution review
requirements for assessing aggregation impacts and points to an ongoing
collaborative process underway in California that requires additional
time to complete.\216\
---------------------------------------------------------------------------
\212\ EEI Comments (2018 RM18-9) at 14-16; Organization of MISO
States Comments (2018 RM18-9) at 8-9; San Diego Gas & Electric
Comments (2018 RM18-9) at 5; SoCal Edison Comments (2018 RM18-9) at
11.
\213\ EEI Comments (2018 RM18-9) at 15-16; PJM Utilities
Coalition Comments (2018 RM18-9) at 14; San Diego Gas & Electric
Comments (2018 RM18-9) at 5.
\214\ TAPS Comments (2018 RM18-9) at 12.
\215\ NRECA Comments (2018 RM18-9) at 29, 30.
\216\ Pacific Gas & Electric Comments (2018 RM18-9) at 14-15,
18.
---------------------------------------------------------------------------
87. On the other hand, several commenters raise concerns about the
use of distribution interconnection processes to limit participation of
distributed energy resources in wholesale markets. Advanced Energy
Economy argues that the distribution interconnection process should not
be used as a lever to unduly limit participation in wholesale
markets.\217\ Similarly, Stem asserts that the Commission must prevent
a distribution utility from imposing discriminatory state-level
interconnection requirements that are intended to foreclose distributed
energy resources from participating in the RTO/ISO markets.\218\ Stem
asserts that, for instance, the Commission should not allow the
distribution utilities to effectively veto distributed energy resource
participation in wholesale markets by unreasonably delaying necessary
updates to interconnection tariffs.\219\ Advanced Energy Management and
Icetec agree that distributed energy resources should comply with
distribution interconnection requirements, but argue that the exercise
of state and local regulatory and distribution utility authority should
occur prior to a distributed energy resource's registration in an RTO/
ISO.\220\ Specifically, they argue that state and local regulatory
authorities and distribution utilities should define non-discriminatory
interconnection procedures that ensure the distribution grid can
accommodate distributed energy resources.\221\ NRG argues that
distributed energy resources should only be required to have one
interconnection study and should not be subject to additional review,
noting that collaboration on transmission and distribution impact
studies may be necessary, and that NYISO, PJM, and CAISO are already
engaged in some form of collaboration with distribution utilities on
these matters.\222\
---------------------------------------------------------------------------
\217\ Advanced Energy Economy Comments (2018 RM18-9) at 18.
\218\ Stem Comments (2018 RM18-9) at 15.
\219\ Id. at 16.
\220\ Advanced Energy Management Comments (2018 RM18-9) at 18;
Icetec Comments (2018 RM18-9) at 18.
\221\ Advanced Energy Management Comments (2018 RM18-9) at 18;
Icetec Comments (2018 RM18-9) at 18-19.
\222\ NRG Comments (2018 RM18-9) at 8-9.
---------------------------------------------------------------------------
88. Several commenters argue that the relevant electric retail
regulatory authorities must have discretion to allocate any
distribution system-related costs incurred by utilities as a result of
distributed energy resource participation in RTO/ISO markets.\223\ Some
commenters warn that, without proper cost allocation methods, retail
customers effectively would be subsidizing wholesale market
participation.\224\ EEI argues that distribution utilities should not
have to absorb any stranded costs if they invest in upgrades needed for
distributed energy resource aggregation that are ultimately not
utilized.\225\ APPA and EEI argue that there is little evidence of
significant demand for distributed energy resource aggregation
programs, and so distribution utilities may have to invest in upgrades
to the distribution system that are ultimately never needed.\226\ The
Indiana Commission asserts that distribution utilities may have to
procure additional capacity to account for uncertainty in their
forecasts regarding the amount of future distributed generation
available to them.\227\
---------------------------------------------------------------------------
\223\ Vice Chairman Place Comments (2018 RM18-9) at 3; APPA
Comments (2018 RM18-9) at 21; EEI Comments (2018 RM18-9) at 20; New
Jersey Board Comments (2018 RM18-9) at 4.
\224\ APPA Comments (2018 RM18-9) at 10; Indiana Commission
Comments (2018 RM18-9) at 8; NRECA Comments (2018 RM18-9) at 12.
\225\ EEI Comments (2018 RM18-9) at 20.
\226\ APPA Comments (2018 RM18-9) at 10-12; EEI Comments (2018
RM18-9) at 21.
\227\ Indiana Commission Comments (2018 RM18-9) at 8.
---------------------------------------------------------------------------
89. Other commenters argue that any cost allocation associated with
a distributed energy resource aggregator participating in RTO/ISO
markets would fall under the Commission's jurisdiction because the
aggregator would be acting as a wholesale entity engaged in a
Commission-jurisdictional transaction.\228\ Hence, a few commenters
suggest that, to the extent a distribution utility incurs additional
costs to provide service to distributed energy resource aggregations,
those costs should be recovered through a wholesale distribution tariff
filed with the Commission.\229\ NRECA asserts that the impact of a
distributed energy resource or distributed energy resource aggregation
interconnection on a host distribution utility must be considered in
the interconnection process, whether under RTO/ISO procedures or state-
jurisdictional procedures.\230\ NRECA notes that to do so will require
that cooperatives in RTO/ISO regions develop new distributed energy
resource interconnection agreements and procedures.\231\
---------------------------------------------------------------------------
\228\ Icetec Comments (2018 RM18-9) at 12 (citing PJM
Interconnection, LLC, 149 FERC ] 61,185, order on reh'g, 151 FERC ]
61,231); SoCal Edison Comments (2018 RM18-9) at 6 (citing Detroit
Edison Co., 334 F.3d 48 (D.C. Cir. 2003)).
\229\ Advanced Energy Economy Comments (2018 RM18-9) at 18
(citing Order No. 841, 162 FERC ] 61,127 at P 301); Icetec Comments
(2018 RM18-9) at 12; Stem Comments (2018 RM18-9) at 3.
\230\ NRECA Comments (2019 RM18-9) at 6-7.
\231\ Id. at 7.
---------------------------------------------------------------------------
b. Commission Determination
90. For the reasons discussed below, we decline to exercise our
jurisdiction over the interconnections of distributed energy resources
to distribution facilities for the purpose of participating in RTO/ISO
markets exclusively as part of a distributed energy resource
aggregation. Thus, we will not require standard interconnection
procedures and agreements or wholesale distribution tariffs for such
interconnections.
91. In Order Nos. 2003 and 2006, the Commission first adopted
standard interconnection procedures and agreements that apply when an
interconnection customer ``that plans to engage in a sale for resale in
interstate commerce or to transmit electric energy
[[Page 67111]]
in interstate commerce'' \232\ requests interconnection to the
facilities of a public utility's Transmission System \233\ or
Distribution System \234\ that, at the time that the interconnection is
requested, are used either to transmit electric energy in interstate
commerce or to sell electric energy at wholesale in interstate commerce
pursuant to a Commission-filed OATT.\235\ The Commission recognized
that ``some [lower-voltage facilities] are used for jurisdictional
service such as carrying power to a wholesale power customer for resale
and are included in a public utility's OATT,'' and that ``in some
instances, there is a separate OATT rate for using them, sometimes
called a Wholesale Distribution Rate.'' \236\ The Commission also noted
that, with respect to a Commission-jurisdictional interconnection to a
distribution facility, the cost of upgrades needed on the Distribution
System to accommodate the interconnection must be directly assigned to
the interconnection customer because an upgrade to the Distribution
System generally does not benefit all transmission customers.\237\ In
Order No. 2003-C, the Commission concluded that, while it does not have
the authority to directly regulate a ``local distribution'' facility
that is used to transmit energy being sold at wholesale, ``the
Commission may regulate the entire transmission component (rates, terms
and conditions) of the wholesale transaction.'' \238\
---------------------------------------------------------------------------
\232\ Order No. 2003, 104 FERC ] 61,103 at P 804; see also Order
No. 845, 163 FERC ] 61,043.
\233\ The Commission defined ``Transmission System'' as ``[t]he
facilities owned, controlled or operated by the Transmission
Provider or the Transmission Owner that are used to provide
transmission service under the Tariff.'' Order No. 2006, 111 FERC ]
61,220 at P 6.
\234\ The Commission defined ``Distribution System'' as ``[t]he
Transmission Provider's facilities and equipment used to transmit
electricity to ultimate usage points such as homes and industries
directly from nearby generators or from interchanges with higher
voltage transmission networks which transport bulk power over longer
distances. The voltage levels at which Distribution Systems operate
differ among areas.'' Id. P 7.
\235\ Order No. 2003, 104 FERC ] 61,103 at P 804; see Order No.
2006, 111 FERC ] 61,220 at P 5; see also Order No. 845, 163 FERC ]
61,043.
\236\ Order No. 2003, 104 FERC ] 61,103 at P 803; see also Order
No. 845, 163 FERC ] 61,043.
\237\ Order No. 2003, 104 FERC ] 61,103 at P 697; see also Order
No. 845, 163 FERC ] 61,043.
\238\ Order No. 2003-C, 111 FERC ] 61,401 at P 53; see also
Order No. 845, 163 FERC ] 61,043.
---------------------------------------------------------------------------
92. In practice, Order Nos. 2003 and 2006 established what some
RTOs/ISOs have labeled the ``first use'' test, under which the first
interconnection to a distribution facility for the purpose of making
wholesale sales is not subject to Commission jurisdiction. This is
because, at the time of the request, the distribution facility is not
used to transmit electric energy in interstate commerce or subject to
wholesale open access under an OATT. Therefore, the first
interconnecting resource ``that plans to engage in a sale for resale in
interstate commerce or to transmit electric energy in interstate
commerce'' \239\ on a distribution facility is not required to use the
transmission provider's Commission-jurisdictional Generator
Interconnection Procedures or obtain a Commission-jurisdictional
Generator Interconnection Agreement.\240\ As a result, such
interconnections are governed by the applicable state or local law.
---------------------------------------------------------------------------
\239\ Order No. 2003, 104 FERC ] 61,103 at P 804; see also Order
No. 845, 163 FERC ] 61,043.
\240\ See Order No. 2003-C, 111 FERC ] 61,401 at P 53; Order No.
2006, 111 FERC ] 61,220 at P 7; Order No. 845, 163 FERC ] 61,043;
see also PJM Interconnection, L.L.C., 114 FERC ] 61,191, at P 14,
order on reh'g, 116 FERC ] 61,102 (2006).
---------------------------------------------------------------------------
93. However, under the ``first use'' test, subsequent
interconnections of resources to the same distribution facility for the
purpose of engaging in wholesale sales or transmission in interstate
commerce are subject to Commission jurisdiction because the
distribution facilities are already being used to facilitate wholesale
transactions and therefore are subject to an OATT. Thus, any subsequent
resources interconnecting to the same distribution facility for
Commission-jurisdictional purposes (e.g., to make wholesale sales in
interstate commerce) must use the Commission-jurisdictional Generator
Interconnection Procedures and Generator Interconnection Agreement
established in Order Nos. 2003 and 2006 and later amended in Order No.
845. The United States Court of Appeals for the District of Columbia
Circuit upheld this jurisdictional application as consistent with the
FPA.\241\
---------------------------------------------------------------------------
\241\ See Nat'l Ass'n of Regulatory Util. Comm'rs v. FERC, 475
F.3d at 1280-82 (``By establishing standard agreements FERC has
exercised its jurisdiction over the terms of those relationships.'')
(citing Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667,
696 (D.C. Cir. 2000) (``FPA [section] 201 makes clear that all
aspects of wholesale sales are subject to federal regulation,
regardless of the facilities used.'')).
---------------------------------------------------------------------------
94. The Commission adopted this limited jurisdictional approach to
avoid ``allow[ing] a potential wholesale seller to cause the
involuntary conversion of a facility previously used exclusively for
state jurisdictional interconnections and delivery, and subject to the
exclusive jurisdiction of the state, into a facility also subject to
the Commission's interconnection jurisdiction,'' believing that this
outcome would cross the jurisdictional line established by
Congress.\242\ Nevertheless, the Commission anticipated that its
standard interconnection procedures and agreement terms would rarely
apply to distributed generation: ``We recognize that Order No. 2003
does not apply to most distributed generation, since these facilities
almost always interconnect to facilities that are not subject to an
OATT.'' \243\
---------------------------------------------------------------------------
\242\ Order No. 2003-C, 111 FERC ] 61,401 at P 51; see also
Order No. 845, 163 FERC ] 61,043.
\243\ Order No. 2003-A, 106 FERC ] 61,220 at P 739; see also
Order No. 2006, 111 FERC ] 61,220 at P 8 (``Because of the limited
applicability of this Final Rule, and because the majority of small
generators interconnect with facilities that are not subject to an
OATT, this Final Rule will not apply to most small generator
interconnections.''); Order No. 845, 163 FERC ] 61,043.
---------------------------------------------------------------------------
95. We agree with commenters that the integration of distributed
energy resource aggregations into the RTO/ISO markets warrants our
addressing the application of the Commission's interconnection policy
to the distributed energy resource aggregations enabled by this final
rule. As the Commission recognized in Order No. 792, renewable
portfolio standards, state policies promoting distributed generation,
and decreases in capital costs have driven a substantial increase in
small generator interconnection requests.\244\ In the intervening
years, those trends have only intensified, further stimulating
distributed energy resource development.\245\ We anticipate that
increased participation of distributed energy resources in RTO/ISO
markets via distributed energy resource aggregations will substantially
increase the number of distributed energy resource interconnections to
distribution facilities for the purpose of engaging in wholesale
transactions and/or transmission in interstate commerce. Such growth
could increase the number of distribution-level interconnections
subject to the Commission's jurisdiction. As Public Interest
Organizations suggest, a large influx of distribution-level
interconnections could create uncertainty as to whether certain
interconnections are subject to Commission jurisdiction or state/local
jurisdiction, and whether they would require the use of the
Commission's
[[Page 67112]]
standard interconnection procedures and agreement.\246\ It could
additionally burden RTOs/ISOs with an overwhelming volume of
interconnection requests.\247\
---------------------------------------------------------------------------
\244\ Small Generator Interconnection Agreements & Procedures,
Order No. 792, 145 FERC ] 61,159, at P 23 (2013), as modified,
errata notice, 146 FERC ] 61,019, as modified, errata notice, 148
FERC ] 61,215, clarified, Order No. 792-A, 146 FERC ] 61,214 (2014).
\245\ See Public Interest Organizations Comments (2019 RM18-9)
at 6-7. See also EIA, August 2019 Monthly Energy Review at Figure
7.2a, https://www.eia.gov/totalenergy/data/monthly; Office of Energy
Projects, Energy Infrastructure Update For July2019 at 4 (July
2019), https://www.ferc.gov/legal/staff-reports/2019/july-energy-infrastructure.pdf).
\246\ Public Interest Organizations Comments (2019 RM18-9) at 9.
\247\ Id. at 5.
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96. Given these concerns and the confluence of local, state, and
federal authority over distributed energy resource interconnections, in
this final rule, we decline to exercise jurisdiction over the
interconnections of distributed energy resources to distribution
facilities for those distributed energy resources that seek to
participate in RTO/ISO markets exclusively as part of a distributed
energy resource aggregation. We do not believe that requiring standard
interconnection procedures and agreement terms for these
interconnections is necessary to advance the objectives of Order Nos.
2003, 2006 and 845, which established standard interconnection
procedures and agreements in order to prevent undue discrimination,
preserve reliability, increase energy supply, lower wholesale prices
for customers by increasing the number and types of new generation that
would compete in the wholesale electricity market, reduce
interconnection time and costs, and facilitate development of non-
polluting alternative energy sources.\248\ Rather, we agree with
commenters that state and local authorities, which have traditionally
regulated distributed energy resource interconnections, have the
requisite experience, interest, and capacity to oversee these
distribution-level interconnections.
---------------------------------------------------------------------------
\248\ See Order No. 2003, 104 FERC ] 61,103 at P 1; Order No.
2006, 111 FERC ] 61,220 at P 1; Order No. 845, 163 FERC ] 61,043;
see also New York v. FERC, 535 U.S. 1, 26-27 (2002) (upholding the
Commission's discretion to issue a tailored remedy where ``the
remedy it ordered constituted a sufficient response to the problems
. . . identified in the wholesale market''). In issuing Order Nos.
2003 and 2006, the Commission acknowledged that their requirements
would rarely apply to the interconnections of distributed energy
resources. See Order No. 2003-A, 106 FERC ] 61,220 at P 739; Order
No. 2006, 111 FERC ] 61,220 at P 8; Order No. 845, 163 FERC ]
61,043.
---------------------------------------------------------------------------
97. Because we decline here to exercise our jurisdiction over the
interconnection of a distributed energy resource to a distribution
facility for the purpose of participating in RTO/ISO markets
exclusively through a distributed energy resource aggregation, the
interconnection of such a resource for the purpose of participating in
a distributed energy resource aggregation would not constitute a first
interconnection for the purpose of making wholesale sales under the
``first use'' test. As such, only a distributed energy resource
requesting interconnection to the distribution facility for the purpose
of directly engaging in wholesale transactions (i.e., not through a
distributed energy resource aggregation) would create a ``first use''
and any subsequent distributed energy resource interconnecting for the
purpose of directly engaging in wholesale transactions would be
considered a Commission-jurisdictional interconnection. We believe that
this approach will minimize any increase in the number of distribution-
level interconnections subject to the Commission's jurisdiction that
this final rule may cause.
98. This final rule does not require any changes to the pro forma
Generator Interconnection Procedures or Generator Interconnection
Agreements. To the extent that the jurisdictional conditions described
in Order Nos. 2003 and 2006 are met, those standard interconnection
procedures and agreement terms originally established in Order Nos.
2003 and 2006 and later amended by Order No. 845 will continue to apply
to the interconnections of distributed energy resources that
participate in RTO/ISO markets individually, independent of a
distributed energy resource aggregation. This final rule also does not
revise the Commission's jurisdictional approach to the interconnections
of QFs that participate in distributed energy resource
aggregations.\249\
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\249\ See Order No. 2003, 104 FERC ] 61,103 at PP 813-815; Order
No. 2006, 111 FERC ] 61,220 at PP 516-518; Order No. 845, 163 FERC ]
61,043.
---------------------------------------------------------------------------
99. With respect to arguments that distributed energy resources
should only be required to have one interconnection study--at the
distribution interconnection stage--and should not be subject to
additional review in connection with the possibility of RTO/ISO market
participation, and competing arguments that both distribution
interconnection studies and separate distributed energy resource
aggregation studies are needed when distributed energy resources join
an aggregation, we believe that there could be different approaches to
this issue that would work in appropriate circumstances. We therefore
decline to create new universal requirements or initiate a process to
standardize tariffs with respect to these matters at this time. In
response to increased demand for distributed energy resource
aggregations for wholesale market participation, some state or local
authorities may choose to voluntarily update their distribution
interconnection processes to assess the impacts of distributed energy
resource aggregations on the distribution system at the initial
interconnection stage, while other state and local authorities may not.
In the latter scenario, it may be both necessary and appropriate for
the RTO/ISO, in coordination with affected distribution utilities, to
conduct separate studies of the impact on the distribution system after
a distributed energy resource joins a distributed energy resource
aggregation. Moreover, as the individual distributed energy resources
in an aggregation may change over time,\250\ we cannot discount the
possibility that the electrical characteristics of the aggregation will
change significantly enough to require restudy. In practice, we expect
that modifications to the list of resources in a distributed energy
resource aggregation could occasionally indicate changes to the
electrical characteristics of the distributed energy resource
aggregation that are significant enough to potentially adversely impact
the reliability of the distribution or transmission systems and justify
restudy of the full distributed energy resource aggregation; therefore,
RTOs/ISOs and distribution utilities may perform such aggregation
restudies if necessary. Similarly, while the interconnections of
distributed energy resources seeking to participate in RTO/ISO markets
as part of a distributed energy resource aggregation would be subject
to state or local interconnection procedures, we believe that
coordination between RTOs/ISOs and distribution utilities, as discussed
in Section IV.H below, should ensure that RTOs/ISOs have the
information that they need to study the impact of the aggregations on
the transmission system. In general, where needed, such studies of the
impact of an aggregation as a whole on the transmission system should
be the only aggregation-related studies that the RTO/ISO needs to
undertake.\251\
---------------------------------------------------------------------------
\250\ See infra Section IV.I (Modifications to List of Resources
in Aggregation).
\251\ However, as explained earlier, RTOs/ISOs may still need to
study individually those distributed energy resources intending to
individually participate in RTO/ISO markets rather than through
aggregations.
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100. In response to the comments of Advanced Energy Economy, we
decline to require standard interconnection tariffs in those states
where no retail tariff exists for distributed energy resources that are
not QFs under PURPA. We believe that such a situation should be
addressed at the state level, as discussed above.
101. While some commenters raise concerns that declining to create
new
[[Page 67113]]
universal distribution interconnection requirements or initiate a
process to standardize distribution interconnection tariffs could
result in uncertainty and delay, or could be used to unduly limit
participation of distributed energy resource aggregations in wholesale
markets, we believe that such concerns are speculative at this time. In
this regard, we note that, while we are herein declining to exercise
jurisdiction over the interconnections of distributed energy resources
to distribution facilities for the purpose of participating in
distributed energy resource aggregations, the Commission may revisit
this policy decision in the future, should we discover abuses of the
distribution interconnection process or the rise of unnecessary
barriers to the participation of distributed energy resource
aggregations in RTO/ISO markets.
102. With respect to the related arguments that the distribution
interconnection process and the distributed energy resource aggregation
registration process are separate but require coordination, we agree,
and believe that the coordination requirements discussed in Section
IV.H of this final rule appropriately address this need.
103. Although we find it appropriate to decline to exercise
jurisdiction over the interconnections of distributed energy resources
intending to participate in RTO/ISO markets exclusively through a
distributed energy resource aggregation, we recognize that such
distributed energy resources may already have interconnected pursuant
to procedures that were accepted by the Commission prior to the
effective date of this final rule. Therefore, to minimize disruption to
existing interconnection agreements for distributed energy resources,
we are not requiring distributed energy resources that already
interconnected under Commission-jurisdictional procedures to convert to
state or local interconnection agreements.
104. Accordingly, in its compliance filing, we require each RTO/ISO
to make any necessary tariff changes to reflect the guidance above.
B. Definitions of Distributed Energy Resource and Distributed Energy
Resource Aggregator
1. NOPR Proposal
105. In the NOPR, the Commission proposed to define a distributed
energy resource as ``a source or sink of power that is located on the
distribution system, any subsystem thereof, or behind a customer
meter.'' \252\ The Commission added that these resources may include,
but are not limited to, electric storage resources, distributed
generation, thermal storage, and electric vehicles and their supply
equipment. The Commission proposed to define a distributed energy
resource aggregator as ``an entity that aggregates one or more
distributed energy resources for purposes of participation in the
capacity, energy and ancillary service markets of the regional
transmission operators and independent system operators.'' \253\
---------------------------------------------------------------------------
\252\ NOPR, 157 FERC ] 61,121 at PP 1 n.2, 104.
\253\ Id. P 5 n.13.
---------------------------------------------------------------------------
2. Comments
106. Several commenters raise concerns with the proposed definition
of distributed energy resource. EEI suggests that the Commission use a
term besides ``source or sink of power'' to reflect the Commission's
desire to include all electric devices that can produce or consume
energy because a source or sink is a location and not a resource.\254\
AES Companies, MISO Transmission Owners, and NYISO Indicated
Transmission Owners seek clarification whether the definition of
distributed energy resources includes resources that are behind and in
front of the meter. AES Companies explain that it is not out of the
ordinary for resources such as solar or batteries to be interconnected
at the distribution system but not behind the meter, and NYISO
Indicated Transmission Owners state that aggregations of front-of-the-
meter distributed energy resources should be able to elect to
participate in wholesale markets as part of a distributed energy
resource aggregation.\255\
---------------------------------------------------------------------------
\254\ EEI Comments (RM16-23) at 16 n.23.
\255\ AES Companies Comments (RM16-23) at 40-41; NYISO Indicated
Transmission Owners Comments (RM16-23) at 13.
---------------------------------------------------------------------------
107. NYISO Indicated Transmission Owners caution that, while a
general definition of a distributed energy resource is appropriate,
rules for elective participation in RTO/ISO markets may still require
individual classifications for types of distributed energy resources
because differences in their capabilities may warrant specific
operational, reliability, and compensation considerations.\256\ NYISO
points out that it has a broader definition of distributed energy
resource than that proposed in the NOPR and therefore asks the
Commission to permit regional flexibility to allow NYISO to fashion
rules and market designs that meet its needs while still achieving the
Commission's goal of integrating distributed energy resources into the
wholesale markets.\257\ NYISO notes that it has also proposed to allow
small aggregations of community distributed generation to provide
wholesale market services as distributed energy resources.\258\ NRG
encourages the Commission to direct the RTOs/ISOs to use a definition
of distributed energy resources based on technology-neutral principles,
including the capability to provide load curtailment, load consumption
or charging, injection, and ancillary services (e.g., regulation,
reserves, and flexible ramping services).\259\ According to NRG,
regulatory authorities may differ in their definition of distributed
energy resources, but generally reference their ability to ``generate
and inject power into the distribution and/or transmission systems.''
Thus, NRG states, distributed energy resources should be defined as a
class of assets that can both inject and curtail electricity.\260\
---------------------------------------------------------------------------
\256\ NYISO Indicated Transmission Owner Comments (RM16-23) at
15.
\257\ NYISO Comments (RM16-23) at 11 (stating it defines
distributed energy resource as ``a resource, or a set of resources,
typically located on an end-use customer's premises that can provide
wholesale market services but are usually operated for the purpose
of supplying the customer's electric load''). We note that, on
January 23, 2020, the Commission accepted NYISO's proposed tariff
revisions related to aggregations, including its proposal to define
Distributed Energy Resource as: (i) A facility comprising two or
more Resource types behind a single point of interconnection with an
Injection Limit of 20 MW or less; or (ii) a Demand Side Resource; or
(iii) a Generator with an Injection Limit of 20 MW or less, that is
electrically located in the [New York Control Area]. NYISO
Aggregation Order, 170 FERC ] 61,033; see NYISO, NYISO Tariffs,
NYISO MST, Section 2.4 MST Definitions--D (15.0.0).
\258\ NYISO Comments (RM16-23) at 11.
\259\ NRG Comments (2018 RM18-9) at 3.
\260\ Id. at 5-6.
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108. EEI asks the Commission to clarify the types of distributed
energy resources that qualify as ``thermal storage,'' noting that if
the thermal energy cannot be readily transformed into electric energy,
then the storage device cannot be used as an electric resource.\261\
Public Interest Organizations seek clarification that thermal storage
includes, but is not limited to, both grid-enabled water heaters and
grid-enabled thermostats, which can precool or preheat to avoid energy
usage during peak demand, make and store ice to use as air
conditioning, and direct control of smart-home energy management.\262\
---------------------------------------------------------------------------
\261\ EEI Comments (RM16-23) at 16 n.23.
\262\ Public Interest Organizations Comments (RM16-23) at 15-16
& nn.45-46.
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109. Some commenters seek to capture a broad range of distributed
[[Page 67114]]
energy resources in the definition. Advanced Energy Economy asks the
Commission to revise the definition to explicitly include energy
efficiency and demand response resources of all types as well as
``customer site[s] capable of demand reduction.'' \263\ Other
commenters also request or support including energy efficiency
resources in the definition of distributed energy resource.\264\ NYISO
Indicated Transmission Owners request clarification that intermittent
generation may be considered a distributed energy resource, which can
be aggregated into dispatchable distributed energy resource
aggregations.\265\ They add that certain behind-the-meter intermittent
generation may not be a distributed energy resource if it participates
in a distribution utility's net metering or other program regarding
which the Commission has clarified that the resource is not engaging in
a wholesale sale for jurisdictional purposes.\266\
---------------------------------------------------------------------------
\263\ Advanced Energy Economy Comments (RM16-23) at 21.
\264\ E4TheFuture Comments (RM16-23) at 1; Efficient Holdings
Comments (RM16-23) at 6-7; Public Interest Organizations Comments
(RM16-23) at 15-16.
\265\ NYISO Indicated Transmission Owners Comments (RM16-23) at
15.
\266\ Id. at n.17.
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110. Advanced Energy Management requests that the Commission
clarify that its definition of distributed energy resources includes
demand response resources, or that demand response resources can choose
to participate in distributed energy resource participation models
where they are a better fit.\267\
---------------------------------------------------------------------------
\267\ Advanced Energy Management Comments (RM16-23) at 8-10.
---------------------------------------------------------------------------
111. Commenters ask for assurance that the NOPR does not change
existing demand response rules, and that resources currently
participating as demand response could continue to do so, even if they
would fall under the definition of a distributed energy resource.\268\
They note that certain reforms may drive existing, low-cost commercial
and industrial demand response from the market.\269\ Advanced Energy
Management argues that the NOPR may be more applicable to newer forms
of distributed energy resources that currently are not accommodated by
a demand response model and that the demand response model should not
be changed.\270\
---------------------------------------------------------------------------
\268\ Advanced Energy Economy Comments (RM16-23) at 50-51
(noting that existing market rules recognize a distinction between
demand response and distributed energy resource aggregations, such
as in CAISO, where there are separate programs for exporting
distributed energy resources and non-exporting distributed energy
resources that operate as demand response); Advanced Energy
Management Comments (RM16-23) at 6 (noting specifically the reforms
in Section III.B.4 of the NOPR for distributed energy resource
aggregators as it applies to commercial and industrial demand
response); IRC Comments (RM16-23) at 7; PJM Comments (RM16-23) at 6.
\269\ Advanced Energy Management Comments (RM16-23) at 7.
\270\ Id. at 6-8.
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112. PJM, however, states that it does not view energy efficiency
or load curtailment as distributed energy resources, based upon PJM's
distinction between its existing and robust participation models for
energy efficiency and demand response.\271\ To limit disruption to its
models, PJM distinguishes distributed energy resources by limiting them
to generation and electric storage resources capable of injecting
energy onto the distribution system.\272\
---------------------------------------------------------------------------
\271\ PJM Comments (2018 RM18-9) at 1.
\272\ Id. at 2.
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113. A few commenters discuss the definition of a distributed
energy resource aggregator. E4TheFuture supports the Commission's
proposal to require each RTO/ISO to revise its tariff to define
distributed energy resource aggregators as a type of market
participant.\273\ Efficient Holdings asks the Commission to create a
universal and comprehensive market participant definition for
distributed energy resource aggregators that would be flexible enough
to incorporate emerging technologies and provide these resources the
same ability to offer multiple products afforded to large scale
generators.\274\ MISO Transmission Owners also assert that the term
``distributed energy resource aggregator'' should be formally defined;
in addition, they ask whether that term is inclusive of behind- and
front-of-the-meter products and whether a utility could bid its
existing demand response peak shaving assets into the market as a
distributed energy resource aggregator.\275\ Advanced Energy Management
requests clarification on the distinction between demand response and
distributed energy resource aggregators, arguing that the former should
consist of behind-the-meter resources that participate only in the
demand response framework, while the latter could be either behind- or
front-of-the-meter resources and participate in any model.\276\
---------------------------------------------------------------------------
\273\ E4TheFuture Comments (RM16-23) at 2.
\274\ Efficient Holdings Comments (RM16-23) at 7.
\275\ MISO Transmission Owners Comments (RM16-23) at 17-18.
\276\ Advanced Energy Management Comments (RM16-23) at 6.
---------------------------------------------------------------------------
3. Commission Determination
114. Upon consideration of the comments received, we modify the
definition of distributed energy resource proposed in the NOPR.
Specifically, we amend Sec. 35.28(b) of the Commission's regulations
to define a distributed energy resource as ``any resource located on
the distribution system, any subsystem thereof or behind a customer
meter.'' These resources may include, but are not limited to, resources
that are in front of and behind the customer meter, electric storage
resources, intermittent generation, distributed generation, demand
response, energy efficiency, thermal storage, and electric vehicles and
their supply equipment--as long as such a resource is ``located on the
distribution system, any subsystem thereof or behind a customer
meter.'' \277\ The revised definition of distributed energy resource
that we adopt in this final rule is technology-neutral, thereby
ensuring that any resource that is technically capable of providing
wholesale services through aggregation is eligible to do so, which
enhances competition in the RTO/ISO markets and, in turn, helps to
ensure that these markets produce just and reasonable rates.\278\
---------------------------------------------------------------------------
\277\ As discussed further in Section IV.C.2 below, we find that
RTOs/ISOs may not prohibit any particular type of distributed energy
resource technology from participating in distributed energy
resource aggregations. We note that the types of thermal storage
described by EEI and Public Interest Organizations may qualify as
demand response or energy efficiency resources under RTO/ISO market
rules.
\278\ See infra Section IV.C.2 (Types of Technologies).
---------------------------------------------------------------------------
115. In response to Advanced Energy Economy's request, we clarify
that energy efficiency and demand response resources are capable of
providing demand reductions at customer sites, and therefore ``customer
sites capable of demand reduction'' may meet the definition of a
distributed energy resource.\279\ In response to requests for regional
flexibility, we further note that RTOs/ISOs can propose their own
definitions for the Commission's evaluation as long as the scope and
applicability of the proposed definitions are consistent with the
Commission's definition of distributed energy resource and consistent
with all aspects of this final rule.
---------------------------------------------------------------------------
\279\ See Advanced Energy Economy Comments (RM16-23) at 21.
---------------------------------------------------------------------------
116. We find that the NOPR proposal to define a distributed energy
resource as a source or sink of power risked creating unnecessary
confusion because it was not clear as to which resources could qualify
and the definition inadvertently excluded some resources
[[Page 67115]]
that could be aggregated to sell energy, capacity, or ancillary
services. The revised definition of distributed energy resource is
intended to be broad enough to encompass current and future
technologies that qualify as distributed energy resources with no
further need to clarify or revise the definition as new technologies
are developed.
117. As discussed further below in Sections IV.C, IV.F, and IV.H,
we clarify that distributed energy resource aggregations must be able
to meet the qualification and performance requirements to provide the
service that they are offering into RTO/ISO markets. For example,
because a type of resource like energy efficiency cannot be dispatched,
metered, or telemetered, it would likely be impossible for distributed
energy resource aggregations comprised exclusively of energy efficiency
resources to be able to provide energy or ancillary services to the
RTOs/ISOs because the aggregation would not be technically capable of
providing those services.
118. We also adopt a modified definition of distributed energy
resource aggregator than was proposed in the NOPR, and therefore amend
Sec. 35.28(b) of the Commission's regulations to define a distributed
energy resource aggregator as ``the entity that aggregates one or more
distributed energy resources for purposes of participation in the
capacity, energy and/or ancillary service markets of the regional
transmission organizations and/or independent system operators.'' \280\
We clarify that, because demand response falls under the definition of
distributed energy resource, an aggregator of demand response could
participate as a distributed energy resource aggregator. However, this
final rule does not affect existing demand response rules.
---------------------------------------------------------------------------
\280\ As discussed further in Section IV.C.6, consistent with
Order No. 719, we require each RTO/ISO to allow a single qualifying
distributed energy resource to serve as its own distributed energy
resource aggregator. See Order No. 719, 125 FERC ] 61,071 at P
158(d) (``An [aggregator of retail customers] can bid demand
response either on behalf of only one retail customer or multiple
retail customers.'').
