On 16 June 2011 the Federal Energy Regulatory Commission (FERC or Commission) issued a Notice of Inquiry (NOI) seeking comments on two separate, but related issues: (1) whether the Commission should revise or replace its existing restrictions on third-party provision of ancillary services in order to facilitate the development of robust competitive markets for the provision of ancillary services from all resource types; and (2) whether changes in the Commission's accounting and reporting requirements for jurisdictional entities that use electric storage devices are necessary to facilitate the role storage devices can play in providing multiple services, including ancillary services. Comments are due 60 days after publication in the Federal Register.
Restrictions on third-party provision of ancillary services
Current Commission policy prohibits third parties from selling ancillary services at market-based rates to a transmission provider seeking to meet its obligation to provide ancillary services under an Open Access Transmission Tariff (OATT) (unless the third party can offer a formal market power study showing a lack of market power). Avista Corp., 87 FERC ¶ 61,223, order on reh'g, 89 FERC ¶ 61,136 (1999). The aim of the Avista restriction is to ensure that a transmission provider cannot purchase ancillary services under non-cost-based rates in lieu of providing such services itself under cost-based rates. The Commission's assumption is that the "backstop" of a transmission provider's cost-based rates for ancillary services will prevent a third party from taking advantage of market power.
FERC recognizes in its NOI that the Avista restriction has hindered the creation of markets for ancillary services because many sellers of ancillary services cannot conduct formal market power studies. The Commission is requesting comments on how it can modify the Avista restriction while ensuring just and reasonable rates.
Request for comments
FERC seeks comments on:
- Ways to improve access to information needed to conduct market power studies.
- The possibility of allowing a simplified market power study.
- Whether the Commission should establish a de minimis market presence below which an entity can automatically receive market-based rate authority for sales of ancillary services.
- The possibility of replacing the Avista restriction with alternative mitigation to ensure just and reasonable rates for sales of ancillary services. Such alternatives could include a requirement that transmission providers not automatically pass through the price of non-cost-based third-party purchases that exceed their OATT rate.
- The possibility of extending the principles of the Frequency Regulation NOPR to third-party purchases of frequency regulation services.
Accounting and reporting requirements for energy storage resources
The NOI notes that conventional production, transmission, and distribution resources have well-established methods of accounting, reporting, and cost-based recovery, but the Commission's current regulations may not reflect the complexities of electric storage technology, which can operate in ways that resemble production, transmission, and distribution. For example, the NOI states that the Commission's accounting requirements, which stipulate that utility plant costs be classified according to functional classifications with associated primary plant accounts and Operation and Maintenance (O&M) accounts, do not provide for the accounting of costs related to energy storage resources and operations.
The Commission staff previously issued a Request for Comment to seek comments on various questions related to storage, with some commenters suggesting that the Commission needs to update the Uniform System of Accounts to reflect the complexities of energy storage. The Commission is now requesting comments in greater detail regarding whether it should amend current accounting and reporting requirements to specifically reflect energy storage activities.
Request for comments
FERC seeks comments on:
- The possibility of creating new plant accounts and modifying existing accounts to provide for the costs of new energy storage technologies.
- Various issues related to how a public utility should record power purchased for storage operations, including the account in which it should record: power purchased and then stored for later resale; power purchased that will be stored but not sold for resale; power purchased initially to attain a state of charge; and various costs incurred to internally generate power for use in energy storage operations.
- Whether existing revenue accounts for recording revenue from energy storage services can properly avoid cross-subsidization issues.
- Whether existing O&M accounts sufficiently capture the costs of storage operations for different storage technologies and whether new accounts should be created.
- The possibility of amending FERC Form Nos. 1 and 1-F to capture data regarding energy storage resources.