On June 16, 2011, the Federal Energy Regulatory Commission (FERC) issued a Notice of Inquiry (NOI) seeking comments on what it described as two separate but related issues, both of which apply to electric energy storage (EES).

First, because FERC is interested in facilitating the development of robust competitive markets to provide ancillary services from all resources types, it seeks comment on “existing restrictions on third-party provision of ancillary services, irrespective of the technologies used for such provision.” In soliciting these comments, FERC noted the growing interest in rate flexibility among sellers of ancillary services, and a desire from those obligated to purchase those services to increase the available supply. Although a variety of resources can provide ancillary services, FERC believes that many are discouraged from doing so by the Commission’s restrictions on market-based pricing coupled with a lack of access to information that could help satisfy the requirements of those policies. Access to information is particularly difficult outside of areas served by RTOs/ISOs, which areas are often with the greatest need for an ancillary services market.

FERC pointedly invites comments on whether it should revise or replace the restriction set forth in Avista Corp., 87 FERC ¶ 61,223, order on reh’g, 89 FERC ¶ 61,136 (1999), which prohibits, absent a study showing lack of market power, third-party market-based sales of ancillary services to transmission providers seeking to meet their ancillary services obligations under the Open Access Transmission Tariff (OATT). Assuming that FERC revises or replaces the Avista restriction to facilitate the provision of ancillary services, it also seeks input on how it should contemporaneously ensure just and reasonable rates. In a related inquiry, the Commission is seeking comments on whether the various cost-based compensation methods for frequency regulation that exist in regions outside of organized markets can be adjusted to address the speed and accuracy issues identified in FERC’s recent Frequency Regulation Notice of Proposed Rulemaking for organized wholesale energy markets. See Frequency Regulation Compensation in the Organized Wholesale Power Markets, 76 FR 11177 (March 1, 2011), Notice of Proposed Rulemaking, FERC States & Regs ¶ 32,672 (2011). The June 16 NOI, when considered in context with this year’s NOPR on Frequency Regulation and last year’s NOI on EES, could signal that a broader rulemaking regarding EES is on the horizon.

Recognizing that “the role of electric storage and other new market entrants play in competitive markets is still evolving,” the Commission seeks comments on whether it should revise “current accounting and reporting requirements as they pertain to the oversight of jurisdictional entities using electric storage technologies” other than pumped storage hydro (for which FERC has established methods of accounting, reporting and rate recovery). Current utility accounting requirements do not appropriately fit EES due to the technology’s abilities to act like generation, transmission, and distribution assets. Accordingly, FERC is soliciting “specific details regarding whether and, if so, how to amend the current accounting and reporting requirements to specifically account for and report energy storage operations and activities.”

The NOI was published in the Federal Register on June 22, 2011, and comments are due sixty (60) days from that date.