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C. Eligibility To Participate in RTO/ISO Markets Through a Distributed
Energy Resource Aggregator
1. Participation Model
a. NOPR Proposal
119. In the NOPR, the Commission proposed to require each RTO/ISO
to revise its tariff as necessary to allow distributed energy resource
aggregators to offer to sell capacity, energy, and ancillary services
in RTO/ISO markets.\281\ Specifically, the Commission proposed to
require that each RTO/ISO revise its tariff to define distributed
energy resource aggregators as a type of market participant that can
participate in RTO/ISO markets under the participation model that best
accommodates the physical and operational characteristics of its
distributed energy resource aggregation. The Commission explained that
this means that the distributed energy resource aggregator would
register as, for example, a generation asset if that is the
participation model that best reflects its physical
characteristics.\282\ The Commission stated that, while it expects
efficiencies to be gained by allowing distributed energy resource
aggregations to participate under existing participation models, it
also acknowledges that the use of existing participation models may not
be possible in every RTO/ISO based on how market participation is
structured. However, the Commission emphasized that, where
participation under existing participation models is possible, the
distributed energy resource aggregation must still satisfy the
eligibility requirements of the applicable participation model before
it can participate in RTO/ISO markets under that participation model.
Therefore, to accommodate the participation of distributed energy
resource aggregations, the Commission proposed that each RTO/ISO modify
the eligibility requirements for existing participation models as
necessary to allow for such participation.
---------------------------------------------------------------------------
\281\ NOPR, 157 FERC ] 61,121 at P 124.
\282\ Id. P 128.
---------------------------------------------------------------------------
b. Comments
120. Several commenters assert that a new participation model for
distributed energy resource aggregations is necessary.\283\ The Ohio
Commission, Tesla/SolarCity, and Public Interest Organizations support
the Commission's efforts to require each RTO/ISO to modify its tariff
to provide a participation model for distributed energy resource
aggregators.\284\ AES Companies explain that a new and separate
participation model is necessary to facilitate market participation of
distributed energy resource aggregations due to their unique impacts on
the bulk electric system and state-jurisdictional considerations.\285\
Stem also asserts that each RTO/ISO needs to implement a model that
accommodates behind-the-meter exporting resources or, if that is
impractical, to implement a model in which behind-the-meter non-
exporting resources can fully participate.\286\ Microgrid Resources
Coalition notes its support for allowing aggregations of behind-the-
meter distributed energy resources to participate fully and notes that
it is important to allow for the participation of distributed energy
resources that have flexible controllable output.\287\
---------------------------------------------------------------------------
\283\ See, e.g., Microsoft Comments (2018 RM18-9) at 15; NRG
Comments (2018 RM18-9) at 4.
\284\ Ohio Commission Comments (RM16-23) at 4; Public Interest
Organizations Comments (RM16-23) at 21; Tesla/SolarCity Comments
(RM16-23) at 20.
\285\ AES Companies Comments (RM16-23) at 32 (noting that,
because the proposed definition of a distributed energy resource
aggregation includes resources that are both a source and a sink,
the aggregation can be a distributed generation entity or a micro
grid (includes generation, load, and distribution lines)).
\286\ Stem Comments (RM16-23) at 12-13.
\287\ Microgrid Resources Coalition Comments (2018 RM18-9) at 3,
4-5.
---------------------------------------------------------------------------
121. Commenters offer a range of views regarding how distributed
energy resource aggregations should be treated under an RTO's/ISO's
participation model. Some commenters suggest that when acting as a
generator, distributed energy resource aggregations should be treated
like any generator.\288\ Other commenters focus on the need for clarity
around what services distributed energy resources will be allowed to
provide and how they can be aggregated.\289\ For example, Xcel Energy
Services contends that distributed energy resources will likely not
have firm transmission service and may not be able to deliver services
to the system that depend on firm transmission such as capacity or
black start capability.\290\ Some commenters argue that an aggregation
of distributed energy resources should be treated as a single resource
by the wholesale market operator, noting that this would reduce
barriers and may improve performance.\291\ Other commenters similarly
support the ability of an aggregator to transact directly in the
wholesale market without a load serving entity or electric distribution
company as agent.\292\
---------------------------------------------------------------------------
\288\ NYISO Comments (RM16-23) at 13; PJM Comments (RM16-23) at
5-6.
\289\ AES Companies Comments (RM16-23) at 39; Avangrid Comments
(RM16-23) at 10; Tesla/SolarCity Comments (RM16-23) at 20; Xcel
Energy Services Comments (RM16-23) at 12-13.
\290\ Xcel Energy Services Comments (RM16-23) at 12-13.
\291\ Advanced Microgrid Solutions Comments (RM16-23) at 7; NRG
Comments (RM16-23) at 10; Stem Comments (RM16-23) at 5; Tesla/
SolarCity Comments (RM16-23) at 20-21.
\292\ Mosaic Power Comments (RM16-23) at 5.
---------------------------------------------------------------------------
122. Some commenters posit that the Commission should allow the
[[Page 67116]]
distributed energy resource aggregator to determine the participation
model for distributed energy resource aggregations based on the
characteristics of the aggregation as a whole, even if it includes
diverse technologies,\293\ and that aggregators should be able to
define the capabilities of the resources in their aggregations.\294\
Some commenters stress the importance of allowing diverse technologies
(e.g., solar, storage, and demand response) \295\ to be in the same
aggregation, while others argue that entities that own multiple
distributed energy resources should be allowed to participate in more
than one aggregation.\296\ Stem asserts that, if behind-the-meter
resources are directed to an existing participation model, then the
Commission should require a detailed review to show that the existing
model does not discriminate against the capabilities of new
resources.\297\
---------------------------------------------------------------------------
\293\ Advanced Energy Economy Comments (RM16-23) at 21.
\294\ Microgrid Resources Coalition Comments (RM16-23) at 6.
\295\ Advanced Energy Economy Comments (RM16-23) at 21.
\296\ NextEra Comments (RM16-23) at 14; Public Interest
Organizations Comments (RM16-23) at 16.
\297\ Stem Comments (RM16-23) at 13.
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123. Advanced Energy Management states that, if an end-use customer
is capable of curtailing load and discharging a battery located behind
its meter, it is unclear whether the customer's distributed energy
resource aggregator could aggregate both the storage and load
curtailment into the same resource. Advanced Energy Management also
states that it would be inefficient to have the same customer
participate as part of two different resources or through two
unnecessarily separate participation models.\298\ MISO Transmission
Owners request clarity on the interplay between the rules that apply to
storage and the rules that apply to distributed energy resources,
noting that some resources may fall into both categories, and any
potential conflicts should be resolved. For example, MISO Transmission
Owners seek clarity on whether an aggregator of electric vehicles is
considered storage or a distributed energy resource aggregator, or
both.\299\
---------------------------------------------------------------------------
\298\ Advanced Energy Management Comments (RM16-23) at 9.
\299\ MISO Transmission Owners Comments (RM16-23) at 20.
---------------------------------------------------------------------------
124. Microgrid Resources Coalition argues that RTOs/ISOs should
allow aggregators to bid their resources together or separately as
demand response and delivered power.\300\ Energy Storage Association
also argues that any final rule should account for distributed energy
resources' provision of bi-directional services,\301\ and Icetec
asserts that a participation model should allow sites that mix load
reductions and distributed energy resources to offer their combined
capacity as a single market resource.\302\ Microgrid Resources
Coalition also argues that distributed energy resource aggregations,
particularly microgrids, do not fit neatly into existing participation
models or the new participation model for electric storage resources
proposed in the NOPR.\303\
---------------------------------------------------------------------------
\300\ Microgrid Resources Coalition Comments (2018 RM18-9) at 8.
\301\ Energy Storage Association Comments (2018 RM18-9) at 2.
\302\ Icetec Energy Services Comments (2018 RM18-9) at 6.
\303\ Microgrid Resources Coalition Comments (RM16-23) at 5-6
(noting that demand response participation models that are based on
shutting down an industrial process or activating a seldom used
generator are not appropriate for resources like a microgrid that
uses multiple conventional and unconventional resources to manage
multiple loads of varying flexibility and is optimized by
sophisticated controls).
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125. Other commenters recommend that the Commission require the
RTOs/ISOs to incorporate sufficient flexibility into their
participation models. Public Interest Organizations suggest that, in
order to take advantage of distributed energy resources' ability to
absorb excess electricity, shift load, and reinject electricity onto
the grid at peak times, participation models should be flexible and
enable resources to act as demand-side resources and/or as generation
and should not require resources to choose one participation model
exclusively.\304\ Efficient Holdings similarly contends that
participation models should not force distributed energy resources to
choose between individual categories of services to offer into the
market at any given time.\305\ NYISO Indicated Transmission Owners
request that energy-only distributed energy resource aggregations be
allowed in the distributed energy resource participation model, and
consistent with existing practice for other energy-only resources,
should not be required to offer in the day-ahead market and should be
permitted in both the day-ahead and real-time markets.\306\ NYISO also
asks the Commission to permit regional flexibility that would allow
NYISO to create rules and market designs that meet its needs while
meeting the Commission's desire to integrate distributed energy
resources into the wholesale energy, ancillary service, and capacity
markets.\307\
---------------------------------------------------------------------------
\304\ Public Interest Organizations Comments (RM16-23) at 19.
\305\ Efficient Holdings Comments (RM16-23) at 7-8.
\306\ NYISO Indicated Transmission Owners Comments (RM16-23) at
10-11 (citing Cal. Indep. Sys. Operator Corp., 155 FERC ] 61,229 at
P 11 (accepting CAISO model that allows intermittent resources to
participate in a dispatchable aggregation)).
\307\ NYISO Comments (RM16-23) at 11.
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126. New York State Entities ask the Commission to grant RTOs/ISOs
the flexibility to devise participation models that reflect market
conditions and ongoing initiatives such as those described in NYISO's
Distributed Energy Resource Roadmap.\308\ New York State Entities
highlight that NYISO is attempting to harmonize the developing
wholesale market enhancements with the complementary retail programs
emerging from New York's Reforming the Energy Vision initiative.\309\
---------------------------------------------------------------------------
\308\ New York State Entities Comments (RM16-23) at 12, 13
(citing Distributed Energy Resources Roadmap for New York's
Wholesale Electricity Markets, (January 2017), New York Independent
System Operator, Inc.) (Distributed Energy Resource Roadmap); see
supra note 21.
\309\ New York State Entities Comments (RM16-23) at 13 (citing
Distributed Energy Resource Roadmap at 4-6).
---------------------------------------------------------------------------
127. Some commenters note that the RTOs/ISOs need new and revised
market rules to incorporate distributed energy resources, but not
necessarily a new participation model.\310\ ISO-NE argues that a new
participation model would be costly and disruptive and create no
additional value because distributed energy resources can monetize
their value to the grid through several existing avenues.\311\
---------------------------------------------------------------------------
\310\ Advanced Energy Economy Comments (2018 RM18-9) at 5-6;
Advanced Energy Management Comments (2018 RM18-9) at 3; Icetec
Energy Comments (2018 RM18-9) at 3-4, 6; NYISO Indicated
Transmission Owners Comments (2018 RM18-9) at 5.
\311\ ISO-NE Comments (2018 RM18-9) at 2-4.
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128. Advanced Energy Management argues that a final rule should not
require RTOs/ISOs to replace their existing programs, such as demand
response programs.\312\ Icetec argues, however, that existing
``interconnected generation'' models and demand response models are not
sufficient for distributed energy resource participation, and states
that capacity market requirements for year-round performance in PJM
prevent distributed energy resources from offering their full capacity
value.\313\ Tesla argues that, regardless of model, distributed energy
resources should receive comparable compensation.\314\
---------------------------------------------------------------------------
\312\ Advanced Energy Management Comments (2018 RM18-9) at 3.
\313\ Icetec Comments (2018 RM18-9) at 5
\314\ Tesla Comments (2018 RM18-9) at 1, 9.
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c. Commission Determination
129. In this final rule, we adopt the NOPR proposal to require each
RTO/ISO to have tariff provisions that allow
[[Page 67117]]
distributed energy resource aggregations to participate directly in
RTO/ISO markets. We conclude that existing participation models may
create barriers to the participation of distributed energy resource
aggregators in RTO/ISO markets by limiting the operation of distributed
energy resource aggregations and the services that they may be eligible
to provide.
130. We therefore adopt the NOPR proposal to add Sec.
35.28(g)(12)(i) to the Commission's regulations and require each RTO/
ISO to establish distributed energy resource aggregators as a type of
market participant and to allow distributed energy resource aggregators
to register distributed energy resource aggregations under one or more
participation models in the RTO's/ISO's tariff that accommodate the
physical and operational characteristics of the distributed energy
resource aggregation. However, upon consideration of the comments, we
modify the NOPR proposal to provide each RTO/ISO with greater
flexibility to determine how best to revise the participation models
set forth in its market rules to facilitate the participation of
distributed energy resource aggregations. Specifically, to meet the
goals of the final rule, each RTO/ISO can comply with the requirement
to allow distributed energy resource aggregators to participate in its
markets by modifying its existing participation models to facilitate
the participation of distributed energy resource aggregations, by
establishing one or more new participation models for distributed
energy resource aggregations, or by adopting a combination of those two
approaches. The Commission will evaluate each proposal submitted on
compliance to determine whether it meets the goals of this final rule
to allow distributed energy resources to provide all services that they
are technically capable of providing through aggregation.
131. This approach will provide each RTO/ISO with the flexibility
to facilitate the participation of distributed energy resource
aggregations in its markets in a way that is efficient and cost-
effective as well as fits the market design of the RTO/ISO. Permitting
each RTO/ISO to create one or more new participation models for
distributed energy resources addresses commenter concerns about the
limitations of existing models. Likewise, permitting each RTO/ISO to
modify existing participation models, instead of requiring creation of
one or more new participation models, addresses commenter concerns that
creating a new participation model may be too costly or disruptive, or
that existing models do not need to be replaced.
132. Providing RTOs/ISOs with the flexibility to determine whether
to modify existing participation models, create one or more new
participation models, or use a combination of existing and new
participation models will allow each RTO/ISO to reflect varying
regional needs in its approach to allow distributed energy resource
aggregators to participate in its markets.
2. Types of Technologies
a. NOPR Proposal
133. In the NOPR, the Commission stated that distributed energy
resources may include, but are not limited to, electric storage
resources, distributed generation, thermal storage, and electric
vehicles and their supply equipment.\315\ The Commission also
preliminarily found that limiting the types of technologies that are
allowed to participate in the RTO/ISO markets through distributed
energy resource aggregators would create a barrier to entry for
emerging or future technologies, potentially precluding them from being
eligible to provide all of the capacity, energy and ancillary services
that they are technically capable of providing.\316\ The Commission
stated that, while some individual resources or certain technologies
may not be able to meet the qualification or performance requirements
to provide services to the RTO/ISO markets on their own, they may
satisfy such requirements as part of a distributed energy resource
aggregation where resources complement one another's capabilities. The
Commission further stated that combining electric storage resources
with distributed generation could allow the aggregate resource to
achieve performance requirements (such as minimum run times) that an
electric storage resource could not meet on its own and provide
services (such as regulation) that distributed generation may not be
able to provide on its own.\317\
---------------------------------------------------------------------------
\315\ NOPR, 157 FERC ] 61,121 at P 104; see supra Section IV.B.
(Definitions of Distributed Energy Resource and Distributed Energy
Resource Aggregation).
\316\ NOPR, 157 FERC ] 61,121 at P 133.
\317\ Id. P 133 n.231.
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134. In the NOPR, the Commission proposed to require that each RTO/
ISO revise its tariff so that it does not prohibit the participation of
any particular type of technology in the RTO/ISO markets through a
distributed energy resource aggregator.\318\ This was to help ensure
that the market rules that RTOs/ISOs develop to comply with any final
rule issued in this proceeding were sufficiently flexible to
accommodate the participation of new distributed energy resources as
technology evolves, and to acknowledge the potential that a distributed
energy resource may meet qualification or performance requirements by
participating in a distributed energy resource aggregation that it
cannot on its own. The Commission stated, however, that, to the extent
that existing rules or regulations explicitly prohibit certain
technologies from participating in RTO/ISO markets, it did not intend
to overturn those rules or regulations.
---------------------------------------------------------------------------
\318\ Id. P 133.
---------------------------------------------------------------------------
b. Comments
135. Several commenters support the Commission's proposal not to
prohibit the participation of any particular type of technology in RTO/
ISO markets through a distributed energy resource aggregation.\319\
Generally, they state that it is important for the market rules to be
resource neutral, allowing other attributes such as cost, quality,
flexibility, and other attributes sought by market participants, to
dictate which resources can successfully participate in RTO/ISO
markets. They assert that resource neutrality reduces risk for
investment in new technologies and preserves flexibility for the
participation of future technologies and avoid unnecessary barriers to
entry.
---------------------------------------------------------------------------
\319\ See, e.g., AES Companies (RM16-23) at 32-33; CAISO
Comments (RM16-23) at 23; City of New York Comments (RM16-23) at 8;
Massachusetts Commission Comments (RM16-23) at 8-10; R Street
Institute Comments (RM16-23) at 8.
---------------------------------------------------------------------------
136. Several commenters argue that distributed energy resource
aggregation participation models must allow a variety of technology
configurations. Efficient Holdings argues that third party aggregators
of behind-the-meter resources must have better access to the markets,
which can be achieved through reforms including refined product
definitions, reduction of burdensome and expensive operational
requirements, and rules to address distribution utility non-compliance,
embracing the broadest array of technologies possible.\320\ Energy
Storage Association and Stem seek to ensure that front-of-the-meter
resources, behind-the-meter exporting and non-exporting resources, and
heterogeneous groups of resources are all able to participate in
distributed energy
[[Page 67118]]
resource aggregations.\321\ Stem states that it is reasonable to
restrict the mixing of front-of-the-meter, behind-the-meter exporting,
and behind-the-meter non-exporting resources within a single
aggregation.\322\
---------------------------------------------------------------------------
\320\ Efficient Holdings Comments (RM16-23) at 7-9.
\321\ Energy Storage Association (RM16-23) at 24-25; Stem
Comments (RM16-23) at 7, 12, 13.
\322\ Stem Comments (RM16-23) at 12, 13.
---------------------------------------------------------------------------
137. Commenters also note that allowing distributed energy resource
aggregations to include multiple types of distributed technologies
allows multi-technology aggregations such as microgrids and
complementary resources such as solar and storage to participate in
RTO/ISO markets, will provide RTOs/ISOs another source of flexible
controllable output. CAISO states that, consistent with the
Commission's proposal, its Commission-approved Distributed Energy
Resource Provider model allows aggregations to consist of different
distributed energy resource types.\323\ AES Companies encourage the
Commission to review the validity of any prohibitions on the
participation of existing technologies (i.e., rules currently exist
prohibiting certain types of resources in the tariffs for direct market
participation) in a separate docket rather than in this
proceeding.\324\
---------------------------------------------------------------------------
\323\ CAISO Comments (RM16-23) at 23.
\324\ AES Companies Comments (RM16-23) at 32-33.
---------------------------------------------------------------------------
138. In contrast, some commenters express general concerns about
aggregations that include different types of technologies.\325\
American Petroleum Institute contends that aggregating different types
of distributed energy resources will make market optimization more
difficult.\326\ TAPS urges the Commission to give RTOs/ISOs discretion,
claiming that combining multiple types of distributed energy resources
within a single aggregation may be beneficial but could pose issues
when determining locational and minimum size requirements for mixed
aggregations.\327\
---------------------------------------------------------------------------
\325\ American Petroleum Institute Comments (RM16-23) at 10;
ISO-NE Comments (RM16-23) at 31-35; TAPS Comments (RM16-23) at 27.
\326\ American Petroleum Institute Comments (RM16-23) at 10.
\327\ TAPS Comments (RM16-23) at 27.
---------------------------------------------------------------------------
139. Several commenters state that RTOs/ISOs will need flexibility
to avoid imposing additional costs or barriers to entry on different
types and configurations of prospective distributed energy resource
aggregations.\328\ SPP argues that managing an aggregation as a
discrete set of different assets may be infeasible in commitment and
dispatch and that sub-categorizing different types of distributed
energy resources within a single aggregation would be extremely
complex.\329\ PJM Market Monitor states that distributed generation and
distributed storage should not be mixed within aggregations and that
resources should be aggregated by type for each wholesale market node.
For example, according to PJM Market Monitor, distributed generation
should be aggregated, at the same node with other distributed
generation, while distributed storage should be aggregated at the same
node with other distributed storage.\330\
---------------------------------------------------------------------------
\328\ CAISO Comments (RM16-23) at 38; Fresh Energy/Sierra Club/
Union of Concerned Scientists Comments (RM16-23) at 3; New York
State Entities Comments (RM16-23) at 21.
\329\ SPP Comments (RM16-23) at 22.
\330\ PJM Market Monitor Comments (RM16-23) at 15-16.
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140. ISO-NE also asks for flexibility and provides several
arguments as to why certain heterogeneous aggregations are not
desirable.\331\ More specifically, ISO-NE argues that (1) demand-side
load resources should only be allowed to participate in aggregations
with other load because of how certain charges and credits are
allocated to load; \332\ (2) electric storage resources would not
benefit from participating in aggregations with non-storage distributed
energy resources because of state-of-charge management issues; \333\
and (3) aggregations of non-intermittent resources with different
physical and economic characteristics would need to self-schedule,
potentially adding financial risk for the participant, reducing the
efficiency of the dispatch, and contributing to uplift or excess
generation conditions.\334\ In addition, ISO-NE states that demand
response resources should not be allowed to participate in distributed
energy resource aggregations because of their distinct settlement
rules.\335\ According to ISO-NE, in order to accommodate aggregations
that include both demand response and non-demand response resource
components, ISO-NE would need to establish rules to disaggregate these
components for purposes of settlement. ISO-NE requests that, if they
are not required to participate separately, the Commission clarify
which rules must apply to such resources.\336\ ISO-NE adds that its
region is steadily transitioning its energy market away from self-
scheduling and toward requiring all energy supply and demand to be
priced and that being required to implement rules that accommodate
aggregations composed of heterogenous resource types would be a
significant step backwards in that effort.\337\
---------------------------------------------------------------------------
\331\ ISO-NE Comments (RM16-23) at 31-36.
\332\ Id. at 33.
\333\ Id. at 33-34.
\334\ Id. at 34-35.
\335\ Id. at 32.
\336\ Id. at 32-33.
\337\ Id. at 34-35.
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c. Commission Determination
141. To implement Sec. 35.28(g)(12)(ii)(a) of the Commission's
regulations, we require that each RTO's/ISO's rules do not prohibit any
particular type of distributed energy resource technology from
participating in distributed energy resource aggregations. We find that
limiting the types of technologies that are allowed to participate in
RTO/ISO markets through a distributed energy resource aggregator would
create a barrier to entry for emerging or future technologies,
potentially precluding them from being eligible to provide all of the
capacity, energy, and ancillary services that they are technically
capable of providing. Requiring that each RTO's/ISO's rules do not
exclude any particular types of technology from participating in
distributed energy resource aggregations in RTO/ISO markets will ensure
a technology-neutral approach to distributed energy resource
aggregations, which will ensure that more resources are able to
participate in such aggregations, thereby helping to enhance
competition and ensure just and reasonable rates.
142. We agree with commenters that generally support requiring
RTOs/ISOs to allow groupings of different technology types in
distributed energy resource aggregations.\338\ Additionally, we agree
with NRG that, while some individual resources or certain technologies
may not be able to meet the qualification or performance requirements
to provide certain services to RTO/ISO markets on their own, they may
be able to satisfy such requirements as part of a distributed energy
resource aggregation where resources complement one another's
capabilities.\339\ For instance, in the NOPR, the Commission stated
that aggregating electric storage resources with distributed generation
could allow the aggregation to achieve performance requirements (such
as minimum run times) that an electric storage resource could not meet
on its own and provide services (such as regulation) that
[[Page 67119]]
distributed generation may not be able to provide on its own.\340\
Therefore, to implement Sec. 35.28(g)(12)(ii)(a) of the Commission's
regulations, we clarify the NOPR proposal and require each RTO/ISO to
revise its tariff to allow different types of distributed energy
resource technologies to participate in a single distributed energy
resource aggregation (i.e., allow heterogeneous distributed energy
resource aggregations).\341\ Requiring that RTOs/ISOs allow
heterogeneous aggregations will further enhance competition in RTO/ISO
markets by ensuring that complementary resources, including those with
different physical and operational characteristics, can meet
qualification and performance requirements such as minimum run times,
which will help ensure that these markets produce just and reasonable
rates.
---------------------------------------------------------------------------
\338\ See, e.g., AES Companies (RM16-23) at 32-33; CAISO
Comments (RM16-23) at 23; City of New York Comments (RM16-23) at 8;
Energy Storage Association (RM16-23) at 24-25; Fresh Energy/Sierra
Club/Union of Concerned Scientists Comments (RM16-23) at 3;
Massachusetts Commission Comments (RM16-23) at 8-10; New York State
Entities Comments (RM16-23) at 21; R Street Institute Comments
(RM16-23) at 8; Stem Comments (RM16-23) at 7, 12, 13.
\339\ NRG Comments (RM16-23) at 19.
\340\ NOPR, 157 FERC ] 61,121 at P 133 n.231.
\341\ ISO-NE defines a heterogeneous aggregation as consisting
of ``different resource types, such that, for example, a single
aggregation might consist of a battery, distributed generation
assets, and electric vehicles.'' ISO-NE Comments (RM16-23) at 31.
---------------------------------------------------------------------------
143. We are unconvinced by arguments in favor of homogeneous
aggregations. We find that the benefits of allowing heterogeneous
aggregations outweigh the concerns regarding complexity of
implementation. While SPP and ISO-NE indicate that market rules
allowing for heterogeneous aggregations would be challenging to develop
and implement,\342\ neither explains why their markets are unique such
that it would be necessary for the Commission to permit regional
flexibility. In addition, concerns about RTOs'/ISOs' ability to manage
a diverse set of distributed energy resources are misplaced because the
distributed energy resource aggregator, not an individual distributed
energy resource in the aggregation, is the market participant with whom
the RTO/ISO would be interacting. Moreover, the aggregator, not the
RTO/ISO, would be responsible for ensuring that the distributed energy
resource aggregation meets applicable RTO/ISO performance and
registration requirements.
---------------------------------------------------------------------------
\342\ ISO-NE Comments (RM16-23) at 32; SPP Comments (RM16-23) at
21-22.
---------------------------------------------------------------------------
144. We also are not persuaded by ISO-NE's reservations related to
state-of-charge management and self-scheduling. We find that market
participants are best positioned to make these participation decisions.
If ISO-NE is correct that self-scheduling adds financial risk for the
participant and that, because of state-of-charge management issues,
electric storage resources would not benefit from participating in
distributed energy resource aggregations, then we would expect market
participants to act in their economic interest.
145. As to ISO-NE's concerns about incorporating demand response
resources into distributed energy resource aggregations, we note that
demand response aggregations and the resources in them that effectuate
load reductions currently are not necessarily composed of the same
types of technologies and are already providing services in numerous
RTO/ISO markets. Therefore, similar to the Commission's finding in
Order No. 745-A, from the perspective of the RTO/ISO, the means by
which an aggregation is able to provide wholesale services does not
change the value of that service to the wholesale grid.\343\ In
response to ISO-NE's request for clarification about which settlement
rules apply to distributed energy resource aggregations composed of
both demand response and non-demand response resources, we clarify that
the requirements in Order No. 745 would apply to demand response
resources participating in heterogeneous aggregations. In addition,
while ISO-NE would prefer to exclude demand response resources from
distributed energy resource aggregations to simplify settlement and the
allocation of charges and credits to load, we reiterate that the
benefits of allowing heterogeneous aggregations outweigh ISO-NE's
preference to limit the types of resources that can participate in
aggregations. We clarify, however, that the participation of demand
response in distributed energy resource aggregations is subject to the
opt-out and opt-in requirements of Order Nos. 719 and 719-A. Therefore,
if the relevant electric retail regulatory authority where a demand
response resource is located has either chosen to opt out or has not
opted in, then the demand response resource may not participate in a
distributed energy resource aggregation.\344\
---------------------------------------------------------------------------
\343\ As the Commission stated in Order No. 745-A, ``[f]rom the
perspective of the grid, the manner in which a customer is able to
produce such a load reduction from its validly established baseline
(whether by shifting production, using internal generation,
consuming less electricity, or other means) does not change the
effect or value of the reduction to the wholesale grid.'' Demand
Response Compensation in Organized Wholesale Energy Markets, Order
No. 745-A, 137 FERC ] 61,215, at P 66 (2011), reh'g denied, Order
No. 745-B, 138 FERC ] 61,148 (2012), vacated sub nom. Elec. Power
Supply Ass'n v. FERC, 753 F.3d 216 (D.C. Cir. 2014), rev'd &
remanded sub nom. EPSA, 136 S. Ct. 760.
\344\ See supra P 59.
---------------------------------------------------------------------------
146. As to ISO-NE's concern that self-scheduling will reduce the
efficiency of the dispatch and contribute to uplift or excess
generation conditions, we note that no other RTOs/ISOs raise this
concern. Market rules allowing for heterogeneous aggregations are
already in place in CAISO,\345\ and the Commission recently accepted
market rules allowing for heterogeneous aggregations in NYISO.\346\
Based on the record before us, ISO-NE has not sufficiently demonstrated
why it is uniquely unable to implement market rules that can overcome
these dispatch, uplift, and excess generation challenges.
---------------------------------------------------------------------------
\345\ Cal. Indep. Sys. Operator Corp., 155 FERC ] 61,229 at P
11.
\346\ NYISO Aggregation Order, 170 FERC ] 61,033.
---------------------------------------------------------------------------
3. Double Counting of Services
a. NOPR Proposal
147. In the NOPR, the Commission stated that it is appropriate for
each RTO/ISO to limit the participation of resources in RTO/ISO markets
through a distributed energy resource aggregator that are receiving
compensation for the same services as part of another program.\347\ The
Commission explained that, because resources able to register as part
of a distributed energy resource aggregation will be located on the
distribution system, they may also be eligible to participate in retail
compensation programs, such as net metering, or other wholesale
programs, such as demand response programs. Therefore, to ensure that
there is no duplication of compensation, the Commission proposed that
distributed energy resources that are participating in one or more
retail compensation programs such as net metering or another wholesale
market participation program will not be eligible to participate in
RTO/ISO markets as part of a distributed energy resource aggregation.
---------------------------------------------------------------------------
\347\ NOPR, 157 FERC ] 61,121 at P 134.
---------------------------------------------------------------------------
b. Comments
148. Most commenters that address the issue of double counting
agree that distributed energy resources should not be compensated twice
for providing the same service but disagree on what constitutes ``the
same service,'' how to implement such a requirement, or who should be
responsible.\348\ In this regard, Pacific Gas & Electric supports
prevention of double compensation and discusses the processes in
California that protects against the bypass of retail rates for behind-
the-meter distributed energy resources that both consume and
[[Page 67120]]
export electricity for both retail and wholesale purposes.\349\ Some
commenters also assert that the NOPR proposal provides a solution to
prevent double compensation,\350\ provides clear jurisdictional
lines,\351\ reduces confusion,\352\ and could ease coordination issues
for distributed energy resources and alleviate the limitations of
metering and accounting practices to distinguish between wholesale and
retail activities.\353\ In addition, some commenters posit that
allowing distributed energy resources that earn compensation in out-of-
market retail programs to participate in RTO/ISO markets may distort
price formation, skewing market results and clearing prices.\354\ Other
commenters express concern that dual wholesale and retail participation
could enable distributed energy resources to arbitrage between retail
and wholesale markets, creating opportunities for market
manipulation,\355\ or to cherry pick between retail and wholesale
constructs, preventing effective distribution system planning.\356\ To
address this concern, some commenters suggest that the Commission
should require RTOs/ISOs to restrict the ability of distributed energy
resources to switch between wholesale and retail participation by
imposing a waiting period of at least one year.\357\
---------------------------------------------------------------------------
\348\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
33-34; Calpine Comments (2018 RM18-9) at 6-7; Dominion Comments
(RM16-23) at 9-10; Microsoft Corporation Comments (2018 RM18-9) at
17; New York State Entities Comments (RM16-23) at 13.
\349\ Pacific Gas & Electric Comments (2019 RM18-9) at 5.
\350\ Avangrid Comments (RM16-23) at 11; Pacific Gas & Electric
Comments (RM16-23) at 17.
\351\ Delaware Commission Comments (RM16-23) at 4.
\352\ See, e.g., Calpine Comments (2018 RM18-9) at 6;
Organization of MISO States Comments (2018 RM18-9) at 8; PJM
Utilities Coalition Comments (2018 RM18-9) at 13.
\353\ See, e.g., APPA/NRECA Comments (RM16-23) at 39-40; EEI
Comments (RM16-23) at 25-26; Massachusetts Municipal Electric
Comments (RM16-23) at 3; National Hydropower Association Comments
(RM16-23) at 11; Six Cities Comments (RM16-23) at 6.
\354\ Calpine Comments (2018 RM18-9) at 6; EPSA Comments (2018
RM18-9) at 15; TAPS Comments (2018 RM18-9) at 25.
\355\ TAPS Comments (2018 RM18-9) at 26.
\356\ PJM Utilities Coalition Comments (2018 RM18-9) at 13.
\357\ APPA Comments (2018 RM18-9) at 25 (suggesting a waiting
period of one year); Calpine Comments (2018 RM18-9) at 7 (suggesting
a waiting period of five years as in PJM's Fixed Resource
Requirement process).
---------------------------------------------------------------------------
149. CAISO comments that, consistent with the NOPR proposal, its
Distributed Energy Resource Provider model specifies that resources
participating in a wholesale market aggregation may not participate in
a retail net energy metering program if that program does not expressly
also permit wholesale market participation.\358\ CAISO states that this
rule extends to various aspects of retail net metering programs such as
net metering with storage or virtual net metering.\359\ CAISO explains
that the rationale for this rule is that CAISO's Distributed Energy
Resource Provider model requires continuous wholesale
participation.\360\ Additionally, CAISO states that under California's
current net energy metering program rules, a participating resource
already benefits from netting its excess energy against subsequent
electricity bills.\361\ Based on this netting approach, there is no
energy available to offer into the CAISO markets because the excess
energy is banked for later withdrawal. CAISO believes the Commission's
approach in the NOPR is consistent with Commission orders determining
that exports to the transmission grid under a net energy metering
program do not constitute a sale for resale of electricity under the
FPA because these customers are, on a net basis, consumers.
---------------------------------------------------------------------------
\358\ CAISO Comments (RM16-23) at 24 (citing Cal. Indep. Sys.
Operator Corp., 155 FERC ] 61,229 at P 6).
\359\ Id. at 24.
\360\ CAISO Comments (2018 RM18-9) at 15.
\361\ CAISO Comments (RM16-23) at 24.
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150. Some commenters ask the Commission to modify or clarify
certain issues related to the NOPR proposal to prevent double counting.
For instance, several commenters urge the Commission to give clear
guidance about the definition of a retail compensation program or to
clarify the scope of the retail prohibition.\362\ A number of
commenters argue that the RTOs/ISOs should be responsible for
demonstrating how they will prevent duplicate compensation for the same
service.\363\ To that end, some commenters urge the Commission to, at a
minimum, direct RTOs/ISOs to establish protocols that address duplicate
compensation,\364\ monitor distributed energy resource offers for true
cost, and hold distributed energy resources accountable for
performance, among other measures.\365\ ISO-NE notes that if
distributed energy resources have to choose between wholesale and
retail participation, retail programs and behind-the-meter demand
response may be more attractive in New England.\366\
---------------------------------------------------------------------------
\362\ ISO-NE Comments (RM16-23) at 54; SEIA Comments (RM16-23)
at 16-17; TAPS Comments (RM16-23) at 11.
\363\ See, e.g., Advanced Microgrid Solutions Comments (RM16-23)
at 6; Dominion Comments (RM16-23) at 9-10; EEI Comments (RM16-23) at
25-26; Gridwise Comments (RM16-23) at 2; Public Interest
Organizations Comments (RM16-23) at 23-24; Stem Comments (RM16-23)
at 4, 7-8.
\364\ EPSA Comments (2018 RM18-9) at 14; TAPS Comments (2018
RM18-9) at 26-27.
\365\ Calpine Comments (2018 RM18-9) at 7; EPSA Comments (2018
RM18-9) at 20.
