Those persons that believe that the Federal Power Act left exclusive jurisdiction over local distribution facilities (and everything that occurs on such facilities) to the states have been told that they are wrong. The courts have told them they are wrong. FERC has told them they are wrong. Yet, whenever FERC mentions the distribution system, state regulators and others object vociferously that FERC is intruding into state-jurisdictional matters. Indeed, the Commission’s Final Rule on Storage, which assumes that many if not most storage devices will be connected to distribution, actually raises no meaningful jurisdictional issues that have not already been addressed by the courts. Nonetheless, several rehearings raising jurisdictional issues related to storage devices located on the distribution system were filed in response.
Successful appeals are unlikely on jurisdictional grounds, assuming FERC does not appease the states as it has on other occasions, such as with regards to non-QF interconnections to distribution. NARUC and some utilities have objected to certain aspects of the Final Rule that permit participation by storage resources interconnected to distribution in wholesale markets. FERC jurisdiction over all wholesale sales in interstate commerce is well-established. And, FERC jurisdiction over the usage of a distribution system to engage in wholesale market transactions rests on FERC precedent more than two decades old. FERC jurisdiction over wholesale distribution service was affirmed in New York v. FERC, and Detroit Edison Co. v. FERC.
States may believe that they have a jurisdictional hook to limit wholesale participation in that most states have jurisdiction over the interconnection of a storage device to distribution. This state jurisdiction over “first-use” distribution interconnections exists only because FERC relented to state pressure in its interconnection rulemakings. That jurisdictional hook is limited and can be eliminated by utilities that adopt distribution system-wide FERC-jurisdictional tariffs. Moreover, in Laguna Irrigation District, aff’d sub nom. Pacific Gas & Electric Co. v. FERC, (unpublished), FPA Section 210 was interpreted to permit FERC to mandate electric utility (i.e., entities seeking to engage in wholesale sales or purchases) interconnections to the distribution systems of other utilities. The real question on rehearing in the Final Rule on Storage is whether FERC, despite its strong legal arguments, will be swayed to decline to fully assert its established jurisdiction. A failure to do so will almost certainly be met by challenges from the storage industry, among others.
The Final Rule on Storage raises several issues with jurisdictional implications, such as how to segregate wholesale and retail load behind the same meter; the Final Rule certainly contemplates that retail loads will still pay retail rates. Another issue involving jurisdiction is whether the many state commissions that permit generators to purchase power for station power loads directly from organized wholesale markets, thus bypassing retail charges, despite case law that allows the states to prevent this practice, will permit storage devices to purchase power for station power load from the wholesale market as well. The location of many such devices on distribution facilities makes this question all the more interesting. Some of these same jurisdictional issues will arise in the DERs context in Docket No. RM18-9.