At its February 15, 2018 open meeting, the Federal Energy Regulatory Commission (“FERC”) issued a rulemaking Final Order intended to remove barriers to the participation of electric storage resources in organized electric transmission markets managed by Regional Transmission Organizations (“RTOs”) and Independent System Operators (“ISOs”).¹ FERC stated that “effective integration of electric storage resources into the RTO/ISO markets would enhance competition and, in turn, help to ensure that these markets produce just and reasonable rates.”² As the justification under Section 206 of the Federal Power Act for requiring changes to RTO/ISO tariffs designed to facilitate more effective integration of these resources, FERC found that “existing RTO/ISO market rules are unjust and unreasonable in light of barriers that they present to the participation of electric storage resources in the RTO/ISO markets, thereby reducing competition and failing to ensure just and reasonable rates.”³

FERC noted that existing electric storage resources include pumped hydro, batteries, flywheels and compressed air energy storage. Rather than limit the rulemaking to these existing technologies, FERC adopted a generic definition of an “electric storage resource” as “a resource capable of receiving electric energy from the grid and storing it for later injection of electric energy back to the grid.”⁴ FERC emphasized that this definition was intended not to be limited to existing technologies but rather was meant to encompass new forms of storage that could emerge in the future. It further clarified that the definition would include not only electric storage resources interconnected directly with the interstate transmission grid but also resources interconnected at the distribution level or located behind the meter.

According to FERC, electric storage resources are unique in that they both receive energy from, and inject energy into, the electric grid. FERC stated 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 and must fulfill certain responsibilities set forth in the Federal Power Act and FERC’s rules and regulations.

FERC went on to modify its regulations to incorporate specific tariff requirements requiring each RTO and ISO to develop a “participation model” – distinct tariff provisions created for a particular type of resource – for electric storage resources. Among other things, each RTO/ISO must have tariff provisions that:

• Allow an electric storage resource using the participation model to provide all capacity, energy, and ancillary services that it is technically capable of providing;
• Ensure that an electric storage resource using the participation model can be dispatched and can set the wholesale market clearing price as both a wholesale seller and wholesale buyer consistent with rules that govern the conditions under which a resource can set the wholesale price;
• Account for the physical and operational characteristics of electric storage resources through bidding parameters or other means;
• Establish a minimum size requirement, not to exceed 100 kW, for electric storage resources using the participation model;
• Price electric energy purchased from the RTO/ISO market for charging an electric storage resource at the nodal locational marginal price; and
• Provide “make-whole” payments, consistent with those in place for other resources, to hold electric storage resources harmless for manual dispatch (i.e., for dispatch as load above their bid price and for dispatch as supply below their offer price).⁵

Order No. 841 affords the RTOs and ISOs 270 days from the publication of the order in the Federal Register to file changes to their tariffs needed to implement the requirements of the modified rules. It further affords each RTO and ISO an additional 365 days from that date to implement the tariff provisions. Thus, the rules adopted in Order No. 841 will not be fully implemented until at least last 2019 (or later if these deadlines are extended).

Although FERC’s November 2016 notice of proposed rulemaking included proposed reforms relating to distributed energy resource aggregation, Order No. 841 addresses only electric storage resources. FERC concluded that additional information was required with respect to the former. Concurrently with the issuance of Order No. 841, therefore, FERC issued a notice of a technical conference in Docket No. RM18-6, which includes various questions regarding distributed energy resources.

[1] Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators, Order No. 841, 162 FERC ¶ 61,127 (2018).

[2] Id. ¶ 12.

[3] Id. ¶ 19.

[4] Id. § XI (to be codified at 18 C.F.R. § 35.28(b)(9)).

[5] Id. § XI (to be codified at 18 C.F.R. § 35.28(g).