\366\ ISO-NE Comments (2018 RM18-9) at 3.
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151. Conversely, numerous commenters assert that the Commission
should permit distributed energy resource aggregations to participate
in both wholesale and retail markets,\367\ provided that the
distributed energy resources are technically capable of doing so and
there are not physical system limitations that would prevent such
participation.\368\ Some of these commenters argue that distributed
energy resources should not receive duplicate compensation for the same
service but should receive compensation for each distinct or
incremental value they provide at the retail or wholesale level, and
that being allowed to do so will improve efficiency and lower overall
costs.\369\ Some commenters that are in favor of RTOs/ISOs allowing
dual participation also note that relevant electric retail regulatory
authorities have the ability to prevent it.\370\ Several commenters
contend that there is precedent for dual participation \371\ and argue
that a blanket ban would create a barrier to distributed energy
resource participation, underestimating their capabilities, and inhibit
competition, undermining the NOPR.\372\ Icetec and Tesla point out that
capacity markets have long avoided duplicate compensation for demand
response and for generators providing multiple services at once (e.g.,
energy and reserves) and urge the Commission to apply the logic of
these constructs to
[[Page 67121]]
distributed energy resources.\373\ Advanced Energy Economy claims that
the NOPR proposal would prevent the RTOs/ISOs from accessing a growing
pool of resources located close to load that can be cost-effectively
dispatched to ensure reliability.\374\ Several commenters argue that
requiring resources to choose between markets would diminish the
incremental value of distributed energy resources, leading to less
efficient and flexible markets and reducing distributed energy
resources' commercial viability.\375\ Commenters contend that, even if
some services could qualify generally as the same service, it would be
possible to distinguish them.\376\ Some commenters identify a number of
scenarios in which providing distinct wholesale and retail services is
feasible and explain that dispatch triggers for these programs usually
do not overlap, which further indicates that they are not the same
services.\377\ Additional commenters note potential discrepancies
between the NOPR proposal and the Commission's recent policy statement
enabling multiple-use applications for electric storage resources,\378\
and contend that experience in CAISO has demonstrated that it is
possible to differentiate between services.\379\
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\367\ See, e.g., Advanced Energy Buyers Comments (2018 RM18-9)
at 2; Genbright Comments (RM16-23) at 2-4; Global Cold Chain
Alliance Comments (2018 RM18-9) at 2; MISO Transmission Owners
Comments (RM16-23) at 6; New York Commission Comments (2018 RM18-9)
at 16.
\368\ Energy Storage Association (2018 RM18-9) at 2; Microsoft
Corporation Comments (2018 RM18-9) at 17; NRG Comments (2018 RM18-9)
at 6-8; SEIA Comments (RM16-23) at 16; Sunrun Comments (RM16-23) at
3.
\369\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 8, 12-13; American Petroleum Institute Comments (RM16-23) at 13;
Direct Energy Comments (2018 RM18-9) at 11-13; EPSA Comments (2018
RM18-9) at 15; NARUC Comments (RM16-23) at 5; Viking Cold Solutions
Comments (2018 RM18-9) at 2.
\370\ California Commission Comments (2018 RM18-9) at 10-11; New
York Commission Comments (2018 RM18-9) at 17-18.
\371\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
39; Advanced Energy Management Comments (RM16-23) at 11-14; City of
New York Comments (RM16-23) at 10-11; NRG Comments (2018 RM18-9) at
7-8; NYPA Comments (2018 RM18-9) at 2.
\372\ See, e.g., California Energy Storage Alliance Comments
(RM16-23) at 4-6; Genbright Comments (RM16-23) at 3-4; Microgrid
Resources Coalition Comments (RM16-23) at 12; SEIA Comments (RM16-
23) at 16; Stem Comments (RM16-23) at 4, 7.
\373\ Icetec Comments (2018 RM18-9) at 14; Tesla Comments (2018
RM18-9) at 4.
\374\ Advanced Energy Economy Comments (RM16-23) at 33-34.
\375\ See, e.g., Advanced Energy Management Comments (RM16-23)
at 10-11; Advanced Microgrid Solutions Comments (RM16-23) at 6;
Energy Storage Association Comments (RM16-23) at 22-23; Public
Interest Organizations Comments (RM16-23) at 22-24; Tesla/SolarCity
Comments (RM16-23) at 3.
\376\ Energy Storage Association Comments (2018 RM18-9) at 2;
New York Commission Comments (2018 RM18-9) at 15; NYISO Indicated
Transmission Owners Comments (2018 RM18-9) at 13. See also
California Commission Comments (2018 RM18-9) at 8 (noting that the
California Commission declined to categorize the 22 services defined
for the multiple use application framework adopted in D.18-01-003 by
their service elements, which are either energy or capacity).
\377\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
34-35; California Energy Storage Alliance Comments (RM16-23) at 5-6;
DER/Storage Developers Comments (RM16-23) at 2-3; Tesla/SolarCity
Comments (RM16-23) at 5-7. Advanced Energy Management notes that
dispatch for the Consolidated Edison programs only overlapped with
dispatch for the NYISO programs in six percent of hours from 2011 to
2015. Advanced Energy Management Comments (RM16-23) at 12-13.
\378\ Institute for Policy Integrity Comments (RM16-23) at 7;
Open Access Technology Comments (RM16-23) at 4-5; Stem Comments
(RM16-23) at 4 (citing Utilization of Elec. Storage Res. for
Multiple Servs. When Receiving Cost-Based Rate Recovery, 158 FERC ]
61,051 (2017)).
\379\ Leadership Group Comments (RM16-23) at 3 (citing Cal.
Indep. Sys. Operator Corp., 155 FERC ] 61,229 at P 11).
---------------------------------------------------------------------------
152. However, many commenters disagree over how the Commission
should assess what constitutes ``the same service.'' Some commenters
assert that ``same service'' should refer narrowly to retail and
wholesale programs that compensate a distributed energy resource for
the exact same kW or kWh for the same value, providing no incremental
value to the system.\380\ Other commenters argue that tools are
necessary to prevent double compensation for the same service and
suggest using performance requirements and dispatch triggers,
contracting, market/participation rules, registration,protections,
mathematical/accounting solutions, and/or a coordination framework,
among other measures, to prevent double counting.\381\ According to
some of these commenters, market rules could prevent double
compensation when a resource is dispatched simultaneously for multiple
programs or to prevent a resource from being permitted to sell the same
market product as both an individual resource and as part of an
aggregation in the same timeframe.\382\ Some commenters suggest using
certain criteria to determine when a service provides incremental value
to the retail or wholesale system or using metrics to enable
segmentation of time or service provided.\383\ PJM asks the Commission
not to prohibit PJM from using accounting rules to delineate between a
behind-the-meter distributed energy resource aggregation's wholesale
and retail transactions, as applicable.\384\
---------------------------------------------------------------------------
\380\ Advanced Energy Management Comments (2018 RM18-9) at 13;
New York Commission Comments (2018 RM18-9) at 15.
\381\ See, e.g., California Commission Comments (2018 RM18-9) at
9-10; Microgrid Resources Coalition Comments (2018 RM18-9) at 12-14;
New York Commission Comments (2018 RM18-9) at 16, 18-19; NYISO
Indicated Transmission Owners Comments (2018 RM18-9) at 13-14; Tesla
Comments (2018 RM18-9) at 3-7.
\382\ Advanced Energy Management Comments (RM16-23) at 13; AES
Companies Comments (RM16-23) at 39; New York State Entities Comments
(RM16-23) at 15-16.
\383\ Advanced Energy Buyers Comments (2018 RM18-9) at 6;
Advanced Energy Economy Comments (2018 RM18-9) at 13; Advanced
Energy Management Comments (2018 RM18-9) at 14-15.
\384\ PJM Comments (RM16-23) at 23.
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153. IRC urges the Commission to work with states to set forth
clear processes for resolving jurisdictional and rate issues to prevent
double compensation based on the details of a particular retail
program.\385\ Some commenters suggest that the Commission collaborate
with local regulatory authorities because local conditions may warrant
special rules and restrictions for distributed energy resource
participation in multiple markets or defer to state jurisdictions.\386\
Some commenters request that the Commission clarify the right of state
regulators to monitor and regulate potential duplicate compensation
\387\ and request that the Commission provide guidance to distribution
utilities regarding the proposal.\388\
---------------------------------------------------------------------------
\385\ IRC Comments (RM16-23) at 3-5.
\386\ EEI Comments (RM16-23) at 26-27; Pacific Gas & Electric
Comments (2018 RM18-9) at 10.
\387\ Massachusetts Commission Comments (RM16-23) at 11.
\388\ ISO-NE Comments (RM16-23) at 54.
---------------------------------------------------------------------------
154. In addition, several commenters seek clarification that RTOs/
ISOs are not precluded from allowing distributed energy resources to
provide multiple non-overlapping wholesale services.\389\ NYISO
requests clarification on whether distributed energy resources are
permitted to offer the ``same service'' to the wholesale markets and
distribution system-level retail programs.\390\ Lastly, some commenters
state that the Commission should revisit and further examine the issue
of dual participation in the future.\391\
---------------------------------------------------------------------------
\389\ NextEra Comments (RM16-23) at 14; NYISO Comments (RM16-23)
at 14-15; Public Interest Organizations Comments (RM16-23) at 21-22.
\390\ NYISO Comments (RM16-23) at 14-15.
\391\ EEI Comments (RM16-23) at 25; New York Utility
Intervention Unit Comments (RM16-23) at 6; Pacific Gas & Electric
Comments (RM16-23) at 17-18; SoCal Edison Comments (RM16-23) at 10.
---------------------------------------------------------------------------
155. Other commenters argue that the NOPR proposal would undermine
state policy.\392\ Numerous commenters argue that the NOPR proposal
conflicts with the Commission's findings in New York State Public
Service Commission v. New York Independent System Operator, Inc., in
which the Commission stated that ``[w]hile the wholesale- and the
retail-level demand response programs may complement each other, they
serve different purposes, provide different benefits, and compensate
distinctly different services,'' \393\ and would interfere with New
York's existing programs and state objectives.\394\ The California
Commission maintains that dual participation of a distributed energy
resource in retail programs and RTO/ISO markets is a retail matter
under state jurisdiction.\395\ The
[[Page 67122]]
Arkansas Commission, with support from Advanced Energy Economy, states
that dual participation of distributed energy resource aggregations in
RTO/ISO and retail markets requires a cooperative federalism approach
in which the Commission has authority over RTO/ISO eligibility rules,
states have exclusive jurisdiction over retail customer programs and
may set terms and conditions so long as they do not conflict with
Commission orders, and state regulators play a complementary role.\396\
---------------------------------------------------------------------------
\392\ California Commission Comments (RM16-23) at 6-7; City of
New York Comments (RM16-23) at 13; New York State Entities Comments
(RM16-23) at 18.
\393\ N.Y. Pub. Serv. Comm'n v. N.Y. Indep. Sys. Operator, Inc.,
158 FERC ] 61,137, at P 33 (2017).
\394\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
35-36; Advanced Energy Management Comments (RM16-23) at 11-13;
Harvard Environmental Policy Initiative Comments (RM16-23) at 7; New
York State Entities Comments (RM16-23) at 14,16-18; Union of
Concerned Scientists Comments (RM16-23) at 19.
\395\ California Commission Comments (2018 RM18-9) at 10-11.
\396\ Supplemental Comments of Arkansas Commission (2018 RM18-9-
000) at 1-2; Answer of Advanced Energy Economy to Supplemental
Comments of Arkansas Commission (2018 RM18-9) at 2.
---------------------------------------------------------------------------
156. In addition, some commenters assert that the Commission does
not have authority to prevent distributed energy resources from selling
retail services.\397\ The Harvard Environmental Policy Initiative
argues that there is no legal barrier that prevents distributed energy
resources from participating in both state and Commission programs, and
that the Commission has the authority to allow each RTO/ISO to
determine how to allow distributed energy resources to participate in
both state-level and wholesale programs, though they note it may be
operationally complex.\398\ Tesla/SolarCity asserts that differences in
jurisdiction must not prevent distributed energy resources from
receiving compensation for distinct services \399\ and argues that
effects on retail rates should not be relevant.\400\ Several commenters
add that the Commission's decision in this final rule will not affect
the ability of relevant electric retail regulatory authorities to
restrict wholesale participation for distributed energy resources
wishing to participate in retail programs.\401\
---------------------------------------------------------------------------
\397\ California Commission Comments (RM16-23) at 6; DER/Storage
Developers Comments (RM16-23) at 2; SEIA Comments (RM16-23) at 16;
Stem Comments (RM16-23) at 7.
\398\ Harvard Environmental Policy Initiative Comments (RM16-23)
at 6-7 (citing NOPR, 157 FERC ] 61,121 at P 134).
\399\ Tesla/SolarCity Comments (RM16-23) at 2-3.
\400\ Id. at 3 (quoting EPSA, 136 S. Ct. 760 at 776 (``When FERC
regulates what takes place on the wholesale market, as a part of
carrying out its charge to improve how that market runs, then no
matter that effect on retail rates . . .'')).
\401\ APPA Comments (2018 RM18-9) at 25-26; PJM Utilities
Coalition Comments (2018 RM18-9) at 13; TAPS Comments (2018 RM18-9)
at 25.
---------------------------------------------------------------------------
157. However, some commenters disagree with other commenters'
proposed approaches to differentiate between wholesale and retail
services. APPA contends that the methods proposed by some commenters of
determining what constitutes the same service are flawed, an
incremental value approach is conceptually complicated, and using
dispatch triggers to distinguish services is problematic because a
resource could not respond to a reliability event in both the wholesale
and retail markets at once.\402\ Similarly, Sunrun argues that a
universal characterization of services would create litigation and
confusion.\403\ PJM asserts that the Commission should not ``over-
define'' the services that distributed energy resources provide but
instead should focus on the services traditionally addressed in the
wholesale market (e.g., capacity, energy and ancillary services), and
require that any unit of capacity/resource adequacy only be compensated
once across the wholesale and retail domains.\404\ NYISO Indicated
Transmission Owners point out that the ability to differentiate
services is dependent on particular programs and markets, and suggest
that the Commission consider programs as they are filed by the relevant
RTOs/ISOs.\405\ MISO states that it defers to relevant electric retail
regulatory authorities to address any double compensation matters.\406\
NYISO states that if competing dispatch obligations still arise, it
will be the aggregator's responsibility to resolve the conflict and
face penalties, as appropriate.\407\
---------------------------------------------------------------------------
\402\ APPA Comments (2018 RM18-9) at 24-25.
\403\ Sunrun Comments (2018 RM18-9) at 9-10.
\404\ PJM Comments (2018 RM18-9) at 14.
\405\ NYISO Indicated Transmission Owners Comments (2018 RM18-9)
at 7-8.
\406\ MISO Comments (2018 RM18-9) at 22.
\407\ NYISO Comments (2018 RM18-9) at 9-11.
---------------------------------------------------------------------------
158. NRG and Stem argue that the Commission should only be
concerned with double compensation if retail participation interferes
with the provision of wholesale services.\408\ Similarly, other
commenters argue that the Commission should focus on preventing
distributed energy resources from receiving double payment for the same
wholesale service and not whether those resources are also receiving
retail level compensation.\409\ NYISO Indicated Transmission Owners
note that many distribution utilities have established programs to
accommodate technology within retail service programs and argue that
any changes to market rules for participation of distributed energy
resource aggregations in wholesale markets should avoid encroaching
upon or abrogating the jurisdictional status of these distribution-
level programs, which, they state, do not involve wholesale sales.\410\
---------------------------------------------------------------------------
\408\ NRG Comments (RM16-23) at 8; Stem Comments (RM16-23) at 7.
\409\ Advanced Energy Economy Comments (2018 RM18-9) at 13;
Energy Storage Association Comments (2018 RM18-9) at 5; New York
Commission Comments (2018 RM18-9) at 18; Stem Comments (RM16-23) at
7.
\410\ NYISO Indicated Transmission Owners Comments (RM16-23) at
8.
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c. Commission Determination
159. To implement Sec. 35.28(g)(12)(ii)(a) of the Commission's
regulations and upon consideration of the comments received, we adopt
the NOPR proposal, as modified and clarified below, to allow RTOs/ISOs
to limit the participation of resources in RTO/ISO markets through a
distributed energy resource aggregator that are receiving compensation
for the same services as part of another program.
160. However, we agree with many commenters that the NOPR proposal
to prohibit distributed energy resources that are receiving
compensation in a retail program from being eligible to participate in
the RTO/ISO markets as part of a distributed energy resource
aggregation was overly broad. Commenters identify multiple examples
where participation in both wholesale and retail markets is feasible
\411\ and is already permitted and occurring,\412\ and they identify a
variety of existing and potential approaches to address reasonable
concerns about double counting and overcompensation.\413\ Therefore,
rather than barring participation in both wholesale and retail or
multiple wholesale programs, we modify the NOPR proposal to require
each RTO/ISO to revise its tariff to: (1) Allow distributed energy
resources that participate in one or more retail programs to
participate in its wholesale markets; (2) allow distributed energy
resources to provide multiple wholesale services; and (3) include any
appropriate restrictions on the distributed energy resources'
participation in RTO/ISO markets through distributed energy resource
aggregations, if narrowly designed to avoid counting more than once the
services provided by distributed energy resources in RTO/ISO markets.
In compliance with this final rule, we
[[Page 67123]]
require each RTO/ISO to describe how it will properly account for the
different services that distributed energy resources provide in the
RTO/ISO markets.
---------------------------------------------------------------------------
\411\ See, e.g., Advanced Microgrid Solutions Comments (RM16-23)
at 5-6; American Petroleum Institute Comments (RM16-23) at 13; NRG
Comments (RM16-23) at 8; Open Access Technology Comments (RM16-23)
at 5; Public Interest Organizations Comments (RM16-23) at 22.
\412\ Direct Energy Comments (2018 RM18-9) at 11-13; Energy
Storage Association Comments (2018 RM18-9) at 5; NRG Comments (2018
RM18-9) at 6-8.
\413\ NESCOE Comments (RM16-23) at 14-15 (citing Utilization of
Electric Storage Resources for Multiple Services When Receiving
Cost-Base Rate Recovery, 158 FERC ] 61,051 at P 2); SEIA Comments
(RM16-23) at 16 (citing Utilization of Electric Storage Resources
for Multiple Services When Receiving Cost-Based Rate Recovery, 158
FERC ] 61,051).
---------------------------------------------------------------------------
161. We find that it is appropriate for RTOs/ISOs to place narrowly
designed restrictions on the RTO/ISO market participation of
distributed energy resources through aggregations, if necessary to
prevent double counting of services. For instance, if a distributed
energy resource is offered into an RTO/ISO market and is not added back
to a utility's or other load serving entity's load profile, then that
resource will be double counted as both load reduction and a supply
resource. Also, if a distributed energy resource is registered to
provide the same service twice in an RTO/ISO market (e.g., as part of
multiple distributed energy resource aggregations, as part of a
distributed energy resource aggregation and a standalone demand
response resource, and/or a standalone distributed energy resource),
then that resource would also be double counted and double compensated
if it clears the market as part of both market participants. Thus, we
find that it is appropriate for RTOs/ISOs to place restrictions on the
RTO/ISO market participation of distributed energy resources through
aggregations after determining whether a distributed energy resource
that is proposing to participate in a distributed energy resource
aggregation is (1) registered to provide the same services either
individually or as part of another RTO/ISO market participant; \414\ or
(2) included in a retail program to reduce a utility's or other load
serving entity's obligations to purchase services from the RTO/ISO
market.
---------------------------------------------------------------------------
\414\ For example, as part of another distributed energy
resource aggregation, a demand response resource, and/or a
standalone distributed energy resource.
---------------------------------------------------------------------------
162. This restriction is similar to that adopted by the Commission
in Order No. 719 in the context of aggregations of demand response,
which states that ``[a]n RTO or ISO may place appropriate restrictions
on any customer's participation in an [aggregation of retail
customers]-aggregated demand response bid to avoid counting the same
demand response resource more than once.'' \415\ In addition, as
discussed in Section IV.A.2 above, relevant electric retail regulatory
authorities may decide whether to permit the customers of small
utilities to participate in the RTO/ISO markets through distributed
energy resource aggregations and relevant electric retail regulatory
authorities continue to have authority to condition participation in
their retail distributed energy resource programs on those resources
not also participating in RTO/ISO markets,\416\ which should allow them
to mitigate any double-compensation concerns.
---------------------------------------------------------------------------
\415\ Order No. 719, 125 FERC ] 61,071 at P 158.
\416\ Supplemental Comments of Arkansas Commission (RM16-23-000)
at 2.
---------------------------------------------------------------------------
163. We agree with many commenters that the NOPR proposal could
undermine the effectiveness of existing retail and wholesale programs,
render current RTO/ISO market participants ineligible to continue their
participation, and reduce competition in RTO/ISO markets, which could
lead to unjust and unreasonable rates. Further, there may be instances
in which an individual distributed energy resource could technically,
reliably, and economically provide multiple, distinct services at
wholesale and retail levels, and therefore preventing it from doing so
may undermine the final rule by creating a new barrier to participation
in RTO/ISO markets, thereby inhibiting competition and decreasing
reliability. We believe the modified rules that we adopt herein will
enable efficient outcomes in RTO/ISO markets by capturing the full
value of distributed energy resources and enabling efficient resource
allocation while also requiring RTOs/ISOs to address double-counting
concerns.
164. In addition to addressing the potential market and reliability
impacts of the NOPR proposal described above, we find that the reforms
we adopt here are consistent with the Commission's determination that a
single distributed energy resource can participate in both retail and
wholesale programs and be compensated in each for providing
``distinctly different services.'' \417\ While commenters suggest
several tests to identify duplicate services, the record does not
include a consistent or practical method for the Commission to
universally define ``same services'' across wholesale and retail
markets, and we therefore do not believe that it is appropriate to
prescribe an approach across all RTOs/ISOs. For this reason, we will
grant RTOs/ISOs regional flexibility with respect to the restrictions
they propose in their tariffs to minimize market impacts caused by the
double counting of services provided by distributed energy resources in
the RTO/ISO markets.
---------------------------------------------------------------------------
\417\ N.Y. Pub. Serv. Comm'n v. N.Y. Indep. Sys. Operator, Inc.,
158 FERC ] 61,137 at P 33.
---------------------------------------------------------------------------
4. Minimum and Maximum Size of Aggregation
a. NOPR Proposal
165. In the NOPR, the Commission proposed that distributed energy
resource aggregations must meet any minimum size requirements of the
participation model under which they elect to participate in RTO/ISO
markets.\418\ The Commission stated that, for example, if a distributed
energy resource aggregator decides to register using the participation
model for electric storage resources given the cumulative physical and
operational characteristics of the distributed energy resources in its
aggregation, then its distributed energy resource aggregation would be
required to meet the 100 kW minimum size requirement that the
Commission required for that participation model. The Commission stated
that, alternatively, if the distributed energy resource aggregator
registered as a generator, then its aggregation would be required to
meet the minimum size requirement for the generator participation model
in the relevant RTO/ISO market.
---------------------------------------------------------------------------
\418\ NOPR, 157 FERC ] 61,121 at P 136.
---------------------------------------------------------------------------
166. After the April 2018 technical conference, the Commission
sought comments on whether reducing the minimum size of distributed
energy resource aggregations to participate in RTO/ISO markets would
help alleviate concerns about requiring distributed energy resource
aggregations to locate only at a single node.\419\
---------------------------------------------------------------------------
\419\ Notice Inviting Post-Technical Conference Comments at 3.
---------------------------------------------------------------------------
b. Comments
167. SPP agrees with the Commission's proposal for aggregations to
meet any minimum size requirements of the participation model under
which they elect to participate, noting that that is consistent with
SPP's registration requirements for any resource type.\420\
---------------------------------------------------------------------------
\420\ SPP Comments (RM16-23) at 16.
---------------------------------------------------------------------------
168. In contrast, several commenters argue that the Commission
should require RTOs/ISOs to adopt a minimum size requirement of 100 kW
for all distributed energy resource aggregations, regardless of the
participation model in which they elect to participate.\421\ NYISO
states that it is currently working with stakeholders on a distributed
energy resource market design proposal that would set a minimum
aggregation size of 100 kW
[[Page 67124]]
because this is the smallest increment that NYISO believes it can
accurately model, commit, and dispatch with its current grid operations
software.\422\ Some of those commenters contend that a minimum size
requirement above 100 kW runs counter to the NOPR's goal of improving
competition in the wholesale markets while avoiding excessive
registration of individual small resources and modeling
complexity.\423\ Tesla/SolarCity state that a minimum size requirement
of 100 kW across all markets would avoid any confusion caused by
artificial differences between the electric storage and distributed
energy resource aggregation participation models.\424\ Some commenters
argue that minimum size requirements greater than 100 kW pose a
significant barrier to entry.\425\ Direct Energy disagrees with ISO-
NE's assertion at the technical conference that there is no real need
for aggregation because there is no minimum size limitation for
participating in ISO-NE's markets, stating that while Direct Energy is
supportive of establishing a framework without minimum size limitations
for distributed energy resources, the lack of such limitations should
not serve as an alternative for aggregation.\426\ NRG states that 100
kW is an efficient minimum size requirement but that the participation
model for distributed energy resource aggregations should set minimum
resource participation thresholds only to the extent necessary to
accommodate existing metering and data management systems
infrastructure.\427\
---------------------------------------------------------------------------
\421\ See, e.g., Advanced Energy Management Comments (RM16-23)
at 16-17, 25-26; Mensah Comments (RM16-23) at 3; Efficient Holdings
Comments (RM16-23) at 8; NYISO Comments (RM16-23) at 15-16; Tesla/
SolarCity Comments (RM16-23) at 17, 26.
\422\ NYISO Comments (RM16-23) at 15-16; PJM Comments (RM16-23)
at 27. On January 23, 2020, the Commission accepted NYISO's tariff
revisions establishing a new participation model for aggregations of
resources, including distributed energy resources, which requires
that each energy, ancillary service, and capacity transaction on
behalf of an aggregation must have a minimum offer of 100 kW, and if
an aggregation offers a combination of withdrawals, injections, and/
or demand reductions, it must offer at least 100 kW of each. See
NYISO Aggregation Order, 170 FERC ] 61,033 at P 14.
\423\ Advanced Energy Management Comments (RM16-23) at 16-17;
Advanced Energy Economy Comments (RM16-23) at 51-52 (citing NOPR,
157 FERC ] 61,121 at P 94); California Energy Storage Alliance
Comments (RM16-23) at 7-8.
\424\ Tesla/SolarCity Comments (RM16-23) at 26.
\425\ Fresh Energy/Sierra Club/Union of Concerned Scientists
Comments (RM16-23) at 2 (citing MISO Market Subcommittee
Presentation, November 29th, 2016, https://www.misoenergy.org/Library/Repository/Meeting%20Material/Stakeholder/MSC/2016/20161129/20161) (stating that the integration of distributed energy resources
and smaller-scale resources is within the ``probable limit of
current systems''); Tesla/SolarCity Comments (RM16-23) at 27 (citing
N.Y. Indep. Sys. Operator, Inc., 155 FERC ] 61,166 (2016)).
\426\ Direct Energy Comments (2018 RM18-9) at 8-9 (citing
Technical Conference Transcript at 22).
\427\ NRG Comments (RM16-23) at 12; NRG Comments (2018 RM18-9)
at 4.
---------------------------------------------------------------------------
169. Several commenters argue that the Commission should provide
the RTOs/ISOs with flexibility to establish any minimum size
requirement for distributed energy resource aggregations based on their
ability to model and dispatch these resources.\428\ SoCal Edison states
that each RTO/ISO should be allowed to determine its own minimum size
requirements, providing the example of CAISO's requirement that
distributed energy resource aggregations be at least 500 kW to help
ensure that an aggregation is large enough to have a measurable impact
on the transmission system.\429\ EPRI and SoCal Edison both highlight
the software challenges and potential costs associated with
implementing a minimum size requirement at or below 100 kW.\430\
Pacific Gas & Electric asserts that RTOs/ISOs must be allowed to
account for the differences between interacting with aggregations and
stand-alone resources in their markets.\431\ MISO states that, to the
extent the Commission deems it necessary to set a volume threshold for
aggregated participation, the threshold should apply to registration
minimums and not be related to how RTOs/ISOs model or dispatch
resources.\432\ NYISO Indicated Transmission Owners assert that
aggregations should be subject to the same minimum size requirements as
traditional resources that are based on the services they are
providing.\433\
---------------------------------------------------------------------------
\428\ See, e.g., AES Companies Comments (RM16-23) at 34; IRC
Comments (RM16-23) at 7; ISO-NE Comments (RM16-23) at 36; MISO
Comments (RM16-23) at 20; Pacific Gas & Electric Comments (RM16-23)
at 17.
\429\ SoCal Edison Comments (RM16-23) at 11 (citing CAISO
Tariff, Section 4.17.5.1; CAISO, Transmittal Letter, Docket No.
ER16-1085, at 9 (filed March 4, 2016)).
\430\ EPRI Comments (2018 RM18-9) at 7-8; SoCal Edison Comments
(2018 RM18-9) at 5.
\431\ Pacific Gas & Electric Comments (RM16-23) at 17.
\432\ MISO Comments (2018 RM18-9) at 16-17.
\433\ NYISO Indicated Transmission Owners Comments (RM16-23) at
12.
---------------------------------------------------------------------------
170. Energy Storage Association agrees that a lower limit is
necessary but asserts that the Commission should not allow RTOs/ISOs to
place upper limits on the size of distributed energy resource
aggregations.\434\ In contrast, CAISO believes that the Commission
should adopt an upper limit on the size of these aggregations to ensure
reliable operation of the transmission system while obtaining more
experience with distributed energy resource aggregations. CAISO notes
that its Distributed Energy Resource Provider model imposes a maximum
capacity requirement of 20 MW on aggregations that span multiple
pricing nodes to limit the impact of these aggregations on congestion
on the CAISO grid without severely constraining the ability of
distributed energy resource providers to form viable aggregations.\435\
Similarly, SPP argues that the Commission should consider a maximum
size requirement for aggregations across multiple nodes but that no
maximum requirement is necessary for aggregations located at a single
node.\436\ University of Delaware's EV R&D Group argues that upper
power limits should allow for an aggregation of 100-200 kW resources as
this will better permit the participation of electric bus fleets.\437\
---------------------------------------------------------------------------
\434\ Energy Storage Association Comments (RM16-23) at 25-26.
\435\ CAISO Comments (RM16-23) at 25-26.
\436\ SPP Comments (RM16-23) at 16.
\437\ University of Delaware EV R&D Group Comments (2018 RM18-9)
at 1.
---------------------------------------------------------------------------
c. Commission Determination
171. We adopt the NOPR proposal, with modifications, and add Sec.
35.28(g)(12)(iii) to the Commission's regulations to require each RTO/
ISO to implement a minimum size requirement not to exceed 100 kW for
all distributed energy resource aggregations. We agree with commenters
that a minimum size requirement not to exceed 100 kW will help improve
competition in the RTO/ISO markets and avoid confusion about
appropriate minimum size requirements for distributed energy resource
aggregations under existing or new participation models. We do not
expect this requirement to overburden RTO/ISO modeling software with an
excessive number of small resources because 100 kW is currently a
commonly used resource size. In contrast, larger minimum size
requirements that may have been designed for different types of
resources could pose a significant barrier to entry for distributed
energy resource aggregations. In addition, this minimum size
requirement is consistent with the Commission's minimum size
requirement for electric storage resources in Order No. 841.\438\
---------------------------------------------------------------------------
\438\ Order No. 841, 162 FERC ] 61,127 at P 270.
---------------------------------------------------------------------------
172. Several RTOs/ISOs support a minimum size requirement not to
exceed 100 kW. PJM and SPP have a minimum size requirement of 100 kW
for all resources and support the same requirement for distributed
energy resource aggregations, and all of the RTOs/ISOs have at least
one participation model that allows resources as small as 100 kW to
[[Page 67125]]
participate in their markets.\439\ However, we recognize concerns about
the ability of modeling and dispatch software to handle a large number
of small distributed energy resource aggregations. Therefore, while we
require each RTO/ISO to implement on compliance a minimum size
requirement not to exceed 100 kW for all distributed energy resource
aggregations, we will consider any future post-implementation requests
to increase the minimum size requirement above 100 kW if the RTO/ISO
demonstrates that it is experiencing difficulty calculating efficient
market results and there is not a viable software solution for
improving such calculations.\440\
---------------------------------------------------------------------------
\439\ See, e.g., CAISO Data Request Response (AD16-20) at 10-11;
ISO-NE Data Request Response (AD16-20) at 13-14; MISO Data Request
Response (AD16-20) at 10; NYISO Data Request Response (AD16-20) at
9; PJM Data Request Response (AD16-20) at 10.
\440\ The Commission offered the RTOs/ISOs a similar
accommodation for the minimum size requirement for electric storage
resources. See Order No. 841, 162 FERC ] 61,127 at P 275.
---------------------------------------------------------------------------
173. We agree with the post-technical conference comments that a
minimum size requirement that is lower than some existing RTO/ISO
minimum size requirements will help alleviate concerns about the
ability of single node aggregations to achieve the necessary minimum
size, particularly given our findings on locational requirements for
distributed energy resource aggregations.\441\ NYISO recently adopted
this approach, stating that because it decided to limit distributed
energy resource aggregations to a single pricing node in its
distributed energy resources roadmap, NYISO thought it was appropriate
to lower the minimum size threshold for distributed energy resource
aggregations to 100 kW.\442\ Therefore, not only will a minimum size
requirement that does not exceed 100 kW remove a barrier to distributed
energy resource aggregations, improve competition in RTO/ISO markets,
avoid confusion about appropriate requirements, and help ensure just
and reasonable rates, but application of this requirement in
conjunction with our findings on locational requirements, discussed in
Section IV.D below, will help alleviate any adverse competitive impacts
that single node aggregations may have.\443\
---------------------------------------------------------------------------
\441\ See infra Section IV.D (Locational Requirements).
\442\ Technical Conference Transcript at 27; see NYISO
Aggregation Order, 170 FERC ] 61,033.
\443\ See infra Section IV.D (Locational Requirements).
---------------------------------------------------------------------------
174. We are not persuaded by commenters to adopt a maximum size
requirement for distributed energy resource aggregations that span
multiple pricing nodes. We do not see a need to adopt such a
requirement because, as explained in Section IV.E below, to the extent
that RTOs/ISOs allow for multi-node distributed energy resource
aggregations, distribution factors and bidding parameters should
provide the RTOs/ISOs with the information from geographically
dispersed resources in a distributed energy resource aggregation
necessary to reliably operate their systems regardless of the size of
the aggregation.\444\ We also note that, given our findings on
locational requirements, we are not requiring RTOs/ISOs to establish
multi-node distributed energy resource aggregations.\445\
---------------------------------------------------------------------------
\444\ See infra Section IV.E (Distribution Factors and Bidding
Parameters).
\445\ See infra Section IV.D (Locational Requirements).
---------------------------------------------------------------------------
5. Minimum and Maximum Capacity Requirements for Distributed Energy
Resources Participating in an Aggregation
a. NOPR Proposal
175. The Commission proposed not to establish a minimum or maximum
capacity requirement for an individual distributed energy resource to
be able to participate in RTO/ISO markets through a distributed energy
resource aggregator.\446\ The Commission stated that it believes
participation in RTO/ISO markets through a distributed energy resource
aggregator should not be conditioned on the size of the resource but
recognized that existing RTO/ISO market rules may require distributed
energy resources to meet certain minimum or maximum capacity
requirements under certain participation models. Therefore, the
Commission sought comment on whether to establish a minimum or maximum
capacity limit for individual distributed energy resources seeking to
participate in RTO/ISO markets through a distributed energy resource
aggregator, or whether to allow each RTO/ISO to propose such a minimum
or maximum capacity requirement on compliance with any final rule
issued in this rulemaking proceeding. To the extent that commenters
believe that the Commission should adopt a minimum or maximum capacity
requirement for individual distributed energy resources participating
in RTO/ISO markets through a distributed energy resource aggregator,
the Commission sought comment on what that requirement should be.
