May 17, 2019

On May 16, 2019, the Federal Energy Regulatory Commission (Commission) issued an order on rehearing of its February 2018 final rule on Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators, which amended the Commission’s regulations under the Federal Power Act to remove barriers to the participation of electric storage resources in the wholesale capacity, energy, and ancillary service markets managed by Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs).

The Commission generally affirmed the final rule, rejecting arguments concerning its jurisdiction and requests to allow states to “opt out” of wholesale market participation by electric storage resources connected to distribution facilities or located behind the meter. The Commission based its rejection of an opt-out for states, which prompted a dissent from Commissioner Bernard McNamee, on its finding that establishing criteria for electric storage resources to participate in ISO/RTO markets, whether or not they are connected to the transmission system, is essential for the Commission to fulfill its statutory duty to ensure just and reasonable wholesale rates. The Commission also rejected arguments that it does not have the authority to require that power sold to electric storage resources from an ISO/RTO market be priced at the wholesale locational marginal price.

In addition to addressing the jurisdictional issues, the Commission:

• Rejected arguments that developing a single participation model for all electric storage resources is “an impossible task,” continuing to find that a single participation model can be sufficiently flexible to accommodate any type of electric storage resource;
• Clarified that the Electric Storage Participation final rule does not require an ISO/RTO that does not already offer a capacity product in its market to create such a product (however, to the extent an ISO/RTO has a resource adequacy construct, the ISO/RTO must demonstrate that its existing rules for resource adequacy enable electric storage resources to participate if they are technically capable);
• Clarified that, to the extent electric storage resources can be dispatched by an ISO/RTO, the ISO/RTO’s participation model must allow them to participate as dispatchable resources and to set the clearing price in the ISO/RTO markets; and
• Clarified that electric storage resources can only set prices in ISO/RTO markets as either wholesale buyers or wholesale sellers if they are available to the ISO/RTO as dispatchable resources.

The Commission rejected requests to alter the compliance deadlines for ISOs/RTOs established in the Electric Storage Participation final rule.

If you have any questions about the Commission’s clarification of the Electric Storage Participation final rule, ISO/RTO implementation of the rule, or energy storage more generally, please contact Tory Lauterbach, (202) 393-1200.