On November 22, 2019, FERC issued three separate orders accepting, subject to further compliance, California Independent System Operator Corporation’s (“CAISO”), the Midcontinent Independent System Operator, Inc.’s (“MISO”), and ISO New England, Inc.’s (“ISO-NE”) proposals to comply with FERC Order Nos. 841 and 841-A—addressing energy storage resources’ (“ESR”) participation in Regional Transmission Organization/Independent System Operator (“RTO/ISO”)-operated markets (see February 20, 2018 edition of the WER; April 10, 2019 edition of the WER; and May 22, 2019 edition of the WER for more background and context on Order No. 841). The November 22 orders, which follow FERC’s previous acceptance of PJM Interconnection, L.L.C.’s and Southwest Power Pool, Inc.’s storage participation proposals (see October 24, 2019 edition of the WER), found that the RTOs/ISOs generally complied with the requirements of Order No. 841. FERC ordered certain modifications to each RTO’s/ISO’s proposals, addressing metering and accounting practices, ESR bidding parameters, minimum size requirements, and transmission service charges, in addition to other issues. Commissioner McNamee issued separate opinions concurring with all three orders.
Among other issues addressed, FERC rejected CAISO’s, MISO’s, and ISO-NE’s proposals for implementing the metering and accounting practices required by Order No. 841. FERC explained that under Order No. 841, RTOs’/ISOs’ metering and accounting practices must facilitate the sale of energy from wholesale markets to an ESR, and from the ESR back to the market at the wholesale locational marginal price; and enable ESRs to participate in both the retail and wholesale markets without paying twice for the same charging energy. FERC ordered CAISO, MISO, and ISO-NE to revise their Tariffs to: include a basic description of each RTO’s/ISO’s proposed metering methodology and accounting practices for ESRs, as well as references to business practices or other documents containing further details on these metering and accounting practices, and provide further detail on how each RTO/ISO’s metering and accounting practices would allow for simultaneous participation by ESRs in the retail and wholesale markets. In all three orders, FERC also pointed to the Order No. 841 and 841-A requirement that RTOs/ISOs should not charge ESRs wholesale rates for charging energy for which the ESR is already paying retail rates—for example, as a result of a host distribution utility that is unable, due to a lack of the necessary metering infrastructure and accounting practices, to net out any energy purchases associated with an ESR’s wholesale charging activities from the host customer’s retail bill. FERC further required CAISO, MISO, and ISO-NE to demonstrate how they would eliminate duplicative wholesale and retail billing for ESRs.
FERC also found that CAISO and ISO-NE only partially complied with Order No. 841’s requirement to provide a participation model for ESRs that accounts for their physical and operational characteristics through bidding parameters or other means. FERC explained that Order No. 841 defined 10 ESR characteristics (including charge limits, discharge limits state of charge, or ramp rate), and required ESRs to account for each of these characteristics as bidding parameters or other means. For example, FERC found that while CAISO had defined bidding parameters that accounted for these characteristics in its applicable business practice manual, it failed to do so in its Tariff.
In addition, FERC found that while ISO-NE used bidding parameters to account for the physical and operational characteristics of ESRs in the real-time market, ISO-NE failed to account for these characteristics in the day-ahead market. FERC concluded that as a result, ISO-NE would be making assumptions about the state of charge of an ESR in the day-ahead market, which could result in the ESR being scheduled to charge or discharge at times when it could not physically do so based on its state of charge. FERC also rejected ISO-NE’s argument that ISO-NE could avoid these scheduling issues by setting ESR bidding parameters equal to one charge cycle and one discharge cycle per day. FERC explained that assuming that ESRs should limit themselves to only one charge and discharge cycle per day is at odds with Order No. 841’s requirement that RTOs/ISOs account for the physical and operational characteristics of ESRs in order to improve their ability to provide all of the services that they are technically capable of providing, and allow RTOs/ISOs to procure these services efficiently.
With respect to minimum size requirements for ESRs participating in organized markets, FERC found that CAISO’s ESR participation proposal complied with Order No. 841 in requiring ESRs to have a minimum capacity of 100 kW, but rejected CAISO’s 500 kW minimum size requirements for ESRs providing certain services including regulation, spinning reserves, and non-spinning reserves. FERC also accepted MISO’s minimum size requirement of 0.1 MW, but rejected its proposal to phase in very small generators.
Furthermore, FERC found that both MISO and ISO-NE failed to comply with Order No. 841’s requirement that transmission charges be assessed to ESRs when they are charging for later resale into the wholesale market, but not when dispatched by the RTO/ISO to provide a service like frequency regulation or downward ramping service. Specifically, FERC rejected MISO’s proposal to assess transmission charges to ESRs dispatched to withdraw energy pursuant to their down ramp capability, and also rejected ISO-NE’s proposal to exempt all ESRs from transmission service charges. Rather, FERC required MISO and ISO-NE to apply transmission charges to those ESRs that are charging for later resale into the wholesale market and are not providing a service to ISO-NE.
Commissioner McNamee penned concurring opinions to all three orders, in which he argued that CAISO, MISO, and ISO-NE complied in part with Order No. 841 and 841-A, but expressed his concern that FERC exceeded its statutory authority by asserting jurisdiction over ESRs connecting to the distribution system or behind-the-meter. Commissioner McNamee also noted that Order Nos. 841 and 841-A are pending judicial review.