---------------------------------------------------------------------------
\446\ NOPR, 157 FERC ] 61,121 at P 135.
---------------------------------------------------------------------------
b. Comments
176. Several commenters support the Commission's proposal not to
establish a minimum capacity requirement for individual distributed
energy resources participating in RTO/ISO markets through distributed
energy resource aggregations.\447\ Some commenters state that minimum
or maximum capacity requirements are not necessary for individual
distributed energy resources because the aggregator will interact with
the wholesale market as a single resource and, as such, that
aggregation will be subject to eligibility rules.\448\ Fluidic, Fresh
Energy/Sierra Club/Union of Concerned Scientists, and Tesla/SolarCity
argue that aggregators should be allowed to optimize their portfolio
with any mix of resources to ensure the most cost-effective
aggregation.\449\ Energy Storage Association notes that, while many
behind-the-meter electric storage resources are relatively small (only
a few kW in some cases), in aggregate, they can operate nearly
identically to a single, much larger electric storage resource.\450\
---------------------------------------------------------------------------
\447\ See, e.g., APPA/NRECA Comments (16-23) at 43; Fluidic
Comments (RM16-23) at 5; Fresh Energy/Sierra Club/Union of Concerned
Scientists Comments (RM16-23) at 2; ISO-NE Comments (RM16-23) at 36;
NYISO Indicated Transmission Owners Comments (RM16-23) at 12.
\448\ See, e.g., NYISO Indicated Transmission Owners Comments
(RM16-23) at 12; R Street Institute Comments (RM16-23) at 8; SEIA
Comments (RM16-23) at 18; SPP Comments (RM16-23) at 16; Tesla/
SolarCity Comments (RM16-23) at 27.
\449\ Fluidic Comments (RM16-23) at 5, Fresh Energy/Sierra Club/
Union of Concerned Scientists Comments (RM16-23) at 2; Tesla/
SolarCity Comments (RM16-23) at 27.
\450\ Energy Storage Association Comments (RM16-23) at 25-26.
---------------------------------------------------------------------------
177. Several commenters ask the Commission to defer to the RTOs/
ISOs to propose and justify to the Commission any minimum and maximum
capacity requirements for individual distributed energy resources
participating in RTO/ISO markets through distributed energy resource
aggregations.\451\ EEI argues that the RTO/ISO-established requirements
should be based on their individual market rules and their ability to
verify the accuracy of the metering and the verification process for
the resource.\452\ NYISO notes that it is evaluating whether there
should be a maximum size for a distributed energy resource in an
aggregation in order to permit
[[Page 67126]]
independent modeling of relatively large distributed energy resources
and provide grid operators more operational awareness and control over
distributed energy resources that may be needed to address system
conditions.\453\
---------------------------------------------------------------------------
\451\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
51; Duke Energy Comments (RM16-23) at 5; ISO-NE Comments (RM16-23)
at 36; MISO Transmission Owners Comments (RM16-23) at 20; Pacific
Gas & Electric Comments (RM16-23) at 16.
\452\ EEI Comments (RM16-23) at 27.
\453\ NYISO Comments (RM16-23) at 15. The Commission accepted
NYISO's proposal to limit the size of resources in an aggregation to
20 MW or less. NYISO Aggregation Order, 170 FERC ] 61,033 at P 9.
---------------------------------------------------------------------------
178. MISO Transmission Owners argue that capacity limits should be
identified at the RTO/ISO level unless a distribution utility is
impacted, in which case the distribution utility should have discretion
to set its own requirements so that any minimum size requirement
respects capacity limitations on a distribution circuit, whether
individual or in the aggregate.\454\ Similarly, APPA/NRECA assert that
the Commission has no jurisdiction over facilities used for generation
or local distribution and that state and local regulators are likely
best equipped to address minimum or maximum capacity requirements.\455\
---------------------------------------------------------------------------
\454\ MISO Transmission Owners Comments (RM16-23) at 20.
\455\ APPA/NRECA Comments (RM16-23) at 43.
---------------------------------------------------------------------------
c. Commission Determination
179. To implement Sec. 35.28(g)(12)(ii)(a) of the Commission's
regulations, we adopt the NOPR proposal, as modified below, and will
not establish a minimum or maximum capacity requirement for individual
distributed energy resources to participate in RTO/ISO markets through
a distributed energy resource aggregation. Although we decline to
establish a specific maximum capacity requirement for individual
distributed energy resources in an aggregation, we direct each RTO/ISO
to propose a maximum capacity requirement for individual distributed
energy resources participating in its markets through a distributed
energy resource aggregation or, alternatively, to explain why such a
requirement is not necessary, as discussed further below.
180. We decline to require RTOs/ISOs to adopt minimum capacity
requirements for individual distributed energy resources to participate
in their markets through a distributed energy resource aggregation. We
agree with commenters that minimum capacity requirements for
distributed energy resources to participate in an aggregation are not
necessary because each individual resource will participate in the
market via an aggregation, which acts as a single resource. To this
end, we note that distributed energy resource aggregators, as market-
interfacing entities, are responsible for meeting applicable RTO/ISO
qualification and performance requirements, including minimum size
requirements, and for determining how any performance penalties or
deratings determined by the RTO/ISO would apply to the individual
resources in an aggregation.
181. While we find that minimum capacity requirements are
unnecessary, we recognize the concerns raised by EEI and NYISO with
respect to each RTO's/ISO's ability to accurately model and verify the
metering of larger distributed energy resources. We believe that
capping the maximum capacity size of an individual distributed energy
resource participating in a distributed energy resource aggregation
would ensure that larger resources are required to participate
individually, thereby allowing RTOs/ISOs to independently model and
verify the metering of these larger resources. Independent modeling and
verification may provide system operators with greater operational
awareness and control to address changing system conditions. Therefore,
to implement Sec. 35.28(g)(12)(ii)(a) of the Commission's regulations,
we require each RTO/ISO, in compliance with this final rule, to either
propose a maximum capacity requirement for individual distributed
energy resources participating in its markets through a distributed
energy resource aggregation or, alternatively, to explain why such a
requirement is not necessary.
6. Single Resource Aggregation
a. NOPR Proposal
182. The NOPR proposed, consistent with Order No. 719, that each
RTO/ISO revise its tariff to allow a single qualifying distributed
energy resource to avail itself of the proposed distributed energy
resource aggregation rules by serving as its own distributed energy
resource aggregator.\456\
---------------------------------------------------------------------------
\456\ NOPR, 157 FERC ] 61,121 at P 137 (citing Order No. 719,
125 FERC ] 61,071 at P 158(d)).
---------------------------------------------------------------------------
b. Comments
183. AES Companies, NextEra, and NYISO agree with the Commission's
proposal to require each RTO/ISO to revise its tariff to allow a single
qualifying distributed energy resource to avail itself of the proposed
distributed energy resource aggregation rules by serving as its own
distributed energy resource aggregator.\457\ CAISO states that,
consistent with the NOPR proposal, CAISO allows a distributed energy
resource provider to aggregate one or more distributed energy resources
for purposes of wholesale market participation.\458\
---------------------------------------------------------------------------
\457\ AES Companies Comments (RM16-23) at 39; NextEra Comments
(RM16-23) at 14; NYISO Comments (RM16-23) at 16.
\458\ CAISO Comments (RM16-23) at 26.
---------------------------------------------------------------------------
184. Xcel Energy Services suggests that a higher minimum threshold
size should be established for single distributed energy resource
aggregations because a proliferation of individual aggregators could
increase administrative costs.\459\
---------------------------------------------------------------------------
\459\ Xcel Energy Services Comments (RM16-23) at 24.
---------------------------------------------------------------------------
c. Commission Determination
185. To implement Sec. 35.28(g)(12)(ii)(a) of the Commission's
regulations, we adopt the NOPR proposal to require each RTO/ISO to
revise its tariff to allow a single qualifying distributed energy
resource to avail itself of the proposed distributed energy resource
aggregation rules by serving as its own distributed energy resource
aggregator.\460\
---------------------------------------------------------------------------
\460\ See supra P 118 n.280.
---------------------------------------------------------------------------
186. We decline to require a minimum size greater than 100 kW for a
single qualifying distributed energy resource that serves as its own
distributed energy resource aggregator, as requested by Xcel Energy
Services. We find that such a requirement is unnecessary at this time
as the 100 kW minimum size requirement is a commonly used resource size
that should not overburden RTO/ISO modeling software even if many
individual resources choose to participate as such single distributed
energy resource aggregations. In addition, a consistent minimum size
requirement for aggregations of both single and multiple distributed
energy resources will minimize barriers in the event that an individual
distributed energy resource ceases to participate in a multi-resource
aggregation and subsequently seeks to participate in RTO/ISO markets as
a single qualifying distributed energy resource aggregation. As
discussed above in Section IV.C.5, a single distributed energy resource
aggregation would need to comply with all of the applicable RTO's/ISO's
requirements, including any minimum or maximum capacity requirements
for individual distributed energy resources.\461\ We clarify that, like
other distributed energy resources seeking to participate in RTO/ISO
markets exclusively through a distributed energy resource aggregation,
we will not exercise jurisdiction over the interconnection to a
distribution facility of a distributed energy resource for the purpose
of participating in RTO/ISO markets exclusively through a single-
[[Page 67127]]
resource aggregation. We also clarify that a single qualifying
distributed energy resource that serves as its own aggregator would
also be subject to any requirements applicable to distributed energy
resource aggregators.
---------------------------------------------------------------------------
\461\ See supra Section IV.C.5 (Minimum and Maximum Capacity
Requirements).
---------------------------------------------------------------------------
D. Locational Requirements
a. NOPR Proposal
187. In the NOPR, the Commission stated that it was concerned that
some existing requirements for aggregations to be located behind a
single point of interconnection or pricing node may be overly stringent
and may unnecessarily restrict opportunities for distributed energy
resources to participate in the RTO/ISO markets through a distributed
energy resource aggregator.\462\ The Commission noted that recent
improvements in metering, telemetry, and communication technology
should facilitate better situational awareness and enable management of
geographically dispersed distributed energy resource aggregations,
potentially rendering such restrictive locational requirements
unnecessary.
---------------------------------------------------------------------------
\462\ NOPR, 157 FERC ] 61,121 at P 138.
---------------------------------------------------------------------------
188. Thus, the Commission proposed to require each RTO/ISO to
revise its tariff to establish locational requirements for distributed
energy resources to participate in a distributed energy resource
aggregation that are as geographically broad as technically
feasible.\463\ The Commission stated that this proposal would give each
RTO/ISO flexibility to adopt locational requirements that both allow
for the participation of geographically dispersed distributed energy
resources in the RTO/ISO markets through a distributed energy resource
aggregation, where technically feasible, and also account for the
modeling and dispatch of the RTO's/ISO's transmission system. The
Commission further acknowledged that the appropriate locational
requirements may differ based on the services that a distributed energy
resource aggregator seeks to provide (e.g., the locational requirements
for participation in the day-ahead energy market may differ from those
for participation in ancillary service markets).
---------------------------------------------------------------------------
\463\ Id. P 139.
---------------------------------------------------------------------------
189. To the extent that commenters would prefer that the Commission
require the RTOs/ISOs to adopt consistent locational requirements, the
Commission sought comment on what locational requirements it could
require each RTO/ISO to adopt that would allow distributed energy
resources to be aggregated as widely as possible without threatening
the reliability of the transmission grid or the efficiency of RTO/ISO
markets.\464\ The Commission noted that, in some RTOs/ISOs and for some
services, the only geographic limitations imposed on distributed energy
resource aggregations are by zone or due to modeled transmission
constraints.\465\ The Commission also sought comment on potential
concerns about dispatch, pricing, or settlement that the RTOs/ISOs must
address if the distributed energy resources in a particular distributed
energy resource aggregation are not limited to the same pricing node or
behind the same point of interconnection.\466\
---------------------------------------------------------------------------
\464\ Id. P 140.
\465\ Id. n.233 (citing CAISO and NYISO tariff provisions).
\466\ Id. P 141. The Commission noted that its proposal to allow
the relevant distribution utility or utilities to review the list of
distributed energy resources in a distributed energy resource
aggregation would help ensure that dispatch of the aggregated
distributed energy resources as a single resource will not cause any
reliability concerns.
---------------------------------------------------------------------------
190. At the April 2018 technical conference, the Commission sought
comment on how to establish locational requirements for distributed
energy resource aggregations that are as broad as technically
feasible.\467\ After the technical conference, the Commission sought
further comment on how RTOs/ISOs can accurately represent distributed
energy resources in each node within a multi-node aggregation.\468\
---------------------------------------------------------------------------
\467\ Supplemental Notice of Technical Conference at 2-3.
\468\ Notice Inviting Post-Technical Conference Comments at 2-3.
---------------------------------------------------------------------------
b. Comments
191. Several commenters support the Commission's proposal to
require distributed energy resource aggregations that are as
geographically broad as technically feasible and cite numerous benefits
of broad aggregation.\469\ IRC states that this proposal strikes the
appropriate balance between accommodating smaller distributed energy
resources and providing the necessary flexibility to RTOs/ISOs.\470\
Advanced Energy Economy contends that aggregation across a broad
geographic area is fundamental to the distributed energy resource
business model.\471\ Advanced Energy Management contends that the
larger the aggregation, the lower the chance of underperformance.\472\
Several commenters support multi-node aggregation, stating that it will
improve market entry and overall competitive benefits.\473\ Others
assert that multi-node aggregation will improve the services that
distributed energy resource aggregations can provide, enhancing grid
resilience and reliability.\474\
---------------------------------------------------------------------------
\469\ See, e.g., Advanced Energy Management Comments (RM16-23)
at 24; DER/Storage Developers Comments (RM16-23) at 4; Efficient
Holdings Comments (RM16-23) at 17-18; IRC Comments (RM16-23) at 8;
NRG Comments (RM16-23) at 10-11.
\470\ IRC Comments (RM16-23) at 8.
\471\ Advanced Energy Economy Comments (RM16-23) at 45.
\472\ Advanced Energy Management Comments (RM16-23) at 24.
\473\ See, e.g., Advanced Energy Buyers Comments (2018 RM18-9)
at 7; CAISO Comments (2018 RM18-9) at 10-11; EPRI Comments (2018
RM18-9) at 6; NRG Comments (2018 RM18-9) at 4-5; SEIA Comments (2018
RM18-9) at 14.
\474\ Advanced Energy Management Comments (2018 RM18-9) at 5;
Direct Energy Comments (2018 RM18-9) at 2-3; Lorenzo Kristov
Comments (2018 RM18-9) at 14; SEIA Comments (2018 RM18-9) at 14.
---------------------------------------------------------------------------
192. Several commenters highlight examples of current RTO/ISO
activities supporting broad geographic aggregation. Advanced Energy
Economy states that PJM and NYISO have allowed aggregation at a broad
level for behind-the-meter resources.\475\ Several commenters note that
CAISO allows aggregation across nodes by permitting an aggregator to
submit distribution factors.\476\ Advanced Energy Management highlights
that ISO-NE allows aggregation at the dispatch zone level, stating that
this suggests that it is technically feasible to aggregate behind-the-
meter resources to that level even for energy and ancillary services
participation.\477\
---------------------------------------------------------------------------
\475\ Advanced Energy Economy Comments (RM16-23) at 45.
\476\ Id.; DER/Storage Developers Comments (RM16-23) at 4;
Tesla/SolarCity Comments (RM16-23) at 28. CAISO uses load
distribution factors to reflect the relative amount of load at each
node. The sum of all load distribution factors for a single
aggregation is one. See CAISO Tariff, Appendix A.
\477\ Advanced Energy Management Comments (RM16-23) at 25.
---------------------------------------------------------------------------
193. Multiple commenters also articulate concerns regarding
limiting distributed energy resource aggregations to a single
node.\478\ Advanced Energy Economy and Advanced Energy Management
contend that aggregation limited to the nodal level will not meet the
``geographically broad as technically feasible'' standard, and Advanced
Energy Management asks the Commission to clarify that it does not.\479\
Advanced Energy Economy and CAISO further caution against the economic
effects of single-node aggregation, stating that it would erode
[[Page 67128]]
the economics of aggregating distributed energy resources and create a
barrier to their wholesale market participation.\480\
---------------------------------------------------------------------------
\478\ See, e.g., AES Companies Comments (RM16-23) at 36;
Efficient Holdings Comments (RM16-23) at 18; Public Interest
Organizations Comments (RM16-23) at 24; R Street Institute Comments
(RM16-23) at 9; Sunrun Comments (2018 RM18-9) at 14.
\479\ Advanced Energy Economy Comments (RM16-23) at 46-47;
Advanced Energy Management Comments (RM16-23) at 24.
\480\ Advanced Energy Economy Comments (2018 RM18-9) at 22;
CAISO Comments (2018 RM18-9) at 10-11.
---------------------------------------------------------------------------
194. Several commenters state that, at the technical conference,
CAISO and PJM described workable approaches to mitigate any reliability
concerns and to achieve proper price formation for multi-node
aggregations of distributed energy resources.\481\ Other commenters
point to approaches used elsewhere, such as multi-node aggregations of
demand response resources in other regions.\482\ Organization of MISO
States comments that, in MISO, multi-node aggregation is allowed for
purposes of capacity accreditation, but only for a limited set of
resource types.\483\
---------------------------------------------------------------------------
\481\ Advanced Energy Economy Comments (2018 RM18-9) at 22;
Advanced Energy Management Comments (2018 RM18-9) at 5-6; Direct
Energy Comments (2018 RM18-9) at 6 (citing Technical Conference
Transcript at 17, 18, 53); Sunrun Comments (2018 RM18-9) at 14.
\482\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 22; Advanced Energy Management Comments (2018 RM18-9) at 6
(citing ISO-NE Comments, Docket No. AD16-20-000 (filed Feb. 13,
2017) (``ISO-NE explains that, for the capacity market, demand
resources may consist of an aggregation of multiple end-use
customers, though they must be at least 100 kW and located within a
dispatch zone or load zone as required under the participation model
through which they are participating. ISO-NE further explains that
for the energy and reserve markets, demand response resources may
also be aggregated as long as they are individually at least 10 kW,
have an expected maximum interruptible capacity of 5 MW or less, and
are located within a dispatch zone and reserve zone.'')); CAISO
Comments (2018 RM18-9) at 10, 12-13; Lorenzo Kristov Comments (2018
RM18-9) at 14; PJM Market Monitor Comments (2018 RM18-9) at 7-8.
\483\ Organization of MISO States Comments (2018 RM18-9) at 2
(citing Midcontinent Independent System Operator, Open Access
Transmission, Energy, and Operating Reserve Markets Tariff, Module
E-1, Section 69A.3.5).
---------------------------------------------------------------------------
195. Other commenters further express support for the feasibility
of dispatching and settling distributed energy resource aggregations
across multiple nodes. For instance, PJM explains that it already
dispatches demand response resources across varying levels of
geographic areas, including across different pricing nodes, which could
be used as a foundation for developing similar rules to dispatch
distributed energy resources injecting past the applicable retail
meter.\484\ Xcel Energy Services states that it is not concerned with
aggregations across multiple nodes if the region has accurate topology
models, volumetric weightings, and billing/settlement metering at each
location (and penalties are assessed at the individual resource level
to disincentivize gaming, manipulation, and price formation
errors).\485\ Avangrid contends that provisions that would allow
``settlement-only'' generation treatment for aggregated distributed
energy resources would allow aggregation of these resources on a
broader load zone basis for energy market settlement.\486\
---------------------------------------------------------------------------
\484\ PJM Comments (RM16-23) at 28.
\485\ Xcel Energy Services Comments (RM16-23) at 25.
\486\ Avangrid Comments (RM16-23) at 12.
---------------------------------------------------------------------------
196. Some commenters address the relationship between the minimum
and maximum size requirement for distributed energy resource
aggregations and the locational requirements for them. Eversource and
other commenters state that limiting the maximum size of a distributed
energy resource aggregation can also mitigate any negative operational
impacts of geographically broad aggregations.\487\ Tesla/Solar City
state that a minimum size requirement of 100 kW would allow the
reasonable development of aggregations within any locational
requirement established for distributed energy resource
aggregations.\488\ In their comments in response to the Notice Inviting
Post-Technical Conference Comments, multiple commenters agree that
reducing the minimum size requirement for distributed energy resource
aggregations to 100 kW may alleviate concerns about requiring
aggregations to be located at a single node.\489\ Organization of MISO
States observes that lowering the minimum size requirement for
distributed energy resource aggregations would decrease the need for
broad aggregation across Local Balancing Authorities and that this
could also reduce the size of resources, which inherently lowers any
related reliability risk to the system.\490\ Lorenzo Kristov states
that single-node distributed energy resource aggregations that meet the
minimum size threshold would be useful resources for the wholesale
market, so the question is whether the additional complexity of multi-
node distributed energy resource aggregations has commensurate
benefits.\491\ SEIA states that it supports a 100 kW minimize size
limit, but does not support limiting aggregations to single pricing
nodes.\492\
---------------------------------------------------------------------------
\487\ Advanced Energy Economy Comments (2018 RM18-9) at 22
(citing Technical Conference Transcript, Comments of Andrew Levitt,
Senior Market Strategist, PJM Interconnection, L.L.C., at p. 20,
lines 2-8, and P 49, lines 21-24 (noting the ability of economic
dispatch engines to manage any constraints that may be caused by
dispatching individual resources within an aggregation)); CAISO
Comments (2018 RM18-9) at 5; Eversource Comments (2018 RM18-9) at
13; PJM Comments (2018 RM18-9) at 5, 11-12; SEIA Comments (2018
RM18-9) at 14.
\488\ Tesla/SolarCity Comments (RM16-23) at 26.
\489\ See, e.g., EPRI Comments (2018 RM18-9) at 7-8; Lorenzo
Kristov Comments (2018 RM18-9) at 14; Organization of MISO States
Comments (2018 RM18-9) at 2; PJM Comments (2018 RM18-9) at 12.
\490\ Organization of MISO States Comments (2018 RM18-9) at 2.
\491\ Lorenzo Kristov Comments (2018 RM18-9) at 14.
\492\ SEIA Comments (2018 RM18-9) at 14.
---------------------------------------------------------------------------
197. Other commenters, however, recommend that the Commission
restrict aggregation to one pricing node or interconnection point.\493\
Some commenters are concerned that a geographically broad locational
requirement could have potential reliability impacts on the
distribution system or the bulk electric system.\494\ For instance,
several RTOs/ISOs, including those that support multi-node
aggregations, express concerns related to managing the aggravation of
transmission constraints and resulting pricing and operational
implications in real time if aggregated resources were to span both
sides of a constraint.\495\ PJM Market Monitor states that the
potential addition of more distributed energy resources means they
should be aggregated at a single node to allow operators to have
visibility and control.\496\ PJM Market Monitor asserts that it is
impossible to ensure that dispatch of a multi-node aggregation of
distributed energy resources does not exacerbate a transmission
constraint in a nodal system.\497\
---------------------------------------------------------------------------
\493\ ISO-NE Comments (RM16-23) at 37-40; NYISO Comments (RM16-
23) at 17; NYISO Indicated Transmission Owners Comments (RM16-23) at
13-14; PJM Market Monitor Comments (RM16-23) at 13.
\494\ See, e.g., American Petroleum Institute Comments (RM16-23)
at 10-11; Duke Energy Comments (RM16-23) at 3, 5-6; EEI Comments
(RM16-23) at 28-29; Institute for Policy Integrity Comments (RM16-
23) at 9; Pacific Gas & Electric Comments (RM16-23) at 18-19.
\495\ See, e.g., CAISO Comments (RM16-23) at 27; ISO-NE Comments
(RM16-23) at 37; MISO Comments (RM16-23) at 21-22; NYISO Comments
(2018 RM18-9) at 6, 16; SPP Comments (RM16-23) at 17-19.
\496\ PJM Market Monitor Comments (2018 RM18-9) at 12.
\497\ Id. at 4.
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198. NYISO Indicated Transmission Owners argue that aggregations
spanning more than one transmission zone could present both
administrative and operational difficulties for the RTO/ISO and the
distribution utility and that aggregations should be limited to a
single transmission node unless price separation does not exist.\498\
EPSA and the PJM Market Monitor argue that because all the RTOs/ISOs
rely on nodal security constrained economic dispatch, it is appropriate
for a generic rule to limit aggregations to a single node to ensure
that the markets continue to be
[[Page 67129]]
efficient and competitive.\499\ EPRI states that aggregations at single
nodes would generally be the most beneficial for the distributed energy
resources financially, for the RTOs/ISOs with respect to reliability,
and for consumers economically.\500\ NYISO states that single-node
aggregation allows NYISO to telemeter only the aggregation rather than
each individual resource within the aggregation, reducing the cost of
participation and better allowing smaller resources to participate in
the NYISO markets.\501\
---------------------------------------------------------------------------
\498\ NYISO Indicated Transmission Owners Comments (RM16-23) at
13-14.
\499\ EPSA Comments (2018 RM18-9) at 8-9; PJM Market Monitor
Comments (2018 RM18-9) at 2-3.
\500\ EPRI Comments (2018 RM18-9) at 6.
\501\ NYISO Comments (2018 RM18-9) at 6, 8.
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199. Commenters also address the dynamic nature of managing multi-
node aggregations of distributed energy resources--such as the
challenges that come from frequent changes in congestion patterns and
system topology.\502\ Several commenters express concerns that a
geographically broad locational requirement for distributed energy
resource aggregations could disrupt nodal pricing methods and result in
different treatment of resources located at a single node (i.e., among
multi-node distributed energy resource aggregations and
generators).\503\ Calpine states that it may be possible to revisit
procedures for multi-node aggregation of distributed energy resources
as the system topology changes due to congestion, but that rules
associated with locational requirements may not provide the flexibility
necessary for the RTOs/ISOs to manage dynamic grid conditions in real
time.\504\
---------------------------------------------------------------------------
\502\ CAISO Comments (2018 RM18-9) at 5-6; EPRI Comments (2018
RM18-9) at 3-4; MISO Comments (2018 RM18-9) at 18; NYISO Comments
(2018 RM18-9) at 6; PJM Market Monitor Comments (2018 RM18-9) at 3.
\503\ See, e.g., American Petroleum Institute Comments (RM16-23)
at 10-11; EEI Comments (RM16-23) at 28-30; ISO-NE Comments (RM16-23)
at 37-40; NYISO Indicated Transmission Owners at 16-17; PJM Market
Monitor Comments (RM16-23) at 13.
\504\ Calpine Comments (2018 RM18-9) at 4-5 (citing comments of
Dr. Joseph Bowring, Technical Conference Transcript at 37; comments
of Jeff Bladen, Technical Conference Transcript at 36).
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200. With respect to whether the Commission should require the
RTOs/ISOs to adopt consistent locational requirements for distributed
energy resource aggregations, commenters provide varied
recommendations. Tesla/SolarCity recommend that the Commission
establish consistent locational requirements across the RTOs/ISOs,
similar to CAISO's Distributed Energy Resource Provider framework.\505\
Mensah supports locational requirements by distribution utility zones
or defined sub-zones, while noting locational requirements may vary
across RTOs/ISOs.\506\ Mensah asserts that locational requirements
should be consistent for all wholesale market services within an
individual RTO/ISO in order to avoid unnecessary complications.
---------------------------------------------------------------------------
\505\ Tesla/SolarCity Comments (RM16-23) at 27.
\506\ Mensah Comments (RM16-23) at 3.
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201. Other commenters suggest that the RTOs/ISOs should have
flexibility to determine the locational requirements appropriate for
their region. Noting CAISO's approach to distributed energy resource
aggregation within ``sub-zones,'' ISO-NE's approach to self-scheduling
distributed energy resources, and the PJM Market Monitor's desire for
nodal aggregations, MISO argues that the Commission should allow each
RTO/ISO to establish tailored approaches based on its regional
needs.\507\ Similarly, Calpine and SoCal Edison assert that the
Commission should allow regional variations.\508\ PJM asserts that the
Commission should require RTOs/ISOs to adopt measures necessary to
ensure control of congestion, but should allow flexibility to tailor
those measures for individual systems.\509\
---------------------------------------------------------------------------
\507\ MISO Comments (2018 RM18-9) at 20 (citing Technical
Conference Transcript at 9-11, 14-15, 20-23).
\508\ Calpine Comments (2018 RM18-9) at 5-6; SoCal Edison
Comments (2018 RM18-9) at 3.
\509\ PJM Comments (2018 RM18-9) at 6-7.
---------------------------------------------------------------------------
202. Other commenters, including AES Companies and MISO
Transmission Owners, argue for regional flexibility but recommend that
other entities besides the RTOs/ISOs, such as affected balancing
authorities, distribution utilities, states, and non-regulated
distribution cooperatives, determine the locational requirements.\510\
---------------------------------------------------------------------------
\510\ AES Companies Comments (RM16-23) at 10, 34; MISO
Transmission Owners Comments (RM16-23) at 21.
---------------------------------------------------------------------------
203. Several of the commenters that support the Commission adopting
rules for multi-node aggregations suggest that the RTOs/ISOs could be
permitted to present evidence in their compliance filings demonstrating
that limiting aggregations is necessary for reliability reasons.\511\
Direct Energy and NRG argue that any limits or boundaries on
aggregations of distributed energy resources must be supported by a
transparent, comprehensive, and data-driven regional analysis, and that
a distributed energy resource's participation should only be precluded
if its participation would undermine reliability.\512\
---------------------------------------------------------------------------
\511\ Advanced Energy Economy Comments (2018 RM18-9) at 22-23;
Advanced Energy Management Comments (2018 RM18-9) at 6; Direct
Energy Comments (2018 RM18-9) at 3-4 (describing examples of
distributed energy resource aggregations being operated in Belgium,
France and Australia); NRG Comments (2018 RM18-9) at 5.
\512\ Direct Energy Comments (2018 RM18-9) at 4-5, 6-7 (citing
Technical Conference Transcript at 9, 34).
---------------------------------------------------------------------------
c. Commission Determination
204. We adopt the NOPR proposal and add Sec. 35.28(g)(12)(ii)(b)
to the Commission's regulations to require each RTO/ISO to revise its
tariff to establish locational requirements for distributed energy
resources to participate in a distributed energy resource aggregation
that are as geographically broad as technically feasible. However,
given the variety of approaches to locational requirements proposed by
commenters, we will provide each RTO/ISO with flexibility to determine
the locational requirements for its region, as long as it demonstrates
that those requirements are as geographically broad as technically
feasible. To the extent that an RTO/ISO seeks to continue its currently
effective locational requirements for distributed energy resources, it
must demonstrate on compliance that its approach meets this
requirement. To comply with this rule, each RTO/ISO must provide a
detailed, technical explanation for the geographical scope of its
proposed locational requirements. This explanation could include, for
example, a discussion of the RTO/ISO's system topology and regional
congestion patterns, or any other factors that necessitate its proposed
locational requirements.
205. We recognize the arguments for both multi-node and single-node
aggregations. There are several benefits of multi-node aggregations,
such as improved market entry and competition, lower chance of
underperformance, and improved services that aggregations can provide.
However, single-node aggregations may reduce the cost of participation
for smaller resources by telemetering the aggregation rather than each
individual resource and allows RTOs/ISOs to better manage intra-zonal
price congestion. Additionally, as discussed above, the reduction of
the minimum size requirement for distributed energy resource
aggregations will help alleviate commenters' concerns about requiring
aggregations to locate only at a single node.\513\
---------------------------------------------------------------------------
\513\ See supra Section IV.C.4 (Minimum and Maximum Size of
Aggregation).
---------------------------------------------------------------------------
206. We are persuaded by comments that identify the various
benefits of multi-node distributed energy resource
[[Page 67130]]
aggregations. In particular, we are persuaded by CAISO's arguments that
multi-node aggregations allow for greater market participation by
reducing transaction costs and assembling appropriately sized resources
optimized for the wholesale electricity markets, and by PJM's assertion
that it already dispatches demand response resources across different
pricing nodes.\514\ We believe that the challenges of managing a multi-
node aggregation--especially around a transmission constraint--can be
overcome through coordination between RTOs/ISOs, aggregators, and
distribution system operators. However, we also recognize that existing
differences--both operational and administrative--among RTOs/ISOs make
such a uniform requirement challenging. Those differences are relevant
here because some RTOs/ISOs already aggregate resources in a different
manner, dynamic changes in system topology and congestion patterns vary
across each RTO/ISO, and each RTO/ISO may have different solutions
addressing reliability impacts on their respective systems.
Accordingly, while each RTO/ISO must provide a detailed, technical
explanation for the geographical scope of its proposed locational
requirements, this final rule provides RTOs/ISOs with a certain degree
of flexibility as to the technical aspects of a locational requirement
that is as geographically broad as possible.
---------------------------------------------------------------------------
\514\ See CAISO Comments (2018 RM18-9) at 10; PJM Comments
(RM16-23) at 28.
---------------------------------------------------------------------------
207. As to arguments regarding the relative merits of single node
and multi-node aggregations, we find that providing RTOs/ISOs with the
flexibility to establish their own locational requirements on
compliance that are as geographically broad as technically feasible
will allow such arguments to be considered in the stakeholder process
and in each RTO/ISO-specific compliance proceeding. We also are not
persuaded by Mensah's and Tesla/SolarCity's arguments for consistent
locational requirements either across the RTOs/ISOs or for all
wholesale market services within an individual RTO/ISO. We find that
there is no need to standardize the locational requirements and
therefore instead provide the RTOs/ISOs the flexibility to develop more
tailored approaches based on their regional needs. In addition, we are
not persuaded by AES Companies' and MISO Transmission Owners' arguments
that entities other than the RTO/ISO should determine the locational
requirements of distributed energy resources. We find that RTOs/ISOs
have the primary responsibility of administering the regional markets
and reliably operating the system, and are therefore in the best
position to propose on compliance the appropriate locational
requirements, as long as they demonstrate that those requirements are
as geographically broad as technically feasible, to enable distributed
energy resources to participate in a distributed energy resource
aggregation for their regions.
E. Distribution Factors and Bidding Parameters
a. NOPR Proposal
208. In the NOPR, the Commission proposed to require each RTO/ISO
to revise its tariff to include the requirement that distributed energy
resource aggregators (1) provide default distribution factors \515\
when they register their distributed energy resource aggregation; and
(2) update those distribution factors if necessary when they submit
offers to sell or bids to buy into the RTO/ISO markets.\516\ The
Commission also proposed to require each RTO/ISO to revise the bidding
parameters for each participation model in its tariff to allow
distributed energy resource aggregators to update their distribution
factors when participating in RTO/ISO markets. The Commission sought
comment on this proposal as well as comment on alternative approaches
that may provide the RTOs/ISOs with the information from geographically
or electrically dispersed resources in a distributed energy resource
aggregation necessary to reliably operate their systems. The Commission
also sought comment on whether bidding parameters in addition to those
already incorporated into existing participation models may be
necessary to adequately characterize the physical or operational
characteristics of distributed energy resource aggregations.
---------------------------------------------------------------------------
\515\ Distribution factors indicate how much of the total
response from a distributed energy resource aggregation would be
coming from each node at which one or more resources participating
in the aggregation are located.
\516\ NOPR, 157 FERC ] 61,121 at P 143.
---------------------------------------------------------------------------
209. After the April 2018 technical conference, the Commission
sought additional information about bidding parameters or other
potential mechanisms needed to represent the physical and operational
characteristics of distributed energy resource aggregations in RTO/ISO
markets.\517\
---------------------------------------------------------------------------
\517\ Notice Inviting Post-Technical Conference Comments at 4-5.
