A Federal Energy Regulatory Commission notice of proposed rulemaking, or NOPR, related to energy storage participation in wholesale power markets “could represent a really huge jurisdictional leap,” but that depends on what was intended by the NOPR and how a newly-formed commission interprets it, William Huang, an energy attorney, told an American Public Power Association conference on Oct. 9.
Huang, a partner with the law firm Spiegel & McDiarmid in Washington, DC, spoke about jurisdictional challenges associated with the NOPR at the Association’s Legal & Regulatory Conference in New Orleans, La.
In the NOPR, FERC said that it was concerned that electric storage resources may face barriers that limit them from participating in organized electric markets, the attorney noted.
The NOPR, which was issued in November 2016, would require regional transmission organizations and independent system operators to revise their wholesale power tariffs to better remove barriers to RTO-run wholesale market participation by energy storage resources such as large battery systems.
It also would also require RTOs and ISOs to allow aggregators of distributed energy resources to participate directly in the organized wholesale electric markets, and similarly remove barriers to DER aggregator participation.
“Now, for storage connected at the transmission level, the NOPR’s proposed changes don’t really stretch FERC’s jurisdiction,” Huang told conference attendees.
He noted that large storage units, particularly pumped storage, have participated in organized RTO markets since those markets were created. “The NOPR would impose additional requirements on RTOs with respect to those units, but they don’t fundamentally push the boundaries of FERC jurisdiction with respect to those units,” Huang went on to say.
Bigger jurisdictional issues
Huang said that the “bigger jurisdictional issues relate to something that actually isn’t even mentioned in the title of the NOPR – distributed generation.”
Huang said the NOPR defines a new term, distributed energy resources, which is defined as a source or sink of power that is located on the distribution system, “or any subsystem thereof, or behind a customer meter.” These resources may include, but are not limited to, electric storage resources, distributed generation, thermal storage, and electric vehicles and their supply equipment, the NOPR said.
Storage is a mixture of both generation and load, “so this definition would include storage that’s connected to the distribution network,” the attorney said. “But the definition is extremely broad and it basically includes just about any generator or load that is connected at the distribution level and includes anything that’s connected behind the customer meter,” Huang said.
The NOPR utilizes an aggregator concept that is similar to the one FERC used for demand response resources in Order 719 “and it also proposes a variety of requirements that are designed to enable distribution-connected resources and loads to participate in FERC-jurisdictional wholesale markets,” the attorney noted.
NOPR may represent ‘huge jurisdictional leap’
Huang noted that FERC has yet to act on the NOPR.
Comments were due on the NOPR in February, but the agency lost its quorum just prior to the comment deadline.
In comments it filed on Feb. 13, the Association said it generally supports FERC's efforts to allow storage and distributed energy resources to participate in wholesale markets, but urged the commission to keep its main focus on the end result to electricity consumers, and offered a number of recommendations. The Association was joined in its comments by the National Rural Electric Cooperative Association.
The Commission’s quorum was recently restored with the swearing in of Neil Chatterjee and Robert Powelson as commissioners, but it is “unclear whether the storage distributed energy resources NOPR will be a priority for the new commission,” Huang said.
“However, depending on what was intended by the NOPR and, more importantly, how the new commission interprets it, the NOPR could represent a really huge jurisdictional leap,” the attorney told conference attendees.
“At the extreme, it could enable distribution-connected resources and loads to participate directly in FERC-regulated wholesale markets – basically, to buy and sell directly into the RTO.”
Moreover, Huang continued, “even if this particular NOPR is not intended to push and test the limits of FERC’s jurisdiction, it does raise a basic question, which is how far can FERC’s regulation of distributed resources go? What are the limits, given the jurisdictional boundaries of the Federal Power Act?”
Huang provided an overview of FERC’s jurisdiction under the Federal Power Act and noted that FERC’s authority is primarily economic.
He also detailed the commission’s jurisdiction as it relates more specifically to DERs. “It turns out that FERC has actually issued a number of decisions that interpret and try to fit the statutory framework and apply it to distributed energy resources,” Huang said.
He discussed several “clusters” of cases where FERC has done this including net metering for distributed generation and FERC cases that involve state jurisdiction to set rates for sales of generation from distributed generators that are Public Utilities Regulatory Policies Act qualifying facilities.
“There is also some precedent on generator interconnections to distribution facilities and specifically FERC’s authority to actually” compel and regulate new interconnections by generators to distribution facilities, he went on to say.
“We do not know if distributed energy resources will be a priority for the new commission,” Huang said. FERC could decide to take no action or it could issue a final rule “on just the portions of the NOPR that deal with transmission-connected storage,” the attorney said.
The agency could also issue a new or supplemental NOPR or it could issue a final rule as proposed by the NOPR, Huang went on to say.
Late last week, FERC posted a series of letters from Chatterjee, FERC’s chairman, to federal lawmakers related to the NOPR, Huang pointed out.
In the letters, Chatterjee said, “I believe that the nation should be able to rely on all forms of energy resources, which includes renewable and electric storage resources and that the Commission has a role in fostering resource neutral, non-discriminatory policies with respect to the wholesale markets.”
This would include removing barriers to the participation of resources, such as distributed energy resources, in the wholesale markets, he said.
“To that end, I am reviewing the many comments the Commission received in response to the NOPR. I am personally committed to addressing the issues raised in the NOPR with my colleagues and moving forward on this rulemaking,” he wrote.
Choices on jurisdiction
Huang said that if FERC does move forward, it has a range of choices on jurisdiction as well.
“One thing that FERC could do is that it could clarify that the NOPR’s new requirements for distributed energy resources apply only to electricity products from DERs that have actually already been delivered to the RTO grid,” he remarked.
“They could say that they’re not altering their precedent on FERC’s jurisdiction over local distribution facilities and they’re not altering their precedent on net metering or qualifying facilities either,” he said.
If FERC did this, the NOPR would require RTOs to alter their market rules, but most regulation of DERs would remain at the state and local levels, Huang said.
“FERC, however, may be unwilling to stay on the sidelines, so they may want to take a more proactive role with respect to such resources. If they want to do that, they have choices as well,” the attorney went on to say.
One thing that FERC could do is attempt to assert broad jurisdiction to compel distribution utilities to interconnect and provide delivery service to distributed generators.
“This would require FERC to change its existing precedent and also to justify that change. That isn’t necessarily insurmountable, but FERC would likely face significant legal challenges if it tried to do that. It would also likely face very significant political opposition from the states,” he said.
The agency’s prior decisions involving demand response resources “suggest some alternatives that are softer that FERC could try as well,” Huang said.
For example, FERC could try to adopt an approach that is similar to the opt-in/opt-out approach that the Commission used in Order 719-A related to demand response resources.