---------------------------------------------------------------------------
b. Comments
210. A number of commenters support the Commission's proposed
requirement for distributed energy resource aggregators to provide
default distribution factors to the RTO/ISO when registering
distributed energy resource aggregations and to update those
distribution factors as necessary.\518\ Tesla/SolarCity states that
this method strikes the proper balance between providing flexibility
and market access to distributed energy resource aggregators while
providing sufficient information to RTOs/ISOs about the locations of
the individual distributed energy resources and how dispatching them
will affect the system.\519\ DER/Storage Developers assert that
distribution factors would provide the RTO/ISO with sufficient
information to maintain reliability without requiring unnecessary
information about individual distributed energy resources.\520\
---------------------------------------------------------------------------
\518\ See, e.g., CAISO Comments (RM16-23) at 30; DER/Storage
Developers Comments (RM16-23) at 4; NextEra Comments (RM16-23) at
15; SEIA Comments (RM16-23) at 19; Xcel Energy Services Comments
(RM16-23) at 25.
\519\ Tesla/SolarCity Comments (RM16-23) at 28.
\520\ DER/Storage Developers Comments (RM16-23) at 4.
---------------------------------------------------------------------------
211. CAISO generally supports the Commission's proposal and notes
that its Distributed Energy Resource Provider model rules require an
aggregator to submit generation distribution factors with its bid.\521\
CAISO states that multi-node aggregations require distribution factors
to model the impact of the resource on the transmission system and that
allowing resources to update distribution factors in the bid submission
process mitigates the potential for inaccuracies. If an aggregator does
not submit distribution factors with its bid, CAISO states that it uses
the aggregation's default generation distribution factors registered in
CAISO's Master File for a reasonable expectation of how the resource
will perform across applicable pricing nodes.\522\ CAISO notes that
using distribution factors to schedule load is an acceptable and
feasible practice despite inherent inaccuracies.\523\ Microgrid
Resources Coalition notes that CAISO's Distributed Energy Resource
Provider model permits participation in aggregations of separately
metered resources independent of the various attributes of the other
loads and resources behind the meter and that the critical feature of
this arrangement is the ability to define the limits of participation
so that the aggregator and the system operator can dispatch the
aggregation within those
[[Page 67131]]
limits.\524\ Lorenzo Kristov also notes that the CAISO Distributed
Energy Resource Provider structure enables multi-node aggregations
using both default and biddable distribution factors.\525\ Lorenzo
Kristov states, however, that these provisions have not yet been
practically tested by a non-demand-response resource. Conversely, NYISO
states that it does not need distribution factors to dispatch
distributed energy resource aggregations accurately because it intends
to limit distributed energy resource aggregations to resources at a
single transmission node.\526\
---------------------------------------------------------------------------
\521\ CAISO Comments (2018 RM18-9) at 11.
\522\ CAISO Comments (RM16-23) at 30-31.
\523\ CAISO Comments (2018 RM18-9) at 11.
\524\ Microgrid Resources Coalition (2018 RM18-9) at 9.
\525\ Lorenzo Kristov Comments (2018 RM18-9) at 14.
\526\ NYISO Comments (RM16-23) at 17. The Commission accepted
NYISO's tariff provisions related to aggregations, which require
that facilities within an aggregation are electrically connected to
the same transmission node. NYISO Aggregation Order, 170 FERC ]
61,033 at PP 6, 11.
---------------------------------------------------------------------------
212. Other RTOs/ISOs assert that implementing the Commission's
proposal may be technically difficult. SPP states that implementing
distribution factors in the software is not trivial.\527\ MISO states
that it currently updates the distribution factors daily and that
updating more frequently may result in a significantly large amount of
data exchange and processing in the market system.\528\
---------------------------------------------------------------------------
\527\ SPP Comments (RM16-23) at 19.
\528\ MISO Comments (RM16-23) at 23.
---------------------------------------------------------------------------
213. Several RTOs/ISOs also describe the limitations of
distribution factor requirements. SPP notes that distribution factors
provide the reliability coordinator with the distribution of the
resources in the aggregation, but those factors do not guarantee that
the resources in the aggregation will move pro-rata. SPP asserts that
the uncertainty in the aggregate response may cause a reliability issue
by introducing uncertainty in its effective dispatch to resolve
constraints. SPP adds that the economics and pricing of the aggregate
may not reflect the actual response on the sub-aggregate level.\529\
Similarly, ISO-NE also argues that distribution factors may vary based
on the actual level of dispatch of the aggregate, for example, there
could be a large difference between distribution factors based upon the
maximum MW output and the minimum MW output of an aggregation.\530\
Pacific Gas & Electric suggests that, because the distribution factors
will impact settlements and congestion, distributed energy resource
aggregations should use an outage management-like system to report if
real-time distribution factors differ from those that are used for the
market award.\531\
---------------------------------------------------------------------------
\529\ SPP Comments (RM16-23) at 19-20.
\530\ ISO-NE Comments (RM16-23) at 42-43.
\531\ Pacific Gas & Electric Comments (RM16-23) at 19.
---------------------------------------------------------------------------
214. Some commenters assert that the Commission should not impose
the distribution factor requirements in all regions. NYISO Indicated
Transmission Owners state that the application of distribution factors
may not be the optimal approach for dispatching resources within an
aggregation in all systems, especially if it leads to dispatching
resources on either side of a single constraint.\532\ NYISO Indicated
Transmission Owners argue that the Commission should require RTOs/ISOs
to develop solutions that are regionally appropriate and that promote
efficient dispatch of resources with effective resolution of
constraints on both the transmission and distribution systems.
---------------------------------------------------------------------------
\532\ NYISO Indicated Transmission Owners Comments (RM16-23) at
20.
---------------------------------------------------------------------------
215. Similarly, ISO-NE asks the Commission to allow each RTO/ISO to
develop an approach that works well in light of each region's
particular network configuration, infrastructure, and existing
operational processes.\533\ ISO-NE explains that, rather than providing
distribution factors, an aggregator could, for example, report the
expected MW capability at each node, or that size limits for being
dispatchable in the markets could be lowered, reducing the need to
aggregate across multiple nodes to participate.\534\ ISO-NE states
that, for a mesh network such as most of New England, using
distribution factors as the basis for dispatch is problematic.\535\
ISO-NE explains that a participant would be unable to predict the
changing power flows to multiple connected nodes without possessing the
same detailed knowledge of grid configuration used by ISO-NE and the
distribution utilities in real-time operations. As a result, ISO-NE
contends that any stated distribution factors could bear little
relation to real-time operations.
---------------------------------------------------------------------------
\533\ ISO-NE Comments (RM16-23) at 41.
\534\ Id. at 45.
\535\ Id. at 42.
---------------------------------------------------------------------------
216. ISO-NE contends that, in scenarios where the distribution
system is not radial to the transmission system, a single resource
located in the distribution network may have sensitivities to multiple
nodes in the transmission system.\536\ ISO-NE argues that it is not
reasonable for an aggregator to try to submit distribution factors for
each node as they would not have visibility to these sensitivities.
ISO-NE notes that it has addressed this problem with Asset-Related
Demand by only supporting aggregations of Asset-Related Demand that
have similar sensitivities to each node, so that an aggregated node can
be modeled to reflect the impacts to the system of the Asset-Related
Demand for which the Asset-Related Demand has a 100% distribution
factor. ISO-NE states that this approach may or may not be appropriate
for distributed energy resource aggregations and would require further
evaluation and coordination with the distribution utilities.\537\
---------------------------------------------------------------------------
\536\ Id. at 44.
\537\ Id. at 44-45.
---------------------------------------------------------------------------
217. In response to the Commission's request for comment on whether
bidding parameters in addition to those already incorporated into
existing participation models may be necessary to adequately
characterize the physical or operational characteristics of distributed
energy resource aggregations, some commenters argue that RTOs/ISOs
should be allowed to require additional bidding parameters for
distributed energy resource aggregations to reliably operate the bulk
power system and accurately reflect resources in the wholesale
markets.\538\ Stem suggests that bidding parameters in current RTO/ISO
rules assume that a resource's physical attributes, such as ramp rate
or maximum charge limit, are fixed values and that the resource is
dispatchable to those levels at all times, which will need to
change.\539\ Stem argues that behind-the-meter resources should be able
to elect to be out of the market at certain times, as long as their
existing service obligations are met.\540\ PJM Market Monitor asserts
that, as long as distributed energy resources are priced and dispatched
locationally, the existing offer parameters should address the
characteristics of the resources.\541\ Dominion argues that distributed
energy resource aggregators should be allowed to communicate
distributed energy resource aggregations' operating limitations to the
RTO/ISO and control their dispatch to the same extent as other
resources.\542\ Dominion adds that certain distributed energy
resources, such as solar generators, should also have the option to
only be curtailed for reliability concerns.
---------------------------------------------------------------------------
\538\ Dominion Comments (RM16-23) at 11; NYISO Comments (RM16-
23) at 17.
\539\ Stem Comments (RM16-23) at 15, 16.
\540\ Id. at 16.
\541\ PJM Market Monitor Comments (2018 RM18-9) at 5.
\542\ Dominion Comments (RM16-23) at 11.
---------------------------------------------------------------------------
218. NYISO Indicated Transmission Owners assert that distributed
energy resource aggregations participating in capacity markets should
bid a capacity value that reflects the aggregation's
[[Page 67132]]
value in satisfying the peak period resource adequacy
requirements.\543\ NYISO Indicated Transmission Owners state that the
capacity value for distributed energy resource aggregations should take
into account various factors, such as variability of the aggregation,
extent to which the distributed energy resource aggregation is energy
limited, and composition of technologies that comprise the aggregation,
but underscores that solutions should be addressed during
implementation in each RTO's/ISO's stakeholder process to ensure
regional variations are accommodated.\544\
---------------------------------------------------------------------------
\543\ NYISO Indicated Transmission Owners Comments (RM16-23) at
11.
\544\ Id. at 11-12.
---------------------------------------------------------------------------
219. MISO states that it needs more time to further investigate and
better understand the potential need for additional bidding parameters
for distributed energy resource aggregations.\545\ MISO asserts that
such parameters will likely be needed to the extent a distributed
energy resource may involve an aggregation of electric storage
resources and if the RTO/ISO is expected to manage their state of
charge. MISO explains that, as an example, distributed energy resource
aggregations might need to provide information describing sub-
aggregations for MISO to address security constraints associated with
separate distribution networks or separate nodes within a distribution
network.\546\
---------------------------------------------------------------------------
\545\ MISO Comments (RM16-23) at 23.
\546\ Id. at 23-24.
---------------------------------------------------------------------------
220. Advanced Microgrid Solutions asserts that RTOs/ISOs must have
separate rules regarding attributes, bidding parameters, and dispatch
in order to recognize the multiple uses for behind-the-meter electric
storage resources.\547\ Advanced Microgrid Solutions further explains
that some requirements relevant to a single-site resource are
irrelevant for an aggregation.\548\ For instance, Advanced Microgrid
Solutions states that an aggregation of behind-the-meter resources does
not have an equivalent to a state of charge for a single-site
distributed energy resource to be used as a bidding parameter for a
fleet of aggregated distributed energy resources and, instead, the
aggregator must bid based on calculated availability and should be
penalized if the fleet does not perform as bid. Furthermore, Microgrid
Resources Coalition asserts that microgrids can also provide wholesale
services with suitable metering and controls but that their
participation is frequently restricted.\549\ Microgrid Resources
Coalition argues that it is important that the resource be able to
define the limits of participation within the aggregation, so that it
can be dispatched within its own limits, noting that an aggregation
would be subject to penalties if it cannot comply.
---------------------------------------------------------------------------
\547\ Advanced Microgrid Solutions Comments (RM16-23) at 7.
\548\ Id. at 8.
\549\ Microgrid Resources Coalition Comments (RM16-23) at 6.
---------------------------------------------------------------------------
221. EPRI states that an injection of energy from a resource on the
distribution system usually results in reduced losses as compared to
the same injection on the transmission bus.\550\ EPRI argues that this
reduction of losses is one of the substantial values that distributed
energy resources can provide and that this value should be reflected in
marginal prices at distributed energy resource locations.\551\ EPRI
states that the RTO/ISO may not be able to calculate the value without
information on the distribution system, so this value may need to be
included as a bidding parameter, which may require verification by the
distribution utility.
---------------------------------------------------------------------------
\550\ EPRI Comments (RM16-23) at 28.
\551\ Id. at 29.
---------------------------------------------------------------------------
222. Several RTOs/ISOs do not believe that the Commission should
mandate additional universal bidding parameters. SPP believes that each
RTO/ISO should have the discretion to develop bidding parameters that
reflect their unique needs relative to their individual software and
applications.\552\ CAISO notes that its existing market participation
models available to distributed energy resource aggregations provide
the means to account for the physical and operational characteristics
of an aggregation and argues that no universal bidding parameters need
to be established.\553\
---------------------------------------------------------------------------
\552\ SPP Comments (RM16-23) at 20.
\553\ CAISO Comments (RM16-23) at 31.
---------------------------------------------------------------------------
223. Duke Energy argues that any RTO/ISO bidding parameters must
treat all resources comparably and not favor certain new technologies
or resources over others.\554\ NRG contends that, for aggregations,
bidding parameters should generally match the appropriate participation
model. For example, NRG states generation bidding parameters should
apply to aggregations composed strictly of distributed generators, and
demand response bidding parameters should apply to aggregations
containing only load resources with no ability to net inject into the
system.\555\ NRG notes that the bidding parameters for bi-directional
resources should be general enough to encompass requirements of
distributed energy resource aggregators as well as storage-only
resources.
---------------------------------------------------------------------------
\554\ Duke Energy Comments (RM16-23) at 6-7.
\555\ NRG Comments (RM16-23) at 14.
---------------------------------------------------------------------------
224. EPRI states that distribution factors are the primary unique
parameter, noting that they may need to be allowed to vary dynamically
in order for values to be as accurate as possible.\556\ EPRI also
suggests that the value of marginal distribution losses on the
distribution system is unique and may help the RTO/ISO determine
economically efficient resources.
---------------------------------------------------------------------------
\556\ EPRI Comments (2018 RM18-9) at 5.
---------------------------------------------------------------------------
c. Commission Determination
225. In this final rule, we adopt the NOPR proposal, as modified
below, and add Sec. 35.28(g)(12)(ii)(c) to the Commission's
regulations to require each RTO/ISO to establish market rules that
address distribution factors and bidding parameters for distributed
energy resource aggregations. Specifically, we require each RTO/ISO
that allows multi-node aggregations to revise its tariff to (1) require
that distributed energy resource aggregators give to the RTO/ISO the
total distributed energy resource aggregation response that would be
provided from each pricing node, where applicable, when they initially
register their aggregation and to update these distribution factors if
they change; \557\ and (2) incorporate appropriate bidding parameters
into its participation models as necessary to account for the physical
and operational characteristics of distributed energy resource
aggregations.\558\
---------------------------------------------------------------------------
\557\ We note that distribution factors are only necessary to
the extent that distributed energy resources participating in an
aggregation are located at different nodes. This methodology would
apply only when distributed energy resources located at different
nodes participate in the same aggregation to provide a particular
market service.
\558\ For example, such bidding parameters could include
response rates, ramp rates, and upper and lower operating limits.
See CAISO Tariff, Section 30.5.2.1; NYISO Tariffs, NYISO MST,
Section 4.2.1.3.3 (18.0.0).
---------------------------------------------------------------------------
226. As the Commission explained in the NOPR, RTOs/ISOs need to
know which resources in a distributed energy resource aggregation will
be responding to their dispatch signals and where those resources are
located.\559\ As the Commission also explained in the NOPR, this
information is particularly important if the resources in a distributed
energy resource aggregation are located across multiple points of
interconnection, multiple transmission or distribution lines, or
multiple nodes on the grid.
---------------------------------------------------------------------------
\559\ NOPR, 157 FERC ] 61,121 at P 142.
---------------------------------------------------------------------------
227. Additionally, we agree with commenters that some bidding
parameters for existing participation models may not accommodate the
[[Page 67133]]
unique features of certain distributed energy resource aggregations,
and that different bidding parameters may be needed to recognize
distributed energy resources' multiple uses. Therefore, we further
modify the NOPR proposal to require that each RTO/ISO incorporate
appropriate bidding parameters into its participation models as
necessary to account for the physical and operational characteristics
of distributed energy resource aggregations. In meeting this
requirement, each RTO/ISO must either (1) incorporate appropriate
bidding parameters that account for the physical and operational
characteristics of distributed energy resource aggregations into its
one or more new participation models for such aggregations; and/or (2)
adjust the bidding parameters of the existing participation models to
account for the physical and operational characteristics of distributed
energy resource aggregations.
228. We find that the revisions directed by this final rule will
provide distributed energy resource aggregators with the flexibility to
update their distribution factors and provide RTOs/ISOs with the
information needed to model aggregations accurately enough to issue
feasible dispatch instructions and maintain reliability.
229. However, several commenters contend that requiring the RTOs/
ISOs to account for distribution factors and other bidding parameters
as described in the NOPR may be technically difficult to implement, or
of little benefit considering the RTO's/ISO's network configuration. In
light of this concern, we find that, in meeting this requirement, each
RTO/ISO may revise its tariff to manage the locational attributes of
distributed energy resource aggregations in a manner that reflects the
RTO's/ISO's unique network configuration, infrastructure, and existing
operational processes. We will evaluate, upon compliance, the RTO's/
ISO's proposal to ensure that it will provide the RTO/ISO with
sufficient information from resources in a multi-node distributed
energy resource aggregation that is necessary to reliably operate its
systems without imposing undue burden on individual distributed energy
resources or utility distribution companies.\560\ RTOs/ISOs that allow
multi-node aggregations must, at a minimum, propose clear protocols
explaining how a distributed energy resource aggregation can provide
the required information and update that information when needed.
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\560\ Id. P 143.
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F. Information and Data Requirements
a. NOPR Proposal
230. In the NOPR, the Commission proposed that the distributed
energy resource aggregator must initially provide to the RTO/ISO a
description of the physical parameters of the distributed energy
resource aggregation, including (1) the total capacity; (2) the minimum
and maximum operating limits; (3) the ramp rate; (4) the minimum run
time; and (5) the default distribution factors, if applicable.\561\ The
Commission also proposed to require each RTO/ISO to revise its tariff
to require each distributed energy resource aggregator to provide the
RTO/ISO with a list of the distributed energy resources in the
distributed energy resource aggregation that includes information about
each of those distributed energy resources, including each resource's
capacity, location on the distribution system, and operating limits. In
addition, the Commission proposed to require each RTO/ISO to revise its
tariff to require distributed energy resource aggregators to maintain
aggregate settlement data for the distributed energy resource
aggregation so that the RTO/ISO can regularly settle with the
distributed energy resource aggregator for its market
participation.\562\ Lastly, the Commission proposed to require
distributed energy resource aggregators to maintain data, for a length
of time consistent with the RTO's/ISO's auditing requirements, for each
individual resource in its distributed energy resource aggregation so
that each resource can verify its performance if audited. The
Commission sought comment on these proposed data requirements and on
whether there are information and data requirements imposed by RTOs/
ISOs that apply to other market participants that should not apply to
individual distributed energy resources participating in RTO/ISO
markets through a distributed energy resource aggregation.\563\
---------------------------------------------------------------------------
\561\ Id. P 145.
\562\ Id. P 147.
\563\ Id. PP 146, 147.
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b. Comments
231. Some commenters support the NOPR proposal to require
information and data requirements for individual distributed energy
resources. CAISO, EEI, and Organization of MISO States support
requiring distributed energy resource aggregators to provide a list of
individual resources and their location and technical
capabilities.\564\ The New York Commission asserts that local
distribution utilities must have information on the activities of
distributed energy resources, even when they are only providing
wholesale services.\565\ However, Mosaic Power requests that electric
distribution companies address their operational need for information
in the least restrictive manner possible, given that account owner
registration requirements would create prohibitive costs under its
business model.\566\ ISO-NE and NYISO request that the Commission give
them flexibility to develop their own information and data requirements
and urge the Commission to provide only high-level guidance.\567\
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\564\ CAISO Comments (RM16-23) at 32; EEI Comments (RM16-23) at
31; Organization of MISO States Comments (RM16-23) at 8.
\565\ New York Commission Comments (RM16-23) at 14.
\566\ Mosaic Power Comments (RM16-23) at 6.
\567\ ISO-NE Comments (RM16-23) at 46-47; NYISO Comments (RM16-
23) at 17.
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232. In contrast, many developers argue that information and data
requirements should only apply to the distributed energy resource
aggregation as a whole because (1) it is the single interface with the
RTO/ISO; and (2) it is not necessary for the RTO/ISO to model each and
every resource included in an aggregation to effectively model and
dispatch the aggregation.\568\ Efficient Holdings claims that failure
to account for the dynamic nature of a distributed energy resource
aggregation asset's performance capabilities and the likely turnover of
individual resources within a distributed energy resource aggregation
will place undue burden on these assets.\569\
---------------------------------------------------------------------------
\568\ See, e.g., Advanced Microgrid Solutions Comments (RM16-23)
at 8; AES Companies Comments (RM16-23) at 41, 45-46; DER/Storage
Developer Comments (RM16-23) at 3-4; MISO Transmission Owners
Comments (RM16-23) at 22; Stem Comments (RM16-23) at 13-14.
\569\ Efficient Holdings Comments (RM16-23) at 20.
---------------------------------------------------------------------------
233. Several commenters believe RTOs/ISOs currently have
information and data requirements for other market participants that
should not apply to individual distributed energy resources
participating in RTO/ISO markets through an aggregation.\570\ For
example, CAISO explains that it has certain requirements that do not
apply to distributed energy resources in an aggregation (e.g., its
meteorological data requirements that apply to eligible intermittent
resources do not extend to a distributed energy resource aggregation)
and urges the Commission to maintain a degree of flexibility on this
issue.\571\ R Street Institute similarly
[[Page 67134]]
argues that requiring the same meteorological data for distributed
energy resource aggregators as stand-alone variable energy resources
could impose undue burdens on individual distributed energy
resources.\572\ MISO argues that current data communication methods
between MISO, the local balancing authority, and the generation
operator may be cost prohibitive for distributed energy resource
aggregators.\573\ However, several distribution utilities argue that
information and data requirements should be comparable for all
wholesale market participants.\574\
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\570\ CAISO Comments (RM16-23) at 33; Efficient Holdings
Comments (RM16-23) at 11, 19-20; R Street Institute Comments (RM16-
23) at 10.
\571\ CAISO Comments (RM16-23) at 32-34.
\572\ R Street Institute Comments (RM16-23) at 10.
\573\ MISO Comments (2018 RM18-9) at 19.
\574\ EEI Comments (RM16-23) at 31; Duke Energy Comments (RM16-
23) at 6; Xcel Energy Services Comments (RM16-23) at 26.
---------------------------------------------------------------------------
234. Some commenters generally support the requirements for
distributed energy resource aggregators to maintain aggregate
settlement data \575\ and maintain data for a defined length of time,
consistent with the RTO's/ISO's auditing requirements, for each
individual resource in the aggregation so that each resource can verify
its performance if audited.\576\ However, Sunrun requests that RTOs/
ISOs only apply these requirements to the aggregation and not to
individual resources within the aggregation.\577\
---------------------------------------------------------------------------
\575\ CAISO Comments (RM16-23) at 34; MISO Comments (RM16-23) at
25; Xcel Energy Services at 26.
\576\ CAISO Comments (RM16-23) at 34; IRC Comments (RM16-23) at
10; SoCal Edison Comments (RM16-23) at 12-13.
\577\ Sunrun Comments (RM16-23) at 5.
---------------------------------------------------------------------------
235. Advanced Energy Buyers state that RTOs/ISOs should facilitate
streamlined data collection and sharing, including from the RTO/ISO to
the distribution utility, to enable data-driven planning and operation
to maximize efficiency, as well as to send good investment signals to
enable customers to prioritize delivery of distributed energy resources
where they will add maximum value.\578\
---------------------------------------------------------------------------
\578\ Advanced Energy Buyers Comments (2018 RM18-9) at 7.
---------------------------------------------------------------------------
c. Commission Determination
236. Upon consideration of the comments, we adopt the NOPR
proposal, with modifications, and add Sec. 35.28(g)(12)(ii)(d) to the
Commission's regulations to require each RTO/ISO to establish market
rules that address information requirements and data requirements for
distributed energy resource aggregations. Specifically, we require each
RTO/ISO to revise its tariff to (1) include any requirements for
distributed energy resource aggregators that establish the information
and data that a distributed energy resource aggregator must provide
about the physical and operational characteristics of its aggregation;
(2) require distributed energy resource aggregators to provide a list
of the individual resources in its aggregation; and (3) establish any
necessary information that must be submitted for the individual
distributed energy resources. We also require each RTO/ISO to revise
its tariff to require distributed energy resource aggregators to
provide aggregate settlement data for the distributed energy resource
aggregation and to retain performance data for individual distributed
energy resources in a distributed energy resource aggregation for
auditing purposes.
237. With respect to the NOPR proposal that the distributed energy
resource aggregator initially provide to the RTO/ISO ``a description of
the physical parameters of the distributed energy resource
aggregation,'' \579\ we believe that the physical attributes of the
distributed energy resource aggregation as a whole may already be
captured by an RTO's/ISO's registration requirements for all market
participants or may otherwise be inapplicable to distributed energy
resource aggregations. Therefore, to avoid creating unnecessary or
redundant requirements for distributed energy resource aggregations and
to provide flexibility to the RTOs/ISOs, we do not adopt that proposal.
Rather, we require the RTOs/ISOs to revise their tariffs to establish
any necessary physical parameters that distributed energy resource
aggregators must submit as part of their registration process only to
the extent these parameters are not already represented in general
registration requirements or bidding parameters applicable to
distributed energy resource aggregations.
---------------------------------------------------------------------------
\579\ NOPR, 157 FERC ] 61,121 at P 145.
---------------------------------------------------------------------------
238. With respect to information requirements for individual
distributed energy resources, we do not adopt the NOPR proposal to
require each RTO/ISO to revise its tariff to require distributed energy
resource aggregators to provide the RTO/ISO with specific information
about each of the distributed energy resources in an aggregation,
including each resource's capacity, location on the distribution
system, and operating limits. Instead, we direct each RTO/ISO to revise
its tariff to require distributed energy resource aggregators to
provide a list of the individual distributed energy resources
participating in their aggregations to the RTO/ISO. If an RTO/ISO needs
additional information beyond this list, the RTO/ISO should identify
and explain in its compliance filing what additional specific
information about the individual distributed energy resources within an
aggregation that the RTO/ISO needs. The RTO/ISO should also propose how
the information requested must be shared with the RTO/ISO and affected
distribution utilities. As part of these tariff revisions, and as
further discussed in Section IV.I. below, each RTO/ISO must also
require that the distributed energy resource aggregator update that
list of individual resources and associated information as it changes.
We find that this approach provides greater flexibility to RTOs/ISOs
and imposes potentially less onerous requirements upon distributed
energy resource aggregators, while ensuring that necessary information
is conveyed to RTOs/ISOs.
239. We also clarify that the distributed energy resource
aggregator, not an individual distributed energy resource in the
aggregation, is the single point of contact with the RTO/ISO, and the
aggregator would be responsible for managing, dispatching, metering,
and settling the individual distributed energy resources in its
aggregation. As such, the RTO/ISO may only need the information
necessary to model and dispatch the distributed energy resource
aggregation as a whole, and thus we agree with commenters that sharing
detailed information about the individual distributed energy resources
may be an unnecessary and unduly burdensome requirement. We believe
that the modified approach described above strikes a reasonable balance
between the information needs of RTOs/ISOs and the burden that
providing such information can place on distributed energy resource
aggregators seeking to participate in RTO/ISO markets.
240. With respect to the aggregate settlement data for a
distributed energy resource aggregation, as well as performance data
for individual distributed energy resources in a distributed energy
resource aggregation, we find that these sets of information are
necessary for the participation of any type of resource in RTO/ISO
markets and to enable RTOs/ISOs to perform necessary audit functions.
Therefore, we adopt the NOPR proposal to require each RTO/ISO to revise
its tariff to require each distributed energy resource aggregator to
maintain and submit aggregate settlement data for the distributed
energy resource aggregation, so that the RTO/ISO can regularly settle
with the distributed energy resource aggregator for its market
participation,
[[Page 67135]]
and to provide, upon request from the RTO/ISO, performance data for
individual resources in a distributed energy resource aggregation for
auditing purposes.\580\ However, we clarify that the requirements for
settlement and performance data should be consistent with the
settlement and auditing data requirements for other market
participants. Additionally, while we believe that performance data for
individual distributed energy resources will be necessary for
distributed energy resource aggregations to comply with the data
retention and auditing procedures of the RTOs/ISOs, we are also
sympathetic to the concerns that data requirements for individual
distributed energy resources in a distributed energy resource
aggregation can be unduly burdensome. To reduce the burden on
distributed energy resource aggregators and the RTOs/ISOs, we find that
distributed energy resource aggregators should only be required to
retain that performance data for individual distributed energy
resources in an aggregation that the RTO/ISO deems necessary for
auditing purposes. Therefore, to the extent that an RTO/ISO does not
need certain performance data from individual distributed energy
resources in a distributed energy resource aggregation for auditing
purposes, it should not require a distributed energy resource
aggregator to retain that information for individual distributed energy
resources participating in a distributed energy resource aggregation.
With respect to Advanced Energy Buyers' assertion that RTOs/ISOs should
facilitate streamlined data collection and sharing, we decline to
prescribe the specific manner in which information and data should be
collected and shared with distribution utilities.
---------------------------------------------------------------------------
\580\ See id. P 147.
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G. Metering and Telemetry System Requirements
a. NOPR Proposal
241. In the NOPR, the Commission stated that, while the distributed
energy resources in an aggregation will need to be directly metered,
the metering and telemetry system, i.e., hardware and software,
requirements RTOs/ISOs impose on distributed energy resource
aggregators and individual resources in distributed energy resource
aggregations can pose a barrier to the participation of these
aggregations in RTO/ISO markets.\581\ The Commission recognized that
RTOs/ISOs need metering data for settlement purposes and telemetry data
to determine a resource's real-time operational capabilities so that
they can efficiently dispatch resources. The Commission found, however,
that metering and telemetry systems are often expensive, potentially
creating a burden for small distributed energy resources. The
Commission stated that, while telemetry data about a distributed energy
resource aggregation is necessary for the RTO/ISO to efficiently
dispatch the aggregation, telemetry data for each individual resource
in the aggregation may not be.
---------------------------------------------------------------------------
\581\ NOPR, 157 FERC ] 61,121 at P 150.
---------------------------------------------------------------------------
242. The Commission stated that, while it did not propose to
require specific metering and telemetry systems for distributed energy
resource aggregators, it proposed to require each RTO/ISO to revise its
tariff to identify any necessary metering and telemetry hardware and
software requirements for distributed energy resource aggregators and
the individual resources in a distributed energy resource
aggregation.\582\ The Commission stated that these requirements must
ensure that the distributed energy resource aggregator can provide
necessary information and data to the RTO/ISO,\583\ but must not impose
unnecessarily burdensome costs on the distributed energy resource
aggregators or individual resources in a distributed energy resource
aggregation that may create a barrier to their participation in the
RTO/ISO markets.
---------------------------------------------------------------------------
\582\ Id. P 151.
\583\ Id. (citing the Commission's proposal pertaining to
information and data requirements).
---------------------------------------------------------------------------
243. The Commission noted that there may be different types of
resources in these aggregations, some in front of the meter, some
behind the meter with the ability to inject energy back to the grid,
and some behind the meter without the ability to inject energy to the
grid.\584\ The Commission therefore sought comment on whether the RTOs/
ISOs need to establish metering and telemetry hardware and software
requirements for each of the different types of distributed energy
resources that participate in the RTO/ISO markets through distributed
energy resource aggregations as well as whether the Commission should
establish specific metering and telemetry system requirements and, if
so, what requirements would be appropriate.
---------------------------------------------------------------------------
\584\ Id. P 151.
---------------------------------------------------------------------------
244. With respect to telemetry, the Commission stated that the
distributed energy resource aggregator should be able to provide to the
RTO/ISO the real-time capability of its aggregated resource in a manner
similar to the requirements for generators, including the operating
level of the resource and how much that resource can ramp up or ramp
down over its full range of capability, including its charging
capability for distributed energy resource aggregations that include
electric storage resources.\585\ The Commission further noted that
these telemetry system requirements may also need to be in place at
different locations for geographically dispersed distributed energy
resource aggregations that have to provide distribution factors or
other similar information.
---------------------------------------------------------------------------
\585\ Id. P 152.
---------------------------------------------------------------------------
245. With respect to metering, the Commission recognized that
distributed energy resources may be subject to metering system
requirements established by the distribution utility or local
regulatory authority.\586\ Therefore, the Commission proposed that each
RTO/ISO rely on meter data obtained through compliance with these
distribution utility or local regulatory authority metering system
requirements whenever possible for settlement and auditing purposes,
only applying additional metering requirements for distributed energy
resource aggregations when this data is insufficient.
---------------------------------------------------------------------------
\586\ Id.
---------------------------------------------------------------------------
b. Comments
246. In their comments, the various RTOs/ISOs describe slightly
different approaches to metering and telemetry requirements for
distributed energy resource aggregations. CAISO states that, under its
Distributed Energy Resource Provider model, the aggregator must follow
the same metering and telemetry standards as other resources.\587\
NYISO states that it will propose to require distributed energy
resource aggregators to have six-second real-time metering and
telemetry that will be sent either directly to NYISO or through the
utility and to provide after-the-fact meter data uploads for settlement
purposes.\588\ ISO-NE states that individual distributed energy
resources in an aggregation should meet
[[Page 67136]]
the same product-based metering and telemetry requirements as all other
resources, whether the distributed energy resource is behind the meter
or in front and whether or not it can inject power into the grid.\589\
PJM states that, generally, it is reasonable for behind-the-meter
distributed energy resources that seek to inject power onto the grid
(either individually or as part of a distributed energy resource
aggregation) to follow existing telemetry and metering rules from the
generation framework for similarly sized resources, noting that
metering and telemetry rules for generation may vary by resource
size.\590\
---------------------------------------------------------------------------
\587\ CAISO Comments (RM16-23) at 38.
\588\ NYISO Comments (RM16-23) at 18-19. NYISO's Aggregation
Participation Model, accepted by the Commission on January 23, 2020,
requires that (1) aggregations provide real-time telemetry every six
seconds; (2) NYISO send real-time base point signals to, receive
revenue-quality meter data for settlement purposes from, and receive
real-time telemetry from an aggregation, not the individual
facilities within an aggregation; (3) aggregations of like resource
types are subject to the existing metering and telemetry rules for
that resource type; and (4) metering and telemetry of the individual
facilities in an aggregation derive from either directly measured or
calculated values, or a combination thereof, in accordance with the
requirements set forth in NYISO's procedures. See NYISO Aggregation
Order, 170 FERC ] 61,033 at PP 57-74.
\589\ ISO-NE Comments (RM16-23) at 48-50.
\590\ PJM Comments (RM16-23) at 22 (citing PJM Manual 14D:
Generation Operational Requirements, rev. 40, section 4.2.2 (Jan. 1,
2017)).
---------------------------------------------------------------------------
247. A number of commenters support the Commission's proposal to
provide the RTOs/ISOs with flexibility to establish and implement
metering and telemetry rules to suit their individual needs.\591\ CAISO
states that local regulatory authorities already impose metering and
telemetry standards and that RTOs/ISOs need flexibility to incorporate
those local requirements without imposing additional costs or barriers
to entry on prospective distributed energy resource aggregations.\592\
A number of other commenters make similar points.\593\ ISO-NE
recommends that the Commission avoid being overly prescriptive so that
ISO-NE can apply existing metering and telemetry requirements to
distributed energy resources.\594\ SoCal Edison asks that the
Commission not issue a standard directive but rather encourage the
distribution utilities in an RTO/ISO to work together with the RTO/ISO
to continue the development of appropriate metering and telemetry
technologies.\595\ IRC asserts that RTOs/ISOs should be given the
flexibility to define metering and telemetry requirements outside of
their tariffs.\596\ Tesla argues that RTOs/ISOs should allow
alternatives to metering and telemetry requirements that could provide
the needed information, such as sampling, end-use metering devices, or
verifiable behavioral actions.\597\
---------------------------------------------------------------------------
\591\ See, e.g., CAISO Comments (RM16-23) at 38; IRC Comments
(RM16-23) at 10; ISO-NE Comments (RM16-23) at 48; New York State
Entities Comments (RM16-23) at 21; SoCal Edison Comments (RM16-23)
at 14-15.
\592\ CAISO Comments (RM16-23) at 38.
\593\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 9; Advanced Energy Management Comments (2018 RM18-9) at 22-23;
Microsoft Comments (2018 RM18-9) at 18 (citing Justin Gundlach &
Romany Webb, Distributed Energy Res. Participation in Wholesale
Markets: Lessons from the California ISO, 39 ENERGY L. REV. 47, 68-
69 (2018)); NRG Comments (2018 RM18-9) at 3; Tesla Comments (2018
RM18-9) at 10-11 (citing NOPR, 157 FERC ] 61,121 at P 150).
\594\ ISO-NE Comments (RM16-23) at 48.
\595\ SoCal Edison Comments (RM16-23) at 14-15.
\596\ IRC Comments (RM16-23) at 10.
\597\ Tesla Comments (2018 RM18-9) at 10-11.
---------------------------------------------------------------------------
248. Other commenters contend that the Commission should take a
more active role in establishing specific metering and telemetry
requirements for distributed energy resource aggregations. MISO
believes that it is appropriate for the Commission to define the
telemetry and metering requirements,\598\ while others suggest that the
Commission establish a set of standards or generally applicable
criteria but allow RTOs/ISOs flexibility on how those standards are
implemented or to exceed the Commission's requirements.\599\
---------------------------------------------------------------------------
\598\ MISO Comments (RM16-23) at 25.
\599\ Fresh Energy/Sierra Club/Union of Concerned Scientists
Comments (RM16-23) at 3; Independent Energy Producers Association
Comments (RM16-23) at 5; PJM Comments (RM16-23) at 22.
---------------------------------------------------------------------------
249. Several commenters acknowledge that metering and telemetry
requirements for distributed energy resource aggregators and individual
resources participating in distributed energy resource aggregations can
pose a barrier to the participation of these resources in RTO/ISO
markets.\600\ Advanced Energy Management and R Street Institute note
that the costs of metering, telemetry, and communication equipment pose
a disproportionately high burden for small distributed energy resources
because they cannot spread the cost across as many MWs as large
generators.\601\ Advanced Energy Economy requests that the Commission
clarify that real-time and short interval telemetry is not required for
distributed energy resource aggregations and individual distributed
energy resources.\602\
---------------------------------------------------------------------------
\600\ See, e.g., Advanced Energy Management Comments (RM16-23)
at 17-18; New York State Entities Comments (RM16-23) at 21; NextEra
Comments (RM16-23) at 15-16; Public Interest Organizations Comments
(RM16-23) at 14; R Street Institute Comments (RM16-23) at 10.
\601\ Advanced Energy Management Comments (RM16-23) at 18; R
Street Institute Comments (RM16-23) at 10.
\602\ Advanced Energy Economy Comments (RM16-23) at 47.
---------------------------------------------------------------------------
250. Several commenters argue that telemetry requirements
comparable to those of traditional generators would be too burdensome,
even if imposed only at the aggregation level.\603\ Advanced Energy
Economy asserts that such requirements would be prohibitively expensive
and unnecessary to ensure reliability because equipment would need to
be installed at every distributed energy resource site to obtain
accurate readings.\604\ These commenters and others instead suggest
that telemetry requirements, particularly with respect to timing
granularity, should be commensurate to the need of the system and
service provided.\605\ Advanced Energy Management recommends that
virtual telemetry with after-the-fact meter data be allowed for
aggregators of small resources.\606\ Further, Advanced Energy
Management recommends that the Commission not require that distributed
energy resource aggregators that participate only in capacity markets
implement new telemetry requirements.\607\
---------------------------------------------------------------------------
\603\ Id. at 48; Advanced Energy Management Comments (RM16-23)
at 17; City of New York Comments (RM16-23) at 9.
\604\ Advanced Energy Economy Comments (RM16-23) at 48.
\605\ Id.; Advanced Energy Management Comments (RM16-23) at 18;
City of New York Comments (RM16-23) at 9; Energy Storage Association
Comments (RM16-23) at 25; Public Interest Organizations Comments
(RM16-23) at 24.
\606\ Advanced Energy Management Comments (RM16-23) at 18-19.
Advanced Energy Management describes virtual telemetry as
statistical forecasting of an aggregated resource's performance,
generally monitored by some form of communications to confirm
aggregated resource performance, which provides the aggregator or
scheduling coordinator a signal to send to the RTO/ISO.
\607\ Id.
---------------------------------------------------------------------------
251. Several commenters assert that metering and/or telemetry
requirements are necessary only at the aggregation level, and that
telemetry requirements on individual distributed energy resources would
be cost prohibitive and unnecessarily burdensome.\608\ Public Interest
Organizations, New York State Entities, and Advanced Energy Economy
state that grid operators do not need telemetry information about each
distributed energy resource in an aggregation because the loss of one
would not interfere with system reliability or with the operation of
the aggregation, and these parties request clarification that such
telemetry is not required.\609\ NRG and Advanced Energy Economy contend
that the aggregator should be responsible for providing metering and
telemetry that meets the RTO/ISO requirements to ensure that the
aggregated performance of the distributed energy resources meets the
[[Page 67137]]
claimed and offered performance.\610\ Stem asks that each RTO/ISO be
required to justify any metering and telemetry rules regarding
individual resources in an aggregation.\611\
---------------------------------------------------------------------------
\608\ See, e.g., AES Companies Comments (RM16-23) at 36; Energy
Storage Association Comments (RM16-23) at 25; New York State
Entities Comments (RM16-23) at 20; Public Interest Organizations
Comments (RM16-23) at 14-15; R Street Institute Comments (RM16-23)
at 10.
\609\ Advanced Energy Economy Comments (RM16-23) at 49; New York
State Entities Comments (RM16-23) at 20; Public Interest
Organizations Comments (RM16-23) at 14-15.
\610\ Advanced Energy Economy Comments (RM16-23) at 49-50; NRG
Comments (RM16-23) at 10.
\611\ Stem Comments (RM16-23) at 14.
---------------------------------------------------------------------------
252. Other commenters argue that metering and telemetry
requirements are important for reliability and should be the same for
distributed energy resource aggregations as for any other resource
type.\612\ EEI argues that this is important so the RTO/ISO knows the
operating level of the resource and how much that resource can ramp up
or ramp down over its full range of capability.\613\ Energy Storage
Association agrees, as long as the telemetry allows distributed energy
resource aggregations to provide the same products and services as
traditional generators.\614\ PJM also agrees, but notes that smaller
resources have lower-cost telemetry requirements in its market.\615\
EPSA asserts that estimation, sampling, and other inexact methods
provide insufficient precision and, therefore argues that distributed
energy resources should be subject to the same metering requirements as
traditional supply resources.\616\ NYISO Indicated Transmission Owners
contend that the cost of new or additional communications requirements
should be considered a prerequisite to maintain the reliability of the
system rather than a barrier to entry.\617\
---------------------------------------------------------------------------
\612\ See, e.g., EEI Comments (RM16-23) at 34; Energy Storage
Association Comments (RM16-23) at 25; ISO-NE Comments (RM16-23) at
48-50; New York Utility Intervention Unit Comments (RM16-23) at 3-5;
TAPS Comments (RM16-23) at 23.
\613\ EEI Comments (RM16-23) at 34.
\614\ Energy Storage Association Comments (RM16-23) at 25.
\615\ PJM Comments (RM16-23) at 22.
\616\ EPSA Comments (2018 RM18-9) at 10, 13.
\617\ NYISO Indicated Transmission Owners Comments (RM16-23) at
19.
---------------------------------------------------------------------------
253. Some commenters argue that metering and telemetry requirements
should be placed on individual distributed energy resources within an
aggregation.\618\ Multiple commenters argue that distributed energy
resources need to be directly metered to distinguish between wholesale
and retail actions.\619\ MISO believes that it is appropriate for the
Commission to identify the criteria and process for differentiating
retail versus wholesale transactions of distributed energy
resources.\620\ TAPS states that RTOs/ISOs should require telemetry on
individual distributed energy resources for situational awareness and
so that facilities are not inadvertently directed to operate beyond
physical capabilities.\621\ Moreover, ISO-NE argues that statistical
estimation of an aggregation's output rather than direct metering and
telemetry of individual distributed energy resources introduces error
and that the impact of using estimation to determine distribution
factors is not clear.\622\ PJM and the IRC request that the Commission
establish that RTOs/ISOs have the right to require metering and
telemetry for individual distributed energy resources comparable to
traditional resources in order to avoid seams issues and inconsistent
industry roll-out.\623\ Avangrid cautions that even with separate
metering, ownership and reconciliation of the data for retail billing
and wholesale settlement may be impractically complex.\624\ NYISO
Indicated Transmission Owners assert that resources above a certain
size and within an aggregation may require additional metering to
mitigate issues on a utility's distribution system.\625\
---------------------------------------------------------------------------
\618\ See, e.g., DER/Storage Developers Comments (RM16-23) at 4;
Independent Energy Producers Association Comments (RM16-23) at 8;
ISO-NE Comments (RM16-23) at 48-50; NYISO Indicated Transmission
Owners Comments (RM16-23) at 19; Organization of MISO States
Comments (RM16-23) at 9.
\619\ Avangrid Comments (RM16-23) at 15; Independent Energy
Producers Association Comments (RM16-23) at 8; ISO-NE Comments
(RM16-23) at 48-50; Organization of MISO States Comments (RM16-23)
at 9.
\620\ MISO Comments (RM16-23) at 25.
\621\ TAPS Comments (RM16-23) at 23.
\622\ ISO-NE Comments (RM16-23) at 51.
\623\ PJM Comments (RM16-23) at 22.
\624\ Avangrid Comments (RM16-23) at 15.
\625\ NYISO Indicated Transmission Owners Comments (RM16-23) at
7.
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254. Several commenters agree with the Commission that telemetry
system requirements may need to be in place at different locations for
geographically dispersed distributed energy resource aggregations that
have to provide distribution factors.\626\ PJM Market Monitor argues
that meter and telemetry information should be disaggregated at each
node and that the RTO/ISO should provide nodal settlement.\627\ MISO
Transmission Owners argue that it is not clear how multi-node
aggregations would be settled.\628\ AES Companies contend that the
Commission should permit the aggregation to include more than one
metering point where the system characteristics indicate more are
needed.\629\ Duke Energy maintains that RTOs/ISOs should have access to
telemetry information at individual points of interconnection and that
the distribution utility may need to access similar data.\630\
---------------------------------------------------------------------------
\626\ AES Comments (RM16-23) at 36; Duke Energy Comments (RM16-
23) at 5; EEI Comments (RM16-23) at 34; MISO Transmission Owners
Comments (RM16-23) at 24.
\627\ PJM Market Monitor Comments (RM16-23) at 15.
\628\ MISO Transmission Owners Comments (RM16-23) at 24.
\629\ AES Companies Comments (RM16-23) at 37.
\630\ Duke Energy Comments (RM16-23) at 5.
---------------------------------------------------------------------------
255. Most commenters support the proposal in the NOPR that, when
existing distribution utility metering requirements for distributed
energy resources are sufficient, RTOs/ISOs should rely on that
technology rather than impose new requirements.\631\ Avangrid argues
that the distribution utility might be able to provide the necessary
data to the RTO/ISO on behalf of the distributed energy resource
aggregator via a third-party agreement.\632\
---------------------------------------------------------------------------
\631\ See, e.g., Advanced Energy Management Comments (RM16-23)
at 18-19; EEI Comments (RM16-23) at 33; Mosaic Power Comments (RM16-
23) at 5-6; SoCal Edison Comments (RM16-23) at 14-15; TAPS Comments
(RM16-23) at 24.
\632\ Avangrid Comments (RM16-23) at 15. Avangrid adds that the
electric distribution companies should be allowed to charge for this
service.
---------------------------------------------------------------------------
256. APPA/NRECA express concern that the proposal to rely on meter
data from the distribution utility would place significant burdens on
distribution utilities and introduce new cybersecurity and privacy
implications, issues which will require significant time and resources
for utilities to address.\633\ APPA asserts that such costs could
undermine the benefits of distribution utilities' existing retail
distributed energy resource programs, effectively imposing costs on
retail customers to subsidize wholesale market participation.\634\
Advanced Energy Management asserts that telemetry requirements to
participate in a wholesale program should be driven by the RTO/ISO
system needs, which are less granular than at the distribution
level.\635\ Advanced Energy Management adds that a distributed energy
resource that only seeks participation in the wholesale market should
only be required to fulfill the RTO's/ISO's metering requirements.
Advanced Energy Economy states that RTOs/ISOs should adopt procedures
that provide for regular information and communications flows to occur
from the aggregator, to the RTO/ISO, and then to distribution
utilities.\636\
---------------------------------------------------------------------------
\633\ APPA Comments (2018 RM18-9) at 9-10; NRECA Comments (2018
RM18-9) at 11-12, 30.
\634\ APPA Comments (2018 RM18-9) at 10.
\635\ Advanced Energy Management Comments (2018 RM18-9) at 22-
23.
\636\ Advanced Energy Economy Comments (2018 RM18-9) at 9 n.11.
---------------------------------------------------------------------------
257. Several commenters generally agree with the Commission that
individual distributed energy resources in an aggregation will need to
be
[[Page 67138]]
directly metered. These commenters argue that behind-the-meter
distributed energy resources should be metered separately from the host
site's load due to the need to distinguish between wholesale and retail
actions.\637\ DER/Storage Developers ask the Commission to direct all
RTOs/ISOs to allow direct metering of resources as an optional
alternative to traditional baselines to determine performance.\638\
Independent Energy Producers Association notes that dual-metering can
serve other Commission goals such as minimizing cost shifts, ensuring
reliability, and ensuring market integrity.\639\ MISO states that
visibility at the point of injection is needed to mitigate transmission
risks and ensure that a distributed energy resource is following
dispatch instructions, particularly as the volume of distributed energy
resources grows.\640\ EPSA argues that netting retail and wholesale
services reduces RTO/ISO visibility which makes it difficult for RTOs/
ISOs to efficiently dispatch resources, measure and verify resource
performance, calculate baseline load levels, and support the
reliability, planning, and modeling of system capabilities.\641\
Avangrid cautions that even with separate metering, ownership and
reconciliation of the data for retail billing and wholesale settlement
may be impractically complex.\642\
---------------------------------------------------------------------------
\637\ Avangrid Comments (RM16-23) at 15; Independent Energy
Producers Association Comments (RM16-23) at 8; Microsoft Comments
(2018 RM18-9) at 17; Organization of MISO States Comments (RM16-23)
at 9; Stem Comments (2018 RM18-9) at 3, 19.
\638\ DER/Storage Developers Comments (RM16-23) at 4.
\639\ Independent Energy Producers Association Comments (RM16-
23) at 8.
\640\ MISO Comments (2018 RM18-9) at 19.
\641\ EPSA Comments (2018 RM18-9) at 10-13 (citing Distributed
Energy Resources Roadmap at 29-30).
\642\ Avangrid Comments (RM16-23) at 15.
---------------------------------------------------------------------------
258. Some commenters question the authority of the Commission or
the RTOs/ISOs to impose specific metering and telemetry requirements on
distributed energy resources. AES Companies argue that the only
metering and telemetry requirements that the Commission or the RTOs/
ISOs can dictate are for the aggregator's node or point of
interconnection to the transmission system under RTO/ISO control.\643\
IRC asks the Commission to acknowledge in any final rule that the RTOs/
ISOs have no jurisdiction to require state-regulated utilities to
install specific retail metering technology, but that wholesale
metering rules for distributed energy resources must be met.\644\
California Energy Storage Alliance recommends that local regulatory
authorities develop and implement metering and telemetry requirements
to avoid the Commission imposing any requirements outside the
Commission's jurisdiction.\645\ The Delaware Commission recommends that
the Commission require distributed energy resources to employ separate
metering and telemetry capability if they are providing both wholesale
and retail services.\646\
---------------------------------------------------------------------------
\643\ AES Companies Comments (RM16-23) at 47.
\644\ IRC Comments (RM16-23) at 6.
\645\ California Energy Storage Alliance Comments (RM16-23) at
9.
\646\ Delaware Commission Comments (RM16-23) at 5-7 (citing FPC
v. Fla. Power & Light Co., 404 US 461, 463 (1972)), 8.
---------------------------------------------------------------------------
259. Some state regulators, distribution utilities, and their
representatives note that upgrades may be needed to current metering
technology and associated networking and cyber security in order to
support RTO/ISO needs \647\ and argue that associated costs must be
borne by the distributed energy resources or their aggregators or
through wholesale level cost allocation, and not by distribution
utilities.\648\
---------------------------------------------------------------------------
\647\ See, e.g., Avangrid Comments (RM16-23) at 15; Dominion
Comments (RM16-23) at 12; EEI Comments (RM16-23) at 13; NARUC
Comments (RM16-23) at 6; SoCal Edison Comments (RM16-23) at 14.
\648\ See, e.g., Delaware Commission Comments (RM16-23) at 7;
EEI Comments (RM16-23) at 33-34; IRC Comments (RM16-23) at 6;
Massachusetts Municipal Electric Comments (RM16-23) at 4; Six Cities
Comments (RM16-23) at 3; TAPS Comments (RM16-23) at 24.
---------------------------------------------------------------------------
260. Several commenters discuss the relationship between RTOs/ISOs
and distribution utilities and their respective metering and telemetry
requirements. Fresh Energy/Sierra Club/Union of Concerned Scientists
encourage the development of a framework to share metering data between
the RTO/ISO, distribution utility, and distributed energy resource
aggregator.\649\ Duke Energy recommends that the final rule not
preclude the transfer of telemetry data between the RTO/ISO and the
electric distribution utility.\650\ Similarly, EEI asserts that both
the RTO/ISO and the distribution utility should be provided telemetry
information,\651\ while IRC states that wholesale and retail metering
requirements need to be harmonized to prevent undue barriers to
participation.\652\ Xcel Energy Services recommends that the RTOs/ISOs
and distribution utilities should define the role of a meter data
management agent to provide needed meter data.\653\
---------------------------------------------------------------------------
\649\ Fresh Energy/Sierra Club/Union of Concerned Scientists
Comments (RM16-23) at 3.
\650\ Duke Energy Comments (RM16-23) at 5.
\651\ EEI Comments (RM16-23) at 34.
\652\ IRC Comments (RM16-23) at 6.
\653\ Xcel Energy Services Comments (RM16-23) at 27.
---------------------------------------------------------------------------
261. NARUC, EEI, and MISO argue that, before metering and telemetry
requirements can be established, additional information must be
gathered about the type and purpose of metering and telemetry data
needed, the access to and provision of this data, and the cost
allocation involved.\654\ On the other hand, Fresh Energy/Sierra Club/
Union of Concerned Scientists ask the Commission to not let this debate
hinder progress on establishing necessary distributed energy resource
requirements.\655\
---------------------------------------------------------------------------
\654\ EEI Comments (RM16-23) at 33; MISO Comments (RM16-23) at
25; NARUC Comments (RM16-23) at 7.
\655\ Fresh Energy/Sierra Club/Union of Concerned Scientists
Comments (RM16-23) at 3.
---------------------------------------------------------------------------
c. Commission Determination
262. We adopt the NOPR proposal and add Sec. 35.28(g)(12)(ii)(f)
to the Commission's regulations to require each RTO/ISO to revise its
tariff to establish market rules that address metering and telemetry
hardware and software requirements necessary for distributed energy
resource aggregations to participate in RTO/ISO markets.
263. We understand the need to balance, on one hand, the RTO's/
ISO's need for metering and telemetry data for settlement and
operational purposes, and, on the other hand, not imposing unnecessary
burdens on distributed energy resource aggregators. Therefore, we will
not prescribe the specific metering and telemetry requirements that
each RTO/ISO must adopt; rather, we provide the RTOs/ISOs with
flexibility to establish the necessary metering and telemetry
requirements for distributed energy resource aggregations, and require
that each RTO/ISO explain in its compliance filing why such
requirements are just and reasonable and do not pose an unnecessary and
undue barrier to individual distributed energy resources joining a
distributed energy resource aggregation.
264. To implement this requirement, we direct each RTO/ISO to
explain, in its compliance filing, why its proposed metering
requirements are necessary (e.g., for the distributed energy resource
aggregator to provide the settlement and performance data to the RTO/
ISO discussed in Section IV.F or to prevent double counting of services
as discussed in Section IV.C.3) and why its proposed telemetry
requirements are necessary (e.g., for the RTO/ISO to have sufficient
situational awareness to dispatch the
[[Page 67139]]
aggregation and the rest of the system efficiently). This explanation
should also include a discussion about whether, for example, the
proposed requirements are similar to requirements already in existence
for other resources and steps contemplated to avoid imposing
unnecessarily burdensome costs on the distributed energy resource
aggregators and individual resources in distributed energy resource
aggregations that may create an undue barrier to their participation in
RTO/ISO markets. We find that this approach will provide each RTO/ISO
with the flexibility to develop metering and telemetry requirements
appropriate for the needs of its systems.
265. Given the variety of potential aggregation business models, as
well as the variety of existing distribution utility requirements to
which the distributed energy resources participating in aggregations
will be subject, we find that imposing standard requirements is
unwarranted. Standard metering and telemetry requirements could run the
risk of imposing unnecessary costs on RTOs/ISOs, distributed energy
resource aggregators, and the individual distributed energy resources.
For example, imposing standard requirements could impede RTOs/ISOs from
adequately incorporating metering and telemetry requirements already
imposed on distributed energy resources by local regulatory authorities
and thereby create a barrier to the participation of distributed energy
resources in RTO/ISO markets. We find that adopting the NOPR proposal
minimizes these risks and the costs associated with implementing these
requirements because it allows RTOs/ISOs to propose metering and
telemetry requirements in addition to those already in place only when
they determine that such additional requirements are needed.
266. As clarified in Section IV.F, the distributed energy resource
aggregator, not the individual distributed energy resources in the
aggregation, is the single point of contact with the RTO/ISO,
responsible for managing, dispatching, metering, and settling the
individual distributed energy resources in its aggregation. We further
clarify here that the distributed energy resource aggregator is also
the entity responsible for providing any required metering and
telemetry information to the RTO/ISO.
267. We decline the requests of some commenters to explicitly limit
metering and/or telemetry requirements to the distributed energy
resource aggregation level, or to require telemetry of individual
distributed energy resources participating in an aggregation. Rather,
consistent with the flexibility provided in Section IV.F, we will not
require uniform metering requirements across all RTOs/ISOs, nor will we
require each RTO/ISO to impose uniform metering requirements on
individual distributed energy resources. Rather, we provide flexibility
to RTOs/ISOs to propose specific metering requirements, including any
that may apply to individual distributed energy resources that the RTO/
ISO demonstrates are needed to obtain any required performance data for
auditing purposes and to address double compensation concerns.
Similarly, we provide flexibility to the RTO/ISO as to whether to
propose specific telemetry requirements for individual distributed
energy resources in an aggregation. The need for such requirements may
depend, for example, on whether the RTO/ISO allows multi-node
aggregations or how multi-node aggregations are implemented. By
providing flexibility while also requiring that the RTO/ISO explain why
any proposed metering and telemetry requirements are necessary, we
allow the RTO/ISO to obtain the metering and telemetry information it
needs without burdening the distributed energy resource aggregator to
provide data that may not be necessary.
268. We also clarify that, consistent with this flexible approach,
we are not requiring RTOs/ISOs to establish metering and telemetry
hardware and software requirements for distributed energy resource
aggregations that are identical to those placed on existing resources,
or to establish different or additional metering and telemetry
requirements for distributed energy resource aggregations. Rather, we
expect that RTOs/ISOs will base any proposed metering and telemetry
hardware and software requirements for distributed energy resource
aggregations on the information needed by the RTO/ISO while avoiding
unnecessary requirements that may act as a barrier to individual
distributed energy resources joining distributed energy resource
aggregations or to distributed energy resource aggregations
participating in the wholesale markets. However, as explained in
Section IV.F, we require that metering data for settlement purposes at
the distributed energy resource aggregation level be consistent with
settlement data requirements for other resource types. We recognize
that metering and telemetry requirements may vary depending on the
types of distributed energy resources participating in an aggregation,
the size of the individual distributed energy resources or aggregated
resource, or the particular service provided. For example, more
granular or precise telemetry may be necessary for a distributed energy
resource aggregation that is participating in the frequency regulation
market than one that is exclusively providing energy or capacity. To
ensure that the flexible approach outlined here provides the RTO/ISO
with sufficient information to administer the wholesale markets and
ensure reliability of the transmission system while not unduly
burdening distributed energy resources and distributed energy resource
aggregations, we require that each RTO/ISO explain in its compliance
filing why its proposed metering and telemetry requirements for
distributed energy resource aggregations are just and reasonable and do
not pose an unnecessary and undue barrier to individual distributed
energy resources joining a distributed energy resource aggregation.
269. We also adopt the NOPR proposal that each RTO's/ISO's proposed
metering requirements should rely on meter data obtained through
compliance with distribution utility or local regulatory authority
metering system requirements whenever possible for settlement and
auditing purposes. We further clarify that this requirement also
applies to existing telemetry infrastructure. By using existing
infrastructure whenever possible, RTOs/ISOs should be able to obtain
the data they need and avoid proposing new metering and telemetry
requirements that would be duplicative and could erect unnecessary
barriers to entry for distributed energy resource aggregators and
individual distributed energy resources participating in an
aggregation. With respect to jurisdictional concerns raised by some
commenters, we note that any additional RTO/ISO metering and telemetry
requirements would not change those required by state or local
regulatory authorities and would be required solely to assist with
settlements and audits of activity in RTO/ISO markets, or to provide
RTOs/ISOs with the real-time information needed to reliably and
efficiently dispatch their systems.
270. In response to concerns about the potential costs and burdens
that could be imposed on distribution utilities as a result of the
requirement that RTOs/ISOs rely on metering and telemetry data obtained
through compliance with distribution utility or local regulatory
authority metering system requirements whenever possible, we expect
that in
[[Page 67140]]
general, this information will be provided by individual distributed
energy resources to distributed energy resource aggregators, and from
distributed energy resource aggregators to RTOs/ISOs. However, to the
extent that the RTO/ISO proposes that such information come from or
flow through distribution utilities, we require that RTOs/ISOs
coordinate with distribution utilities and relevant electric retail
regulatory authorities to establish protocols for sharing metering and
telemetry data, and that such protocols minimize costs and other
burdens and address concerns raised with respect to privacy and
cybersecurity.
271. In response to IRC's request for flexibility to define
metering and telemetry requirements outside the RTO/ISO tariffs, we
find that the RTO/ISO tariffs should include a basic description of the
metering and telemetry practices for distributed energy resource
aggregations as well as references to specific documents that will
contain further technical details. Decisions as to whether an item
should be placed in a tariff or in a business practice manual are
guided by the Commission's rule of reason policy,\656\ under which
provisions that ``significantly affect rates, terms, and conditions''
of service, are readily susceptible of specification, and are not
generally understood in a contractual agreement must be included in the
tariff, while items better classified as implementation details may be
included only in the business practice manual. We find that metering
and telemetry requirements significantly affect the terms and
conditions of the participation of distributed energy resource
aggregations in RTO/ISO markets and, therefore, must be included in the
RTO/ISO tariffs.
---------------------------------------------------------------------------
\656\ See, e.g., Energy Storage Ass'n v. PJM Interconnection,
L.L.C., 162 FERC ] 61,296, at P 103 (2018) (Energy Storage Ass'n v.
PJM) (citing Midcontinent Indep. Sys. Operator, Inc., 158 FERC ]
61,003, at P 69 (2017); PacifiCorp, 127 FERC ] 61,144, at P 11
(2009); City of Cleveland v. FERC, 773 F.2d 1368, 1376 (D.C. Cir.
1985) (finding that utilities must file ``only those practices that
affect rates and service significantly, that are reasonably
susceptible of specification, and that are not so generally
understood in any contractual arrangement as to render recitation
superfluous''); Pub. Serv. Comm'n of N.Y. v. FERC, 813 F.2d 448, 454
(D.C. Cir. 1987) (holding that the Commission properly excused
utilities from filing policies or practices that dealt with only
matters of ``practical insignificance'' to serving customers)).
---------------------------------------------------------------------------
H. Coordination Between the RTO/ISO, Aggregator, and Distribution
Utility
1. Market Rules on Coordination
a. NOPR Proposal
272. In the NOPR, the Commission noted that the market rules that
each RTO/ISO adopts to facilitate the participation of distributed
energy resource aggregations must address coordination between the RTO/
ISO, the distributed energy resource aggregator, and the distribution
utility to ensure that the participation of these resources in RTO/ISO
markets does not present reliability or safety concerns for the
distribution or transmission system.\657\ Thus, the Commission proposed
to require each RTO/ISO to revise its tariff to provide for
coordination among the RTO/ISO, a distributed energy resource
aggregator, and the relevant distribution utilities with respect to (1)
the registration of new distributed energy resource aggregations; and
(2) ongoing coordination, including operational coordination, between
the RTO/ISO, a distributed energy resource aggregator, and the relevant
distribution utility or utilities.
---------------------------------------------------------------------------
\657\ NOPR, 157 FERC ] 61,121 at P 153.
---------------------------------------------------------------------------
273. After the April 2018 technical conference, the Commission
sought further information on certain proposals regarding detailed
aspects of the coordination requirements.\658\
---------------------------------------------------------------------------
\658\ Notice Inviting Post-Technical Conference Comments at 7-
11.
---------------------------------------------------------------------------
b. Comments
274. Many commenters support the coordination processes proposed in
the NOPR because it will ensure that participation of distributed
energy resource aggregations in RTO/ISO markets does not compromise
these markets or the reliability or safety of the transmission and
distribution systems.\659\ For example, based on its experience with
implementing CAISO's Distributed Energy Resource Provider framework,
Pacific Gas & Electric states that it is vitally important that RTOs/
ISOs coordinate with distribution utilities with respect to both
registration of distributed energy resource aggregations and their
ongoing operation.\660\
---------------------------------------------------------------------------
\659\ See, e.g., CAISO Comments (RM16-23) at 39; Connecticut
State Entities Comments (RM16-23) at 6; Dominion Comments (RM16-23)
at 13; Institute for Policy Integrity Comments (RM16-23) at 9; NYISO
Comments (RM16-23) at 19.
\660\ Pacific Gas & Electric Comments (RM16-23) at 21.
---------------------------------------------------------------------------
275. Advanced Energy Economy states that it recognizes that the
RTOs/ISOs need visibility into distributed energy resource operations
and that coordination among the RTO/ISO, the distribution utility, and
distributed energy resource aggregators is necessary to ensure reliable
operations.\661\ Advanced Energy Economy asserts that these visibility
and operational issues are surmountable and that certain RTOs/ISOs
(particularly CAISO and ISO-NE) have made great progress in developing
standards and rules to address these issues. Advanced Energy Economy
states that fully integrating advanced energy technologies that are
already available and growing rapidly will only enhance the ability to
quickly address visibility and operational issues.
---------------------------------------------------------------------------
\661\ Advanced Energy Economy Comments (RM16-23) at 13.
---------------------------------------------------------------------------
276. Commenters note that coordination would be further enhanced
with the development of distribution system operators.\662\ PJM
believes that value may be added if an RTO/ISO were to coordinate with
a distribution system operator, but states that without a true
distribution system operator operating in the PJM region (or anywhere
else in the country) it cannot opine on the specific benefits that such
coordination could achieve.\663\ SoCal Edison notes that, in
California, distribution utilities are already performing the initial
functions of a distribution system operator and that the utility is
uniquely situated to provide this role in the future.\664\
---------------------------------------------------------------------------
\662\ De Martini and Kristov define a distribution system
operator as ``the entity responsible for planning and operational
functions associated with a distribution system that is modernized
for high levels of [distributed energy resources].'' Paul De Martini
and Lorenzo Kristov, ``Distribution Systems in a High DER Future:
Planning, Market Design, Operation and Oversight,'' Future Electric
Utility Regulation Series, Lawrence Berkeley National Laboratory,
October 2015, p. vi.
\663\ PJM Comments (RM16-23) at 28.
\664\ SoCal Edison Comments (RM16-23) at 8.
---------------------------------------------------------------------------
277. While supportive of the coordination requirements in the NOPR,
Mensah argues that the cost of registering an aggregation as well as
ongoing operational coordination should not place any unnecessary
burden on distributed energy resource aggregations.\665\
---------------------------------------------------------------------------
\665\ Mensah Comments (RM16-23) at 4.
---------------------------------------------------------------------------
c. Commission Determination
278. We adopt the NOPR proposal, as modified and clarified below,
and add Sec. 35.28(g)(12)(ii)(g) to the Commission's regulations to
require each RTO/ISO to revise its tariff to establish market rules
that address coordination between the RTO/ISO, the distributed energy
resource aggregator, the distribution utility, and the relevant
electric retail regulatory authorities.
[[Page 67141]]
279. We agree with commenters that coordination requirements should
not create undue barriers to entry for distributed energy resource
aggregations. However, we must also consider the substantial role of
distribution utilities and state and local regulators in ensuring the
safety and reliability of the distribution system. We believe that the
reforms adopted herein appropriately balance those needs.
280. Further, as discussed in Section IV.H.4 below,\666\ although
the NOPR did not discuss the role of state and local regulatory
authorities in coordination efforts, we recognize that state and local
regulatory authorities have a key role to play in such coordination
efforts. Therefore, we have modified the NOPR proposal to ensure that
the RTO/ISOs also coordinate with these entities.
---------------------------------------------------------------------------
\666\ See infra Section IV.H.4 (Role of Relevant Electric Retail
Regulatory Authorities).
---------------------------------------------------------------------------
2. Role of Distribution Utilities
a. NOPR Proposal
281. In the NOPR, the Commission proposed that the market rules on
coordination provide the relevant distribution utility or utilities
with the opportunity to review the list of individual resources that
are located on their distribution systems and that enroll in a
distributed energy resource aggregation before those resources may
participate in RTO/ISO markets through the aggregation.\667\ The
Commission explained that the purpose of this coordination would be to
ensure that all of the individual resources in the distributed energy
resource aggregation are technically capable of providing services to
the RTO/ISO through the aggregator and are eligible to be part of the
aggregation.\668\ The Commission further explained that the opportunity
for the relevant distribution utility to review the list of these
resources would allow them to assess whether the resources would be
able to respond to RTO/ISO dispatch instructions without posing any
significant risk to the distribution system and to ensure these
resources are not participating in any other retail compensation
programs. The Commission proposed to give the relevant distribution
utility or utilities the opportunity to report such concerns or issues
to the RTO/ISO for its consideration prior to the RTO/ISO allowing the
new or modified distributed energy resource aggregation to participate
in the organized wholesale electric market.
---------------------------------------------------------------------------
\667\ NOPR, 157 FERC ] 61,121 at PP 149, 154.
\668\ Id. P 154.
---------------------------------------------------------------------------
b. Comments
282. Numerous commenters generally support the NOPR proposal for
distribution utility review,\669\ but differ about the scope and the
timing of this review.
---------------------------------------------------------------------------
\669\ See, e.g., Avangrid Comments (RM16-23) at 16; Pacific Gas
& Electric Comments (RM16-23) at 21; PJM Comments (2018 RM18-9) at
19; Robert Borlick Comments (RM16-23) at 5-7; SoCal Edison Comments
(RM16-23) at 6; TAPS Comments (2018 RM18-9) at 27.
---------------------------------------------------------------------------
283. While generally supportive of the NOPR proposal, several
distribution utilities voice a broad range of concerns about their role
in coordination and the impact of distributed energy resource
aggregations on their distribution systems. In particular, distribution
utilities generally argue for an even greater and decision-making role
in reviewing distributed energy resource registrations.\670\ NRECA
argues for distribution utility review of individual distributed energy
resource participation in distributed energy resource aggregations
before the resources participate in RTO/ISO markets.\671\ Additional
commenters argue that distribution utilities and RTOs/ISOs must be
afforded enough time to perform impact studies, preferably using study
parameters adopted and implemented by state and local regulators, for
each distributed energy resource and for the aggregation to ensure safe
and reliable grid operation,\672\ and other commenters specifically
request that the Commission address the timing of the distribution
utility review in the final rule.\673\ MISO Transmission Owners request
that any final rule require distribution utility approval of any
aggregation arrangement to ensure that all of the appropriate
distribution utility requirements for interconnection and other
relevant regulations and processes have been met.\674\ NRECA asserts
that distribution utilities need detailed information in order to
assess whether distributed energy resource participation is
beneficial.\675\
---------------------------------------------------------------------------
\670\ See, e.g., Dominion Comments (RM16-23) at 10; EEI Comments
(RM16-23) at 35-36; MISO Transmission Owners Comments (RM16-23) at
19; SoCal Edison Comments (RM16-23) at 11-12; Xcel Energy Services
Comments (RM16-23) at 28.
\671\ NRECA Comments (2018 RM18-9) at 29.
\672\ See, e.g., Dominion Comments (RM16-23) at 10; EEI Comments
(RM16-23) at 35-36; PJM Utilities Coalition Comments (2018 RM18-9)
at 14-15.
\673\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
40; Advanced Energy Management Comments (RM16-23) at 21; NextEra
Comments (RM16-23) at 17.
\674\ MISO Transmission Owners Comments (RM16-23) at 19.
\675\ NRECA Comments (2018 RM18-9) at 29.
---------------------------------------------------------------------------
284. Moreover, several distribution utilities seek more than review
capability and assert that the distribution utility's consent to the
participation of a distributed energy resource in an aggregation is a
necessary prerequisite before the aggregation may operate.\676\
According to these commenters, distribution utilities, who have the
knowledge and understanding of distribution system challenges, should
have the authority to make decisions regarding the participation of a
distributed energy resource aggregation.\677\ EEI further argues that
distribution utilities must be able to restrict participation until the
reliability and/or safety issue is addressed, and must be notified in
real-time if a resource that is connected to its distribution system
joins a distributed energy resource aggregation.\678\
---------------------------------------------------------------------------
\676\ See, e.g., EEI Comments (2018 RM18-9) at 10, 13; NRECA
Comments (2018 RM18-9) at 29; PJM Utilities Coalition Comments (2018
RM18-9) at 14; TAPS Comments (RM16-23) at 25; TAPS Comments (2018
RM18-9) at 28.
\677\ See, e.g., EEI Comments (2018 RM18-9) at 13; TAPS Comments
(2018 RM18-9) at 28.
\678\ EEI Comments (2018 RM18-9) at 13.
---------------------------------------------------------------------------
285. Electric storage resource developers and advocates support the
NOPR proposal, but raise concerns about the proposed distribution
utility review process.\679\ They are concerned that distribution
utility review will act as a barrier by providing the distribution
utility a ``gatekeeper'' role.\680\ Furthermore, some commenters argue
that distribution utilities do not have the right or the jurisdiction
to veto what distributed energy resources may join aggregations or what
aggregations may participate in organized wholesale electric
markets.\681\ Advanced Energy Management states that giving
distribution utilities discretionary authority to approve distributed
energy resources ``could usurp FERC's clear jurisdiction over the
conditions for wholesale market eligibility.'' \682\ Similarly, SEIA
suggests that the discretion of distribution utilities should be
limited to violations of interconnection agreements and that it
[[Page 67142]]
would be inappropriate for distribution utilities to have veto rights
over distributed energy resource participation.\683\ SEIA further draws
a distinction between existing and new distributed energy resources.
For existing distributed energy resources that are already operating on
the grid, so long as the distributed energy resource does not modify
the generation system outside of what has already been approved, SEIA
recommends that the Commission ensure that there is a streamlined
process to ensure that the existing distributed energy resources can
participate through a distributed energy resource aggregator
participation model.
---------------------------------------------------------------------------
\679\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
39, 40; Advanced Energy Management Comments (RM16-23) at 21, 22;
Center for Biological Diversity Comments (RM16-23) at 3; Stem
Comments (RM16-23) at 15.
\680\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
39, 40; Advanced Energy Management Comments (RM16-23) at 21, 22;
Stem Comments (RM16-23) at 14-15.
\681\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 11; Advanced Energy Management Comments (2018 RM18-9) at 18; SEIA
Comments (2018 RM18-9) at 16; Stem Comments (2018 RM18-9) at 15;
Sunrun Comments (2018 RM18-9) at 6.
\682\ Advanced Energy Management Comments (2018 RM18-9) at 18.
\683\ SEIA Comments (2018 RM18-9) at 16.
---------------------------------------------------------------------------
286. Commenters in support of the NOPR proposal urge the Commission
to include limits on the scope of this review or adopt specific
parameters for this review. Global Cold Chain Alliance and Viking Cold
Solutions raise concerns about distribution review processes that
prevent development and adoption of new technologies.\684\ Advanced
Energy Management and Advanced Energy Economy further argue that
distribution utilities should (1) be required to identify to RTOs/ISOs
specific areas of their network where they have limited ability to
accommodate additional distributed energy resource registrations, with
a notification requirement only when the local ability has been
exceeded; (2) allow customers and their distributed energy resource
aggregators to see information provided by the utility if the RTO/ISO
uses that information in a decision to prohibit a distributed energy
resource registration, and provide the ability to appeal such a
rejection; and (3) be prohibited from registering customers in their
own distributed energy resource aggregations that they had previously
disqualified for reliability reasons.\685\ Advanced Energy Management
also recommends that there should be no requirement for distribution
utilities to review distributed energy resource registrations unless
the customers are exporting to the grid.\686\ After a specific timeline
of review, Advanced Energy Management and Tesla recommend that the
distribution utility still be given the opportunity to notify the RTO/
ISO if the distributed energy resource does not have the necessary
interconnection agreements or is participating in a retail tariff that
did not allow wholesale participation.\687\ In these limited
``exception only'' models, distribution utilities are not provided the
ability to approve distributed energy resource participation in
Commission-jurisdictional markets, but may review and raise
objections.\688\ Advanced Energy Management and Stem state that
distribution utilities should exercise their authority prior to a
distributed energy resource's registration in a RTO/ISO by defining
non-discriminatory interconnection procedures that ensure the
distribution grid can accommodate distributed energy resources, whether
or not a distributed energy resource aggregation participated in a
wholesale transaction.\689\
---------------------------------------------------------------------------
\684\ Global Cold Chain Alliance Comments (2018 RM18-9) at 2-3;
Viking Cold Solutions Comments (2018 RM18-9) at 3.
\685\ Advanced Energy Economy Comments (RM16-23) at 39, 40;
Advanced Energy Management Comments (RM16-23) at 21, 22.
\686\ Advanced Energy Management Comments (RM16-23) at 21.
\687\ Advanced Energy Management Comments (2018 RM18-9) at 19;
Tesla Comments (2018 RM18-9) at 10.
\688\ See, e.g., Advanced Energy Management Comments (2018 RM18-
9) at 17; Icetec Comments (2018 RM18-9) at 17-18; Sunrun Comments
(2018 RM18-9) at 7; Tesla Comments (2018 RM18-9) at 9-10.
\689\ Advanced Energy Management Comments (2018 RM18-9) at 18;
Stem Comments (2018 RM18-9) at 15.
---------------------------------------------------------------------------
287. Multiple commenters suggest specific review criteria that the
distribution utilities should adhere to. Several commenters assert that
any denial of participation in distributed energy resource aggregation
should only be based on specified operational coordination and
reliability concerns, such as violation of state-regulated
interconnection protocols and agreements that address binding
distribution system constraints and reflect non-discriminatory
agreements on exporting energy to the grid, or reflect customers who
already participate in tariffs or other agreements that disallow
wholesale participation.\690\ NRECA offers the following criteria: That
the participation of a distributed energy resource in an aggregation
will not create any safety, reliability or power quality concerns on
their systems, and that implementation of distributed energy resource
aggregation will conform to the requirements of the IEEE
standards.\691\ NYISO Indicated Transmission Owners suggest that any
interconnection agreement for a distributed energy resource
participating in an aggregation must demonstrate the ability of an
individual distributed energy resource to (1) participate in an
aggregation; (2) communicate essential information to the distribution
system operator and RTO/ISO using RTO/ISO communication and operating
protocols, as appropriate; and (3) meet RTO/ISO performance
standards.\692\ Pacific Gas & Electric recommends that an individual
distributed energy resource wishing to participate in an aggregation
(1) will not cause voltage problems or overload existing equipment; (2)
is able to comply with requirements in its individual interconnection
agreement when operated in the aggregate; and (3) is not already
participating in another distributed energy resource aggregation.\693\
EEI argues that the criteria to determine distributed energy resource
participation should be ``good utility practice.'' \694\ In a similar
vein, several commenters request clear standards or guidelines for
distribution utility review, while APPA conversely urges the Commission
to allow for flexibility in the criteria adopted by distribution
utilities.\695\
---------------------------------------------------------------------------
\690\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 11; Icetec Comments (2018 RM18-9) at 16; SEIA Comments (2018
RM18-9) at 16; Stem Comments (2018 RM18-9) at 14-15; Tesla Comments
(2018 RM18-9) at 9.
\691\ NRECA Comments (2018 RM18-9) at 30.
\692\ NYISO Indicated Transmission Owners Comments (2018 RM18-9)
at 15, 17.
\693\ Pacific Gas & Electric Comments (2018 RM18-9) at 17-18.
\694\ EEI Comments (2018 RM18-9) at 14.
\695\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
39; APPA Comments (2018 RM18-9) at 27; Center for Biological
Diversity Comments (RM16-23) at 3.
---------------------------------------------------------------------------
288. Stem and Tesla/SolarCity do not support the NOPR proposal on
distribution utility review and recommend that limits be placed on this
review if the Commission chooses to include the requirement in a final
rule. Stem argues that the Commission should not give local
distribution utilities carte blanche to deny a distributed energy
resource eligibility to participate in a distributed energy resource
aggregation, RTO/ISO markets, or other participation model.\696\ Stem
recommends an alternative default approach that allows participation
unless the local utility provides a specific, credible safety or
reliability risk.\697\ Tesla/SolarCity argue that having an appropriate
level of communication between the RTO/ISO and distribution utility
eliminates the need for distribution utility review.\698\
---------------------------------------------------------------------------
\696\ Stem Comments (RM16-23) at 4, 15.
\697\ Id. at 4.
\698\ Tesla/SolarCity Comments (RM16-23) at 30.
---------------------------------------------------------------------------
289. Commenters also express differing opinions on the length of
time required to conduct the review of distributed energy resource
participation. Several distribution utilities recommend that a
reasonable timetable or no time limits be established for review, and
argue that sufficient time is needed for review and/
[[Page 67143]]
or consultation between the distributed energy resource aggregator and
distribution utility to ensure the distribution grid can be operated in
a safe and reliable manner during the aggregated distributed energy
resource operating conditions.\699\ Distributed energy resource
providers, such as Stem, take the opposite view and assert that RTOs
and ISOs are not obligated to wait for the distribution utility to
review the registration of a distributed energy resource if the
distributed energy resource can prove it has completed an applicable
state-level interconnection process.\700\ Nevertheless, several
commenters agree that it would be reasonable for an RTO/ISO to pause
registration of a distributed energy resource to provide time (e.g., 10
days or CAISO's 30-day timeline) for the distribution utility to ensure
that sufficient interconnection procedures have been followed and
approved interconnection agreements are in place, but they do not
recommend the Commission require a specific timeline.\701\ Icetec
specifically requests that RTO/ISO rules be developed on the procedures
and timelines for distribution-level studies if there is no state and
local regulatory tariff governing these studies.\702\
---------------------------------------------------------------------------
\699\ See, e.g., NRECA Comments (2018 RM18-9) at 29; Pacific Gas
& Electric Comments (2018 RM18-9) at 13.
\700\ Stem Comments (2018 RM18-9) at 15.
\701\ See, e.g., Icetec Comments (2018 RM18-9) at 17-18; Stem
Comments (2018 RM18-9) at 15; Sunrun Comments (2018 RM18-9) at 7.
\702\ Icetec Comments (2018 RM18-9) at 9.
---------------------------------------------------------------------------
290. RTOs/ISOs support the NOPR proposal but raise questions about
their role in aggregation approvals and dispute resolution,
communication system requirements, and the extent of the coordination
proposed by the Commission.\703\ PJM argues that the registration
process and timing needed to participate in an RTO/ISO market should be
straight forward, predictable, and transparent, and that any basis for
the RTO/ISO to prohibit wholesale market participation should be set
forth in its tariff.\704\ CAISO, IRC, and PJM would also like the
Commission to provide guidance on how and where disputes between the
RTO/ISO and distribution utilities regarding coordination of
distributed energy resources are to be resolved.\705\ CAISO requests
additional processes beyond sharing information, arguing that processes
are needed to resolve or mitigate any problems the distribution utility
may find during its review, including developing a solution with the
distributed energy resource provider.\706\
---------------------------------------------------------------------------
\703\ CAISO Comments (RM16-23) at 39, 41-43, 46; IRC Comments
(RM16-23) at 9; ISO-NE Comments (RM16-23) at 54-55; PJM Comments
(RM16-23) at 8, 26; SPP Comments (RM16-23) at 24.
\704\ PJM Comments (2018 RM18-9) at 19.
\705\ CAISO Comments (RM16-23) at 41; IRC Comments (RM16-23) at
9; PJM Comments (RM16-23) at 8.
\706\ CAISO Comments (RM16-23) at 41.
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291. Finally, while most comments focus on initial registration,
TAPS states that a distribution utility should also be able to reopen
the approval of an individual distributed energy resource's enrollment
in a distributed energy resource aggregation if the distribution system
is reconfigured.\707\
---------------------------------------------------------------------------
\707\ TAPS Comments (2018 RM18-9) at 28.
---------------------------------------------------------------------------
c. Commission Determination
292. To implement Sec. 35.28(g)(12)(ii)(g) of the Commission's
regulations, we adopt the NOPR proposal to require each RTO/ISO to
modify its tariff to incorporate a comprehensive and non-discriminatory
process for timely review by a distribution utility of the individual
distributed energy resources that comprise a distributed energy
resource aggregation, which is triggered by initial registration of the
distributed energy resource aggregation or incremental changes to a
distributed energy resource aggregation already participating in the
markets. As described below, each RTO/ISO must coordinate with
distribution utilities to develop a distribution utility review process
that includes criteria by which the distribution utilities would
determine whether (1) each proposed distributed energy resource is
capable of participation in a distributed energy resource aggregation;
and (2) the participation of each proposed distributed energy resource
in a distributed energy resource aggregation will not pose significant
risks to the reliable and safe operation of the distribution system. To
support this review process, RTOs/ISOs must share with distribution
utilities any necessary information and data collected under Section
IV.F of this final rule about the individual distributed energy
resources participating in a distributed energy resource aggregation.
In addition, the results of a distribution utility's review must be
incorporated into the distributed energy resource aggregation
registration process.
293. To balance the need for distribution utility review with the
need to avoid creating potential barriers to distributed energy
resource aggregation, as noted by commenters, we require each RTO/ISO
to demonstrate on compliance with this final rule, as discussed further
below,\708\ that its proposed distribution utility review process is
transparent, provides specific review criteria that the distribution
utilities should use, and provides adequate and reasonable time for
distribution utility review.\709\ A transparent review process with
specific review criteria will allow distribution utilities to review
and identify concerns regarding the ability of distributed energy
resources to participate in a distributed energy resource aggregation
without posing significant reliability risk to the distribution system.
We also find that allowing an RTO/ISO to design this new process allows
regional flexibility in developing review procedures appropriate for
each particular RTO/ISO.
---------------------------------------------------------------------------
\708\ See infra PP 295-297.
\709\ For example, the approach used in the CAISO Distributed
Energy Resource Provider program.
---------------------------------------------------------------------------
294. As explained above,\710\ we decline to exercise jurisdiction
over the interconnection of an individual distributed energy resource
seeking to participate in RTO/ISO markets exclusively as part of an
aggregation. We expect that the state and local interconnection
processes for distributed energy resources will provide the appropriate
platform to address and study potential distribution system impacts and
provide the necessary information to inform distribution utility review
during distributed energy resource aggregation registration. However,
to the extent that some existing state and local interconnection
processes do not already capture such information, this final rule in
no way prevents state and local regulators from amending their
interconnection processes to address potential distribution system
impacts that the participation of distributed energy resources through
distributed energy resource aggregations may cause. In addition,
coordination between RTOs/ISOs, distributed energy resource
aggregators, relevant electric retail regulatory authorities, and
distribution utilities during the registration and distribution utility
review processes should provide RTOs/ISOs with the information they
need to study the impact of distributed energy resource aggregations on
the transmission system.
---------------------------------------------------------------------------
\710\ See supra Section IV.A.3 (Interconnection).
---------------------------------------------------------------------------
295. We agree with commenters \711\ that a lengthy review time or
the lack of a deadline could erect a barrier to distributed energy
resource
[[Page 67144]]
participation in the RTO/ISO markets and may unduly delay
participation. In response to these concerns, we clarify that any
distribution utility review must be completed within a limited, but
reasonable amount of time.\712\ We expect a reasonable amount of time
may vary among RTOs/ISOs but should not exceed 60 days. An RTO/ISO, on
compliance, should propose a timeline that reflects its regional needs.
In compliance with this final rule, we require each RTO/ISO to revise
its tariff to specify, as part of its proposed distribution utility
review process, the time that a distribution utility has to identify
any concerns regarding a distributed energy resource seeking to
participate in the RTO/ISO markets through an aggregation.
---------------------------------------------------------------------------
\711\ See, e.g., Advanced Energy Management Comments (2018 RM18-
9) at 19; Stem Comments (2018 RM18-9) at 15; Tesla Comments (2018
RM18-9) at 9.
\712\ For instance, CAISO utilizes a 30-day review period in its
Distributed Energy Resource Provider program.
---------------------------------------------------------------------------
296. In addition, we agree with commenters that argue for specific
standards and criteria to guide and govern the distribution utility
review process. However, we are not standardizing the criteria that the
RTOs/ISOs must adopt. We believe there are sufficient differences among
the regions, such as their rules limiting participation in different
programs, to warrant flexibility in determining specific standardized
criteria. On compliance with this final rule, we require that each RTO/
ISO revise its tariff to include, as part of its proposed distribution
utility review processes, the distribution utility review criteria by
which distribution utilities can determine that a distributed energy
resource (1) is capable of participating in an aggregation, e.g., the
distributed energy resource is not already participating in a retail
distributed energy resource program in which the relevant electric
retail regulatory authority conditioned the resource's participation on
not participating in RTO/ISO markets; and (2) does not pose significant
risks to the reliable and safe operation of the distribution system.
297. We agree with multiple commenters, such as EEI and Advanced
Energy Economy, that the RTOs/ISOs must include potential impacts on
distribution system reliability as a criterion in the distribution
utility review process. For example, if a distribution utility
determines during the distribution utility review process that a
distributed energy resource operated as part of an aggregation may
increase voltage above acceptable limits or create potential equipment
overloads, the distribution utility should have the opportunity to
alert the RTO/ISO and recommend removal of that distributed energy
resource from the distributed energy resource aggregation. In addition,
the distribution utility should have the opportunity to request that
the RTO/ISO place operational limitations on an aggregation or removal
of a distributed energy resource from an aggregation based on specific
significant reliability or safety concerns that it clearly demonstrates
to the RTO/ISO and distributed energy resource aggregator on a case-by-
case basis. For example, the RTOs/ISOs may consider requiring a signed
affidavit or other evidence from the distribution utility that a
distributed energy resource's participation in RTO/ISO markets would
pose a significant risk to the safe and reliable operation of the
distribution system, and processes to contest the distribution
utility's recommendation for removal or for operational limitations to
be placed on the aggregation.
298. In response to comments from EEI, TAPS, and multiple
distribution utilities that argue for a larger and decision-making role
for the distribution utilities during the review of distributed energy
resource registrations, we decline to provide such a role. We find that
requiring or permitting distribution utilities to authorize the
participation of distributed energy resources in RTO/ISO markets
directly or as part of an aggregation could create a barrier to
distributed energy resource aggregation.\713\ The distribution utility
review processes and interconnection protocols discussed above should
address and resolve the key distribution reliability concerns raised by
these commenters. We find that the ability of distribution utilities to
review and comment on distributed energy resource participation in
aggregations, as well as the Commission's finding that individual
distributed energy resources that will participate in aggregations will
interconnect under state and local interconnection protocols,
represents a balanced approach to removing barriers to the
participation of distributed energy resource aggregations in RTO/ISO
markets, while protecting reliability and the fundamental role of
distribution utilities in operating their distribution systems.
---------------------------------------------------------------------------
\713\ See supra Section IV.A.2 (Opt-Out) for further discussion.
---------------------------------------------------------------------------
299. In response to concerns raised by IRC and PJM regarding
disputes about distribution utility review,\714\ we find that any
disputes over the application of coordination and distribution utility
review processes between the RTO/ISO, the distribution utilities, and
the distributed energy resource aggregators must be subject to a
process for resolving disputes in the RTO/ISO tariff. Therefore, we
require each RTO/ISO to revise its tariff to incorporate dispute
resolution provisions as part of its proposed distribution utility
review process. In its compliance filing, each RTO/ISO should describe
how existing dispute resolution procedures are sufficient or,
alternatively, propose amendments to its procedures or new dispute
resolution procedures specific to this subject. Ensuring that disputes
regarding the distribution utility review process are subject to
dispute resolution provisions in RTO/ISO tariffs provides a formal
mechanism for the interested party to attempt to resolve the issue with
the RTO/ISO. Any parties in conflict over the distribution utility
review processes may also bring such disputes to the Commission's
Dispute Resolution Service, or file complaints pursuant to FPA section
206 at any time.\715\
---------------------------------------------------------------------------
\714\ See, e.g., IRC Comments (RM16-23) at 9; PJM Comments (2018
RM18-9) at 8.
\715\ For example, a dispute over how the RTO/ISO managed and
implemented the distribution review process during a distributed
energy resource aggregation registration could be brought to the
Commission.
---------------------------------------------------------------------------
3. Ongoing Operational Coordination
a. NOPR Proposal
300. In the NOPR, the Commission proposed to require that each RTO/
ISO revise its tariff to establish a process for ongoing coordination,
including operational coordination, among itself, the distributed
energy resource aggregator, and the distribution utility to maximize
the availability of the distributed energy resource aggregation
consistent with the safe and reliable operation of the distribution
system.\716\ The Commission explained that the purpose of this ongoing
coordination would be to ensure that the distributed energy resource
aggregator disaggregates dispatch signals from the RTO/ISO and
dispatches individual resources in a distributed energy resource
aggregation consistent with the limitations of the distribution system.
To account for the possibility that distribution facilities may be out
of service and impair the operation of certain individual resources in
a distributed energy resource aggregation, the Commission also proposed
to require each RTO/ISO to revise its tariff to require the distributed
energy resource aggregator to report to the RTO/ISO any changes to its
offered quantity and related distribution
[[Page 67145]]
factors that result from distribution line faults or outages.
---------------------------------------------------------------------------
\716\ NOPR, 157 FERC ] 61,121 at P 155.
---------------------------------------------------------------------------
301. In addition, the Commission sought comment on any related
reliability, safety, and operational concerns and how they may be
effectively addressed.
b. Comments
302. Several commenters express their support for ongoing
coordination and emphasize the importance of real-time coordination to
ensure safe and reliable operation of the transmission and distribution
systems.\717\ Many distribution utilities in support of the NOPR
proposal suggest specific roles or priorities for distribution
utilities as part of ongoing coordination. Pacific Gas & Electric
states that services in support of distribution system safety and
reliability must be prioritized, as determined by the distribution
company, over wholesale market participation when distributed energy
resources are providing multiple services.\718\ NYISO Indicated
Transmission Owners and Xcel Energy Services request that the
Commission permit distribution utilities to limit the energy injections
and ancillary services from specific distributed energy resources with
advanced notice.\719\ Other commenters argue that distribution
utilities must have the ability to limit distributed energy resource
generation in order to ensure safety and reliability because RTOs/ISOs
do not have sufficient information to maintain the safety and
reliability of the distribution grid.\720\
---------------------------------------------------------------------------
\717\ See, e.g., APPA/NRECA Comments (RM16-23) at 45; Duke
Energy Comments (RM16-23) at 7; EEI Comments (RM16-23) at 37; Exelon
Comments (RM16-23) at 2, 11; Guannan He Comments (RM16-23) at 2;
NYISO Comments (RM16-23) at 19.
\718\ Pacific Gas & Electric Comments (RM16-23) at 21.
\719\ NYISO Indicated Transmission Owners Comments (RM16-23) at
15-16; Xcel Energy Services Comments (RM16-23) at 28.
\720\ Organization of MISO States Comments (2018 RM18-9) at 5;
SoCal Edison Comments (RM16-23) at 7-8.
---------------------------------------------------------------------------
303. Several commenters provide input on the processes needed to
alert distributed energy resource aggregators about problems on
distribution systems. Dominion agrees with the NOPR requirement that a
distributed energy resource aggregator should be responsible for
reporting to the RTO/ISO when its offered quantity changes due to
distribution facilities being out of service.\721\ SPP notes it will
require significant effort to coordinate with entities with which the
RTO/ISO has not previously had two-way communications.\722\ CAISO
recommends that the approach being developed for its Distributed Energy
Resource Provider program be used as a means to allow distribution
utilities to identify problems on their distribution systems.\723\
CAISO believes that a process is needed for distribution utilities to
notify a distributed energy resource aggregator of changes to
distribution system conditions that will affect the aggregated
resource's ability to perform to its maximum capability, such as a red/
green traffic signal.\724\ The Organization of MISO States argues that
distribution system operators must have the ability to communicate
information on topology changes in real-time which may impact the
ability of aggregations to participate in the wholesale market.\725\
Several commenters indicate that the current data acquisition
technologies are largely manual, but will be adequate initially for
ongoing coordination.\726\
---------------------------------------------------------------------------
\721\ Dominion Comments (RM16-23) at 13-14.
\722\ SPP Comments (RM16-23) at 24.
\723\ CAISO Comments (RM16-23) at 42-43.
\724\ Id. at 42-44.
\725\ Organization of MISO States Comments (2018 RM18-9) at 5.
\726\ See, e.g., NYISO Indicated Transmission Owners Comments
(2018 RM18-9) at 22; PJM Comments (2018 RM18-9) at 27.
---------------------------------------------------------------------------
304. Multiple commenters state that, at higher distributed energy
resource penetrations, enhanced equipment and information to increase
coordination and communication between the distribution utility,
distributed energy resource aggregator, and the RTO/ISO will be
necessary and are still in the process of being developed.\727\ TAPS
and EEI argue that distribution utilities will need timely information
on planned dispatch, and that there must be a realistic timeline for
preventing a dispatch and notifying the distributed energy resource
aggregator or the RTO/ISO if a dispatch would adversely affect retail
service.\728\
---------------------------------------------------------------------------
\727\ See, e.g., Advanced Energy Management Comments (2018 RM18-
9) at 21-22; NYISO Indicated Transmission Owners Comments (2018
RM18-9) at 23; Pacific Gas & Electric Comments (2018 RM18-9) at 22-
23; PJM Comments (2018 RM18-9) at 27; TAPS Comments (2018 RM18-9) at
14.
\728\ EEI Comments (2018 RM18-9) at 12; TAPS Comments (2018
RM18-9) at 14.
---------------------------------------------------------------------------
305. Some commenters address the role of the distribution utility
in ongoing operational coordination. Advanced Energy Economy and EEI
state that the distribution utility should be made aware of all
information collected by the aggregator.\729\ More fundamentally, EEI
comments that the distribution utility is in the best position to serve
as the coordinator of distribution operations to ensure the complete
provision of information is being provided to all parties.\730\
---------------------------------------------------------------------------
\729\ Advanced Energy Economy Comments (2018 RM18-9) at 11; EEI
Comments (2018 RM18-9) at 17.
\730\ EEI Comments (2018 RM18-9) at 17.
---------------------------------------------------------------------------
306. Several commenters offer suggestions or request guidance on
aspects of ongoing coordination. Avangrid advocates that all
communication during ongoing coordination be channeled through
distributed energy resource aggregators.\731\ Furthermore, Avangrid
states that distributed energy resource aggregators should assume the
responsibility for the performance of their aggregated resource and be
responsible for any costs incurred by distribution utilities to
mitigate and resolve power quality issues caused by distributed energy
resources. TeMix states that dispatch of end customer load, distributed
generation, and storage must be coordinated with the operators of the
distribution grid circuits, which can be complex.\732\
---------------------------------------------------------------------------
\731\ Avangrid Comments (RM16-23) at 17.
\732\ TeMix Comments (RM16-23) at 4.
---------------------------------------------------------------------------
307. Several commenters claim that the RTO/ISO tariffs should be
less specific about what is required for ongoing coordination processes
and rules. ISO-NE states that the Commission should not be overly
prescriptive regarding the level of detail required in each RTO/ISO
tariff regarding coordination among these entities on operational
coordination, and requests that the Commission allow each RTO/ISO to
develop these requirements in conjunction with stakeholders.\733\
Pacific Gas & Electric states that it may be appropriate to include
high-level requirements for information sharing and operational
coordination, but more technical issues associated with distributed
energy resource aggregation implementation are fluid and evolving, and
thus tariff language may not be flexible or adaptable enough to account
for needed useful, timely changes.\734\ Advanced Energy Economy and
Union of Concerned Scientists emphasize that ongoing coordination
already occurs with other resources, such as remote and dispersed
hydroelectric generation, and argue that existing protocols are
sufficient.\735\
---------------------------------------------------------------------------
\733\ ISO-NE Comments (RM16-23) at 55.
\734\ Pacific Gas & Electric Comments (RM16-23) at 22.
\735\ Advanced Energy Economy Comments (RM16-23) at 38; Union of
Concerned Scientists Comments (RM16-23) at 9.
---------------------------------------------------------------------------
308. Most commenters agree that distribution utilities should have
the right to override RTO/ISO dispatch instructions for distributed
energy resources located on their distribution systems to resolve or
avoid distribution
[[Page 67146]]
reliability issues.\736\ Lorenzo Kristov indicates that the manner in
which a distribution utility can override a dispatch instruction should
be clarified so that distributed energy resource providers will be
better able to estimate their risk of being curtailed due to
distribution system conditions.\737\ NYISO Indicated Transmission
Owners state that the distribution utility should communicate potential
issues with dispatch schedules to the distributed energy resource
aggregators to provide them with an opportunity to re-adjust the
distributed energy resource aggregation dispatch schedule.\738\
Conversely, Stem argues that, because a distribution utility does not
have visibility into the exact distribution level impacts of a
wholesale market dispatch, the distribution utility should not be able
to override a dispatch.\739\
---------------------------------------------------------------------------
\736\ See, e.g., California Commission Comments (2018 RM18-9) at
18; Duquesne Comments (2018 RM18-9) at 7; NYISO Indicated
Transmission Owners Comments (2018 RM18-9) at 23; Pacific Gas &
Electric Comments (2018 RM18-9) at 24; SunRun Comments (2018 RM18-9)
at 5-6; TAPS Comments (2018 RM18-9) at 29.
\737\ Lorenzo Kristov Comments (2018 RM18-9) at 17.
\738\ NYISO Indicated Transmission Owners Comments (2018 RM18-9)
at 23.
\739\ Stem Comments (2018 RM18-9) at 17.
---------------------------------------------------------------------------
309. Commenters disagree about how performance penalties should be
applied in the event that a distribution utility overrides an RTO/ISO
dispatch. Several commenters generally argue that distributed energy
resource aggregators should be subject to performance penalties, like
all other resources.\740\ PG&E and PJM assert that non-deliverability
penalties are subject to bilateral and contractual agreement between
the distributed energy resource aggregator and the RTO/ISO.\741\
Developers argue that the aggregator should not be assessed penalties
due to an outage caused by the distribution system operator's
controls.\742\ Distribution utilities argue that, in the event of a
curtailment, they must have protection from liability.\743\
---------------------------------------------------------------------------
\740\ Monitoring Analytics Comments (2018 RM18-9) at 13; NYISO
Indicated Transmission Owners Comments (2018 RM18-9) at 23; PJM
Comments (2018 RM18-9) at 27-28.
\741\ Pacific Gas & Electric Comments (2018 RM18-9) at 24; PJM
Comments (2018 RM18-9) at 27-28.
\742\ Microgrid Resources Coalition Comments (2018 RM18-9) at
15; Stem Comments (2018 RM18-9) at 17; SunRun Comments (2018 RM18-9)
at 6.
\743\ Eversource Comments (2018 RM18-9) at 11; SoCal Edison
Comments (2018 RM18-9) at 10; TAPS Comments (2018 RM18-9) at 29.
---------------------------------------------------------------------------
c. Commission Determination
310. We agree with commenters that emphasize the importance of
real-time coordination to ensure safe and reliable operation of the
transmission and distribution systems. Consequently, to implement Sec.
35.28(g)(12)(ii)(g) of the Commission's regulations, we adopt the NOPR
proposal to require each RTO/ISO to revise its tariff to (1) establish
a process for ongoing coordination, including operational coordination,
that addresses data flows and communication among itself, the
distributed energy resource aggregator, and the distribution utility;
and (2) require the distributed energy resource aggregator to report to
the RTO/ISO any changes to its offered quantity and related
distribution factors that result from distribution line faults or
outages. Further, we require each RTO/ISO to revise its tariff to
include coordination protocols and processes for the operating day that
allow distribution utilities to override RTO/ISO dispatch of a
distributed energy resource aggregation in circumstances where such
override is needed to maintain the reliable and safe operation of the
distribution system. These processes that allow distribution utilities
to override RTO/ISO dispatch must be contained in the tariff and must
be non-discriminatory and transparent but still address distribution
utility reliability and safety concerns. We find these operational
coordination requirements will maximize the availability of the
distributed energy resource aggregation consistent with the reliable
and safe operation of the distribution system.
311. Commenters disagree over the level of specificity needed in
RTO/ISO tariffs and describe different approaches to ongoing
coordination. To account for different regional approaches and to
provide flexibility, we are not prescribing specific protocols or
processes for the RTOs/ISOs to adopt as part of the operational
coordination requirements, but rather we will allow each RTO/ISO to
develop an approach to ongoing operational coordination in compliance
with this final rule.
312. We also require each RTO/ISO to revise its tariff to apply any
existing resource non-performance penalties to a distributed energy
resource aggregation when the aggregation does not perform because a
distribution utility overrides the RTO's/ISO's dispatch. We find that
this requirement will ensure that distributed energy resource
aggregations are subject to non-performance penalties similarly to
other resources participating in RTO/ISO markets. We note that this
requirement will incent distributed energy resource aggregators to
register individual distributed energy resources on less-constrained
portions of distribution networks in order to minimize the likelihood
of incurring non-performance penalties from the RTO/ISO.
313. We acknowledge that the timing and location of distribution
utility overrides of dispatch instructions are outside of the control
of distributed energy resource aggregators, and that aggregators may
not have advance notice of overrides during an operating day. In
response to commenters who state that distribution utilities must have
protection from liability in the event of a curtailment or an outage
caused by the distribution system operator's actions to preserve the
safety and reliability of the distribution system,\744\ we decline to
impose any specific liability provisions. Given the arguments advanced
by commenters, we are not persuaded that all distribution providers
face similar liability concerns and that these concerns should be
addressed through standardized liability provisions in RTO/ISO tariffs.
Accordingly, we decline to establish a generic requirement for RTOs/
ISOs with respect to liability provisions.
---------------------------------------------------------------------------
\744\ See, e.g., Eversource Comments (2018 RM18-9) at 11; SoCal
Edison Comments (2018 RM18-9) at 10; TAPS Comments (2018 RM18-9) at
29.
---------------------------------------------------------------------------
4. Role of Relevant Electric Retail Regulatory Authorities
a. NOPR Proposal
314. The NOPR did not directly address the role of relevant
electric retail regulatory authorities in coordination with the RTO/
ISO, the distributed energy resource aggregator, and the distribution
utility when a distributed energy resource aggregation seeks to
participate in an RTO/ISO market. However, after the April 2018
technical conference, the Commission sought comment on the role of
relevant electric retail regulatory authorities in coordination.
b. Comments
315. Most commenters assert that relevant electric retail
regulatory authorities have a central and key role in coordination and
that the responsibilities of such authorities should be focused on
setting rules and supervising distribution utility review of
distributed energy resource participation in aggregations.
316. Some relevant electric retail regulatory authorities argue
that they must have a central role in coordination to ensure that their
jurisdiction is preserved as it relates to market activities on the
distribution system by distributed energy resources participating in
RTO/ISO markets.\745\
[[Page 67147]]
Vice Chairman Place requests that the Commission require the role of
relevant electric retail regulatory authorities be reflected in RTO/ISO
rules, and that, if the Commission sets roles and responsibilities in
RTO/ISO rules, relevant electric retail regulatory authorities should
participate in setting these rules.\746\ In addition, the Organization
of MISO States contends that relevant electric retail regulatory
authorities will need to be aware of coordination efforts and be able
to participate in, and in some cases lead, these efforts based on
jurisdictional scope, prevalence of distributed energy resource
penetration, and state and local policy.\747\ Vice Chairman Place
requests that the relevant electric regulatory authority's ability to
restrict distributed energy resource participation in the wholesale
market be maintained.\748\
---------------------------------------------------------------------------
\745\ See, e.g., Vice Chairman Place Comments (2018 RM18-9) at
8; Organization of MISO States Comments (2018 RM18-9) at 9-10.
\746\ Vice Chairman Place Comments (2018 RM18-9) at 8.
\747\ Organization of MISO States Comments (2018 RM18-9) at 9.
\748\ Vice Chairman Place Comments (2018 RM18-9) at 5.
---------------------------------------------------------------------------
317. Distribution utilities generally agree with the comments from
relevant electric retail regulatory authorities and support a central
and key role for relevant electric retail regulatory authorities in
coordinating the participation of aggregated distributed energy
resource in RTO/ISO markets.\749\ Specific roles and responsibilities
for relevant electric retail regulatory authorities identified by
distribution utility commenters include: Supervision of distribution
utility review of distributed energy resource participation in
aggregations; evaluation of distributed energy resources
interconnection to distribution facilities; overseeing issues regarding
distribution system operation and reliability; data sharing; and
setting of metering requirements and related mechanisms to distinguish
wholesale and retail transactions.\750\ Moreover, APPA requests that
the Commission be explicit that nothing in the final rule preempts or
otherwise limits the ability of relevant electric retail regulatory
authorities to adopt rules or tariffs, and to set rates to recover and
allocate the costs associated with facilitating wholesale market
participation by aggregated distributed energy resources.\751\
---------------------------------------------------------------------------
\749\ See, e.g., APPA Comments (2018 RM18-9) at 2; New York
Indicated Transmission Owners Comments (2018 RM18-9) at 17; Pacific
Gas & Electric Comments (2018 RM18-9) at 16.
\750\ See, e.g., APPA Comments (2018 RM18-9) at 6; California
Commission Comments (2018 RM18-9) at 1-3, 12; Organization of MISO
States Comments (2018 RM18-9) at 9; Pacific Gas & Electric Comments
(2018 RM18-9) at 16.
\751\ APPA Comments (2018 RM18-9) at 4.
---------------------------------------------------------------------------
318. CAISO also comments in support of the role of relevant
electric retail regulatory authorities in facilitating coordination.
Based on its experience in California, CAISO identifies several
possible coordination roles and responsibilities for relevant electric
retail regulatory authorities, including: Establishing metering
requirements for distributed energy resources; establishing rules for
multi-use applications; providing oversight of distribution utility
review of distributed energy resource participation in an aggregation;
and resolving distributed energy resource aggregation
controversies.\752\ As an example of the importance of relevant
electric retail regulatory authorities in distributed energy resource
coordination, CAISO references its Commission-approved distributed
energy resource process that requires that distributed energy resource
providers comply with applicable utility distribution company tariffs,
and operating procedures incorporated into those tariffs, as well as
applicable requirements of the local regulatory authority.\753\
---------------------------------------------------------------------------
\752\ CAISO Comments (2018 RM18-9) at 13-14.
\753\ Id. at 14.
---------------------------------------------------------------------------
319. Conversely, other commenters argue for a somewhat more limited
role for relevant electric retail regulatory authorities. Advanced
Energy Management argues that the role of relevant electric retail
regulatory authorities should be limited to defining non-discriminatory
interconnection procedures that ensure the distribution grid can
accommodate distributed energy resources, and ensuring that the
distributed energy resource can safely deliver energy to the grid.\754\
Icetec asserts that the coordination of distributed energy resource
registrations should not become a vehicle for distribution utilities or
relevant electric retail regulatory authorities to exercise improper
authority over eligibility to participate in wholesale markets.\755\ In
order to forestall this possible intervention, Icetec recommends making
distribution interconnection and registration for wholesale markets
entirely separate processes.\756\
---------------------------------------------------------------------------
\754\ Advanced Energy Management Comments (2018 RM18-9) at 18.
\755\ Icetec Comments (2018 RM18-9) at 16.
\756\ Id. at 18-19.
---------------------------------------------------------------------------
320. Some commenters urge the Commission to respect state and local
concerns regarding distributed energy resource aggregations. APPA
states that the Commission should afford distribution utilities and
their relevant electric retail regulatory authorities a key role in
coordinating the participation of aggregated distributed energy
resources in RTO/ISO markets.\757\ The Indiana Commission states that
distributed energy resource wholesale participation must work in tandem
with, and not in contravention of, Indiana's utility regulatory
framework.\758\ PJM Utilities Coalition urges the Commission to defer
to relevant electric retail regulatory authorities in fashioning
programs that integrate distributed energy resources into the
distribution system, asserting that states are uniquely positioned to
balance the benefits of distributed energy resource participation in
wholesale markets with costs and other adverse impacts on distribution
systems and retail load.\759\
---------------------------------------------------------------------------
\757\ APPA Comments (2018 RM18-9) at 2.
\758\ Indiana Commission Comments (2018 RM18-9) at 2.
\759\ PJM Utilities Coalition Comments (2018 RM18-9) at 10.
---------------------------------------------------------------------------
321. The California Commission recommends that, given the
complexity of ensuring just compensation for resources, it is most
appropriate for local regulatory authorities to establish distinctly
defined services and rules to govern coordination across wholesale and
retail markets.\760\
---------------------------------------------------------------------------
\760\ California Commission Comments (2018 RM18-9) at 10-11.
---------------------------------------------------------------------------
c. Commission Determination
322. In consideration of the comments and to implement Sec.
35.28(g)(12)(ii)(g) of the Commission's regulations, we require each
RTO/ISO to specify in its tariff, as part of the market rules on
coordination between the RTO/ISO, the distributed energy resource
aggregator, and the distribution utility, how each RTO/ISO will
accommodate and incorporate voluntary relevant electric retail
regulatory authority involvement in coordinating the participation of
aggregated distributed energy resources in RTO/ISO markets. We agree
with commenters that relevant electric retail regulatory authorities
have a role in coordination, i.e., in setting rules at the distribution
level and in RTO/ISO stakeholder discussions. Many relevant electric
retail regulatory authorities indicate strong interest in participating
in such coordination.
323. We note that the roles delineated in CAISO's Distributed
Energy Resource Provider tariff provisions may provide an example of
how relevant electric retail regulatory authorities could be involved
in coordinating the participation of distributed energy resource
aggregations in RTO/ISO
[[Page 67148]]
markets. CAISO's Distributed Energy Resource Provider model requires
that distributed energy resource providers comply with applicable
utility distribution company tariffs and operating procedures
incorporated into those tariffs, as well as applicable requirements of
the local regulatory authority.\761\
---------------------------------------------------------------------------
\761\ CAISO Comments (2018 RM18-9) at 14.
---------------------------------------------------------------------------
324. We further note that possible roles and responsibilities of
relevant electric retail regulatory authorities in coordinating the
participation of distributed energy resource aggregations in RTO/ISO
markets may include, but are not limited to: Developing interconnection
agreements and rules; developing local rules to ensure distribution
system safety and reliability, data sharing, and/or metering and
telemetry requirements; overseeing distribution utility review of
distributed energy resource participation in aggregations; establishing
rules for multi-use applications; and resolving disputes between
distributed energy resource aggregators and distribution utilities over
issues such as access to individual distributed energy resource data.
We require that any such role for relevant electric retail regulatory
authorities in coordinating the participation of distributed energy
resource aggregations in RTO/ISO markets be included in the RTO/ISO
tariffs and developed in consultation with the relevant electric retail
regulatory authorities. Further, as noted in Section IV.G, to the
extent that metering and telemetry data comes from or flows through
distribution utilities, we require that RTOs/ISOs coordinate with
distribution utilities and the relevant electric retail regulatory
authorities to establish protocols for sharing metering and telemetry
data that minimize costs and other burdens and address concerns raised
with respect to customer privacy and cybersecurity.
5. Coordination Frameworks
a. NOPR Proposal
325. As part of its proposal to require coordination in the NOPR,
the Commission sought comment on the level of detail necessary in the
RTO/ISO tariffs to establish a framework for ongoing coordination
between the RTO/ISO, a distributed energy resource aggregator, and the
relevant distribution utility or utilities.\762\
---------------------------------------------------------------------------
\762\ NOPR, 157 FERC ] 61,121 at P 155.
---------------------------------------------------------------------------
b. Comments
326. Several commenters propose that the Commission take a more
proactive step and require RTOs/ISOs to establish a broader
coordination structure, or ``coordination framework'' that addresses
all aspects of coordination (planning, distributed energy resource
registration, and operational coordination) between distributed energy
resources, distributed energy resource aggregators, RTOs/ISOs, and
distribution utilities. At the technical conference, panelist Jeffery
Taft, Chief Architect at Pacific Northwest National Laboratory,
described a coordination framework as a way to exchange information and
control signals between the three levels of the U.S. electric system,
namely the bulk power level, the distribution level, and the
distributed energy resource/customer level.\763\ R Street proposes two
purposes for coordination frameworks, namely, to encourage
technological innovation, and to coordinate policies between retail and
wholesale markets.\764\ Stem proposes three coordination frameworks (1)
an operational framework; (2) a planning framework; and (3) a markets
framework.\765\ PJM suggests a framework that focuses on two components
(1) reliability-related items; and (2) administrative items.\766\ CAISO
proposes an all-encompassing process that addresses each element of
distributed energy resource aggregation.\767\
---------------------------------------------------------------------------
\763\ Technical Conference Transcript at 388.
\764\ R Street Comments (RM16-23) at 10-11.
\765\ Stem Comments (2018 RM18-9) at 7-8.
\766\ PJM Comments (2018 RM18-9) at 19-21, 24.
\767\ CAISO Comments (RM16-23) at 39-51.
---------------------------------------------------------------------------
327. Several commenters express the belief that the development of
a coordination framework will ensure that participation of distributed
energy resource aggregations in RTO/ISO markets does not compromise the
reliability or safety of the transmission and distribution
systems.\768\ For example, based on its experience with implementing
CAISO's Distributed Energy Resource Provider framework, Pacific Gas &
Electric states that it is important that RTOs/ISOs coordinate with
distribution utilities.\769\
---------------------------------------------------------------------------
\768\ See, e.g., id. at 39; Institute for Policy Integrity
Comments (RM16-23) at 9; NYISO Comments (RM16-23) at 19.
\769\ Pacific Gas & Electric Comments (RM16-23) at 21.
---------------------------------------------------------------------------
328. R Street Institute argues for a coordination framework that
creates incentives for innovation and deployment of advanced active
network management practices (e.g., real-time operating procedures) and
technologies (e.g., software-enabled communications among control
centers).\770\ E4TheFuture notes that data creation, communications,
and analytics are fundamental to successfully including distributed
energy resources in the organized wholesale electric markets, and that
the technologies and services surrounding these fundamentals and the
standards that will support valuation and aggregation are evolving
rapidly.\771\ E4TheFuture asks the Commission to support the RTOs/ISOs
in creating solutions to nimbly address the rapid development of these
technologies over time.
---------------------------------------------------------------------------
\770\ R Street Institute Comments (RM16-23) at 10.
\771\ E4TheFuture Comments (RM16-23) at 2.
---------------------------------------------------------------------------
329. Several commenters recommend that the Commission not require a
specific coordination framework at this time. Public Interest Groups
argue that the Commission should not specify a particular structure for
coordination frameworks but instead allow the ``laboratories of
innovation'' of state and distribution utilities to develop new
practices and procedures.\772\ Lorenzo Kristov emphasizes that these
coordination efforts are at an early stage, noting that there are no
best practices and no best coordination framework to adopt.\773\ The
California Commission asks that the Commission not establish specific
requirements at this time, but instead to track the development of
frameworks and architectures around the country and document best
practices.\774\
---------------------------------------------------------------------------
\772\ Public Interest Organizations Comments (2018 RM18-9) at
11-12.
\773\ Lorenzo Kristov Comments (2018 RM18-9) at 16-17.
\774\ California Commission Comments (2018 RM18-9) at 12.
---------------------------------------------------------------------------
c. Commission Determination
330. We believe that, among other benefits, a broader, holistic
approach to coordination--referred to herein as a coordination
framework--could help ensure that different elements of distributed
energy resource aggregations do not work at cross-purposes. Because the
topic of coordination frameworks is still developing and was not fully
considered in this record, we encourage, but do not require, each RTO/
ISO to develop a coordination framework that addresses the needs of its
region.
331. We note that it may be beneficial for the RTOs/ISOs and their
stakeholders to take into consideration in developing coordination
frameworks the interoperability of new information technology and
communications systems. Such systems will likely need to exchange
mutually recognizable data, and will become more important as
distributed energy resource penetration reaches higher levels. Early
consideration of these issues could help prevent redundancy and
unnecessary costs later.
[[Page 67149]]
I. Modifications to List of Resources in Aggregation
a. NOPR Proposal
332. In the NOPR, the Commission proposed that each RTO/ISO revise
its tariff to allow a distributed energy resource aggregator to modify
the list of resources in its distributed energy resource aggregation
without re-registering all of the resources if the modification will
not result in any safety or reliability concerns.\775\ The Commission
emphasized, however, that, pursuant to other proposed
requirements,\776\ the relevant distribution utility or utilities must
have the opportunity to review the list of individual resources that
are located on their distribution system in a distributed energy
resource aggregation before those resources may participate in RTO/ISO
markets through the aggregation, so that they can assess whether the
resources would be able to respond to RTO/ISO dispatch instructions
without posing any significant risk to the distribution system.\777\
---------------------------------------------------------------------------
\775\ Id. P 149.
\776\ See supra Section IV.H.2 (Role of Distribution Utilities).
\777\ NOPR, 157 FERC ] 61,121 at P 154.
---------------------------------------------------------------------------
b. Comments
333. Many commenters support the Commission's proposal to allow a
distributed energy resource aggregator to modify its list of resources
without re-registering all of the resources in the distributed energy
resource aggregation.\778\ In support, University of Delaware's EV R&D
Group states that within a substantial aggregation, small residential
electric vehicle interconnection sites might enter and exit the
aggregation even on a daily basis, as new participants and existing
participants change vehicles, homes, or preferences.\779\ However,
NYISO asks the Commission to require the distributed energy resource
aggregator to advise the RTOs/ISOs of any changes to the list of
resources and changes in the aggregation's performance output or
operating characteristics.\780\
---------------------------------------------------------------------------
\778\ See, e.g., Advanced Microgrid Solutions Comments (RM16-23)
at 8; Avangrid Comments (RM16-23) at 13; CAISO Comments (RM16-23) at
35-37; City of New York Comments (RM16-23) at 9-10; EEI Comments
(RM16-23) at 32-33.
\779\ University of Delaware's EV R&D Group Comments (2018 RM18-
9) at 2.
\780\ NYISO Comments (RM16-23) at 18.
---------------------------------------------------------------------------
334. Many commenters also generally support the proposal to allow
distribution utilities to review the list of resources when it is
revised.\781\ Mensah states that any review should be streamlined as
much as possible.\782\ Stem stresses the importance of transparent
standards of review and argues that opaque review methodologies create
an unreasonable barrier to participation of distributed energy
resources.\783\ Additionally, many commenters emphasize the need to
determine whether any changes in the list of resources affect safety
and reliability at both the transmission and distribution levels.\784\
Dominion adds that the review process to determine the impacts of a
change in the list of resources on safety and reliability must be
established in a final rule.\785\
---------------------------------------------------------------------------
\781\ See, e.g., APPA/NRECA Comments (RM16-23) at 45; EEI
Comments (RM16-23) at 32-33; Mensah Comments (RM16-23) at 4; MISO
Transmission Owners Comments (RM16-23) at 23; NYISO Comments (RM16-
23) at 18.
\782\ Mensah Comments (RM16-23) at 4.
\783\ Stem Comments (RM16-23) at 15.
\784\ Avangrid Comments (RM16-23) at 12-13; CAISO Comments
(RM16-23) at 34-35; Dominion Comments (RM16-23) at 11; Mensah
Comments (RM16-23) at 4; Pacific Gas & Electric Comments (RM16-23)
at 20.
\785\ Dominion Comments (RM16-23) at 11.
---------------------------------------------------------------------------
c. Commission Determination
335. We adopt the NOPR proposal, as modified below, and add Sec.
35.28(g)(12)(ii)(e) to the Commission's regulations to require each
RTO/ISO to establish market rules that address modification to the list
of resources in a distributed energy resource aggregation.
336. We require each RTO/ISO to revise its tariff to specify that
distributed energy resource aggregators must update their lists of
distributed energy resources in each aggregation (i.e., reflect
additions and subtractions from the list) and any associated
information and data,\786\ but that, when doing so, distributed energy
resource aggregators will not be required to re-register or re-qualify
the entire distributed energy resource aggregation. We note that any
modification triggers the distribution utility review process
(discussed in Section IV.H.2 above). This requirement is necessary to
ensure that the RTOs/ISOs have accurate and current information about
the individual distributed energy resources that make up a distributed
energy resource aggregation and to allow distribution utilities the
opportunity to review those modifications.\787\ We find that this
requirement will ensure minimal administrative burden, while protecting
safety and reliability at both the transmission and distribution
levels.
---------------------------------------------------------------------------
\786\ See supra Section IV.F (Information and Data
Requirements).
\787\ See supra Section IV.H.2 (Role of Distribution Utilities).
---------------------------------------------------------------------------
337. While any modification of a distributed energy resource
aggregation will trigger distribution utility review, we clarify that
it may be appropriate for each RTO/ISO to abbreviate the distribution
utility's review of modifications to the distributed energy resource
aggregations. As the Commission explained in the NOPR, the requirements
for modifying the list of resources in a distributed energy resource
aggregation can present a barrier to the participation of distributed
energy resource aggregations in RTO/ISO markets.\788\ We find that the
incremental impacts on RTO/ISO markets and operations that would result
from the addition or removal of individual distributed energy resources
from a distributed energy resource aggregation, after the initial
registration, are likely to be minimal and thus individual distributed
energy resources should generally be able to enter and exit distributed
energy resource aggregations participating in RTO/ISO markets without
impairing safety and reliability. Because the impacts of modifications
may often be minimal, an abbreviated review process should be
sufficient for the distribution utility to identify the cases where an
addition to the list of resources might pose a safety or reliability
concern. As stated in Section IV.A.3, modifications to the list of
resources in a distributed energy resource aggregation, and the
resulting distribution utility and RTO/ISO review of those changes,
could occasionally indicate changes to the electrical characteristics
of the distributed energy resource aggregation that are significant
enough to potentially adversely impact the reliability of the
distribution or transmission systems and justify restudy of the full
distributed energy resource aggregation.\789\ However, even in such
circumstances, we do not believe that participation of the distributed
energy resource aggregation will need to be paused during the review of
modifications or restudy. Aggregators should be able to continue to bid
the unmodified portion of their aggregation into RTO/ISO markets. For
example, in the event that a resource withdraws from an aggregation,
the aggregator could continue to participate in the market by modifying
its bidding parameters to reflect the aggregation's changed capability
to perform.
---------------------------------------------------------------------------
\788\ NOPR, 157 FERC ] 61,121 at P 148.
\789\ See supra P 99.
---------------------------------------------------------------------------
338. Finally, to the extent that an RTO/ISO requires distributed
energy resource aggregators to provide information on the physical or
operational characteristics of its distributed energy resource
aggregation (pursuant to Section IV.F), we require
[[Page 67150]]
each RTO/ISO to revise its tariff to ensure that distributed energy
resource aggregators must update such information if any modification
to the list of resources participating in the aggregation results in a
change to the aggregation's performance. We find that this requirement
will ensure that the RTOs/ISOs have accurate and current information
about the physical and operational characteristics of the distributed
energy resource aggregations that are participating in their markets,
with minimal administrative burden.
J. Market Participation Agreements
1. NOPR Proposal
339. In the NOPR, the Commission stated that, in order to ensure
that a distributed energy resource aggregator complies with all
relevant provisions of the RTO/ISO tariffs, it must execute an
agreement with the RTO/ISO that defines its roles and responsibilities
and its relationship with the RTO/ISO before it can participate in RTO/
ISO markets.\790\ The Commission explained that, because the individual
resources in these distributed energy resource aggregations will likely
fall under the purview of multiple organizations (e.g., the RTO/ISO,
state regulatory commissions, relevant distribution utilities, and
local regulatory authorities), these agreements must also require that
the distributed energy resource aggregator attest that its distributed
energy resource aggregation is compliant with the tariffs and operating
procedures of the distribution utilities and the rules and regulations
of any other relevant regulatory authority.\791\ The Commission
therefore proposed that each RTO/ISO revise its tariff to include a
market participation agreement for distributed energy resource
aggregators. The Commission did not propose specific requirements for
such agreements in the NOPR; instead, the Commission sought comment on
the information these agreements should contain.
---------------------------------------------------------------------------
\790\ NOPR, 157 FERC ] 61,121 at P 157.
\791\ The Commission explained that this may include any laws or
regulations of the relevant retail regulatory authority that do not
permit demand response resources to participate in RTO/ISO markets
as the Commission considered in Order No. 719. Id. n.238 (citing
Order No. 719, 125 FERC ] 61,071 at P 154).
---------------------------------------------------------------------------
340. The Commission also explained that, while these agreements
will define the roles and responsibilities of the distributed energy
resource aggregator, they should not limit the business models under
which distributed energy resource aggregators can operate.\792\
Therefore, the Commission proposed that the market participation
agreement for distributed energy resource aggregators that each RTO/ISO
must include in its tariff may not restrict the business models that
distributed energy resource aggregators may adopt. The Commission
stated that market participation agreements for distributed energy
resource aggregators should not preclude distribution utilities,
cooperatives, or municipalities from aggregating distributed energy
resources on their systems or even microgrids from participating in the
RTO/ISO markets as a distributed energy resource aggregation.
---------------------------------------------------------------------------
\792\ Id. P 158.
---------------------------------------------------------------------------
341. After the April 2018 technical conference, the Commission
sought comment on whether the proposed use of market participation
agreements addresses state and local regulator concerns about the role
of distribution utilities in the coordination and registration of
distributed energy resources in aggregations. The Commission further
asked whether the proposed provisions in the market participation
agreements that require that distributed energy resource aggregators
attest that they are compliant with the tariffs and operation
procedures of distribution utilities and state and local regulators are
sufficient to address such concerns.\793\
---------------------------------------------------------------------------
\793\ See Notice Inviting Post-Technical Conference Comments at
6.
---------------------------------------------------------------------------
2. Comments
342. All commenters that address this topic agree that market
participation agreements between RTOs/ISOs and distributed energy
resource aggregators are necessary. However, commenters disagree on the
structure of these agreements.
343. Many commenters support the NOPR proposal to require a market
participation agreement for distributed energy resource
aggregators.\794\ ISO-NE, however, urges the Commission to exclude from
a final rule any specific directives regarding market participation
agreements for aggregations of distributed energy resources, including
requiring attestation from the aggregator.\795\ ISO-NE states that such
directives are not needed because its current generic market
participant agreement is sufficient as a ``simple and proven'' approach
to accommodate distributed energy resource aggregations and because
other coordination processes, including the asset registration process,
may be preferable mechanisms for gathering and verifying information
related to a participant's assets.
---------------------------------------------------------------------------
\794\ See, e.g., APPA/NRECA Comments (RM16-23) at 46; California
Commission Comments (2018 RM18-9) at 7; Mensah Comments (RM16-23) at
4; NYISO Comments (RM16-23) at 20; PJM Comments (RM16-23) at 28-29;
SoCal Edison Comments (2018 RM18-9) at 2, 10-11.
\795\ ISO-NE Comments (RM16-23) at 56-57.
---------------------------------------------------------------------------
344. Some commenters express concerns about the sufficiency of
market participation agreements to address state and local regulatory
concerns. The New York Commission, for example, cautions that a rule
addressing the nature and use of market participation agreements should
not create barriers that hinder a state regulator's ability to guide
the ways that distributed energy resource aggregations can be formed,
registered, managed, and operated, including the role of a distribution
utility in the coordination and registration of distributed energy
resource aggregations.\796\ Organization of MISO States asserts that
concerns remain about the ability to effectively police compliance with
participation agreements, and that in order to comply, new lines of
communication between distribution utilities, distributed energy
resource aggregators, and the RTO/ISO will need to be developed.\797\
---------------------------------------------------------------------------
\796\ New York Commission Comments (2018 RM18-9) at 13.
\797\ Organization of MISO States Comments (2018 RM18-9) at 4.
---------------------------------------------------------------------------
345. Organization of MISO States asserts that further participation
agreements will need to be crafted to accommodate ever-evolving
technology changes and to avoid such initial agreements becoming
barriers to innovation. It asserts that the RTO/ISO stakeholder process
is the appropriate place for these modifications to participation
agreements to occur.\798\
---------------------------------------------------------------------------
\798\ Id. at 4-5.
---------------------------------------------------------------------------
346. Commenters express varying recommendations for the structure
of an agreement or agreements and the parties required to enter them.
AES Companies suggest a three-party agreement between the aggregator,
distribution utility, and RTO/ISO is appropriate,\799\ while Pacific
Gas & Electric suggests two two-party agreements (one agreement between
aggregator and RTO/ISO, and another between aggregator and distribution
utility).\800\ APPA/NRECA and MISO Transmission Owners favor the
utilities being party to the agreements and argue that the agreement
should demonstrate that the aggregation has been authorized by the
utility or its relevant regulatory authority.\801\ CAISO also suggests
that
[[Page 67151]]
the Commission consider whether a separate Commission-jurisdictional
agreement should apply between a distribution utility and a distributed
energy resource aggregator.\802\
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\799\ AES Companies Comments (RM16-23) at 12-13, 49.
\800\ Pacific Gas & Electric Comments (RM16-23) at 24-26.
\801\ APPA/NRECA Comments (RM16-23) at 46-47; MISO Transmission
Owner Comments (RM16-23) at 26-27.
\802\ CAISO Comments (RM16-23) at 51-52.
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347. Some commenters request flexibility, further guidance from the
Commission, and/or the participation of other parties in crafting
market participation agreements. Most RTOs/ISOs suggest that some of
their existing agreements may be applicable but argue for flexibility
in establishing appropriate agreements.\803\ Pacific Gas & Electric
also argues that each RTO/ISO should be allowed to craft agreements
appropriate for its markets.\804\ NARUC requests that, for states that
do allow third party aggregations, the Commission only provide broad
policy direction in a final rule and allow the RTOs/ISOs to develop
with state input the necessary details for implementation.\805\ EEI
similarly argues that RTOs/ISOs and distribution utilities should
develop market participation agreements in conjunction with their
stakeholders.\806\ Xcel Energy Services goes further, stating that the
details of market participation agreements will need to be addressed by
states.\807\ PJM asserts that further clarification as to the role of
electric distribution companies and other relevant regulatory
authorities is needed for PJM to finalize the appropriate market
participant agreement design.\808\ Massachusetts Municipal Electric
requests sufficient flexibility for the agreement to accommodate
different conditions at different distribution utilities.\809\ Mensah,
however, states that the participation agreement, and any necessary
amendments, should be standardized, streamlined, and automated as much
as possible to avoid unnecessary costs.\810\
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\803\ Id.; ISO-NE Comments (RM16-23) at 56-57; MISO Comments
(RM16-23) at 26-27; NYISO Comments (RM16-23) at 20; PJM Comments
(RM16-23) at 28-29.
\804\ See Pacific Gas & Electric Comments (RM16-23) at 24.
\805\ NARUC Comments (RM16-23) at 5.
\806\ EEI Comments (RM16-23) at 39.
\807\ Xcel Energy Services Comments (RM16-23) at 29.
\808\ PJM Comments (RM16-23) at 29.
\809\ Massachusetts Municipal Electric Comments (RM16-23) at 5.
\810\ Mensah Comments (RM16-23) at 4.
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348. Some commenters advocate for specific requirements in market
participation agreements. EEI argues that the agreements should ensure
that distributed energy resource aggregators are subject to comparable
requirements as other resources.\811\ AES Companies assert that an
agreement should only obligate the aggregator to conform to the
appropriate tariff rules and a proportionate share of essential
reliability services as determined by each RTO/ISO and its
stakeholders.\812\ Pacific Gas & Electric states that an agreement
between the aggregator and the distribution utility should include
detailed requirements regarding operational coordination, mitigation of
system impacts, cost allocation, and notification of changes to the
aggregation.\813\
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\811\ EEI Comments (RM16-23) at 39.
\812\ AES Companies Comments (RM16-23) at 12-13.
\813\ Pacific Gas & Electric Comments (RM16-23) at 24-25.
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349. Avangrid emphasizes that the market participation agreement
should be explicit that the aggregator is a wholesale market
participant required to comply with the provisions in the tariff,
including operational requirements.\814\ MISO Transmission Owners and
TAPS support requiring the distributed energy resource aggregator to
attest to compliance with distribution utility tariffs and operating
procedures and with the rules and regulations of any other relevant
regulatory authority.\815\ APPA/NRECA support requiring aggregators to
demonstrate, rather than simply attest, that the relevant electric
retail regulatory authority has authorized wholesale market
participation by the resources in the aggregation, and to include in
the market participation agreement requirements for notice to
distribution utilities of any changes in resources and for compliance
by the aggregator and its resources with the tariffs and operating
procedures of the relevant distribution utilities.\816\ MISO
Transmission Owners make similar arguments in their comments.\817\
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\814\ Avangrid Comments (RM16-23) at 18.
\815\ MISO Transmission Owners Comments (RM16-23) at 19 (citing
NOPR, 157 FERC ] 61,121 at P 157); TAPS Comments (RM16-23) at 13-14.
\816\ APPA/NRECA Comments (RM16-23) at 47.
\817\ MISO Transmission Owners Comments (RM16-23) at 19, 26-27.
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350. On the other hand, Tesla/SolarCity contend that, because many
individual distributed energy resources may not be new nor installed by
the aggregator, any attestation requirement should only require
aggregators to state that, ``to the best of their knowledge,'' the
distributed energy resources in the aggregation are compliant with
distribution company tariffs and operating procedures and relevant
regulatory authority rules and regulations.\818\
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\818\ Tesla/SolarCity Comments (RM16-23) at 31.
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351. APPA/NRECA, Open Access Technology, MISO Transmission Owners,
and NARUC support the NOPR proposal that market participation
agreements should not restrict the business models for distributed
energy resource aggregators, though the latter two commenters condition
their support on the distributed energy resource aggregation having
been permitted by the state regulatory body and, if applicable, the
distribution utility.\819\ NARUC supports the NOPR language that allows
a scenario in which distribution utilities can act as aggregators so
that the states can provide oversight of the terms and conditions of
their relationship with distributed energy resources and customers,
while allowing participation of the aggregator in RTO/ISO markets.\820\
On the other hand, Xcel Energy Services asserts that the NOPR language
may be too vague to protect yet-to-be-designed aggregator business
models and also could inappropriately limit the ability of RTOs/ISOs to
prevent business models that could threaten grid reliability.\821\
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\819\ APPA/NRECA Comments (RM16-23) at 47-48; MISO Transmission
Owners Comments (RM16-23) at 26 (citing NOPR, 157 FERC ] 61,121 at P
158); NARUC Comments (RM16-23) at 5 (citing NOPR, 157 FERC ] 61,121
at P 158); Open Access Technology Comments (RM16-23) at 4.
\820\ NARUC Comments (RM16-23) at 5 (citing NOPR at P158).
\821\ Xcel Energy Services Comments (RM16-23) at 29.
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3. Commission Determination
352. We add Sec. 35.28(g)(12)(ii)(h) to the Commission's
regulations and adopt the NOPR proposal to require each RTO/ISO to
establish market rules that address market participation agreements for
distributed energy resource aggregators. Specifically, we require each
RTO/ISO to revise its tariff to include a standard market participation
agreement that defines the distributed energy resource aggregator's
role and responsibilities and its relationship with the RTO/ISO and
that an aggregator is required to execute before it can participate in
the RTO/ISO markets. We also adopt the NOPR proposal that this market
participation agreement must include an attestation that the
distributed energy resource aggregator's aggregation is compliant with
the tariffs and operating procedures of the distribution utilities and
the rules and regulations of any relevant electric retail regulatory
authority. As the Commission explained in the NOPR, these requirements
are necessary to ensure that a distributed energy resource aggregator
complies with all relevant
[[Page 67152]]
provisions of the RTO/ISO tariffs, the tariffs and operating procedures
of the distribution utilities, and the rules and regulations of any
other relevant electric retail regulatory authority.\822\ These
requirements are also supported by a general consensus among commenters
that market participation agreements are necessary and, as expressed by
some commenters, that the use of market participation agreements could
help address state and local regulatory concerns.
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\822\ See NOPR, 157 FERC ] 61,121 at P 157.
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353. Also, as proposed in the NOPR, we require that the market
participation agreements that the RTOs/ISOs include in their tariffs
not limit the business models under which distributed energy resource
aggregators can operate. Allowing distributed energy resource
aggregators with varying business models to be included in such
agreements should increase the ability of the distributed energy
resource aggregators, and resources within such aggregations, to
participate in the RTO/ISO markets.
354. With the exception of the attestation requirement and
prohibition of business model limitations described above, we will not
specify the exact terms and conditions of the market participation
agreements. This approach will give the RTOs/ISOs and stakeholders
flexibility to develop appropriate agreements, and increase the ability
of the distributed energy resource aggregators, and resources within
such aggregations, to participate in RTO/ISO markets by better
tailoring agreements to the operating conditions and needs of those
markets, and thereby help to enhance competition in the markets.
Commenters, including the RTOs/ISOs, express a variety of views about
the specific requirements that should be included in such agreements
and the potential need for additional agreements, and most commenters
request flexibility in ability to design these agreements. We believe
t