Two ISOs, CAISO and NYISO, filed their Order No. 2222 compliance filings in July, as they had largely already had DER aggregation programs even before the effective date of the Final Rule. Their filings garnered relatively few protests, which is not surprising as they only made minor modifications to their existing programs. But, their
The Death of the Demand Response Opt-Out?
It has been more than a month since FERC proposed eliminating the state opt-out with regard to retail customer participation in demand response programs in organized wholesale markets. In its NOPR, Participation of Aggregators of Retail Demand Response Customers in Markets Operated by Regional Transmission Organizations and Independent System Operators, FERC proposed elimination of the state opt-out. In the concurrently issued Order No. 2222-A, FERC set aside its earlier finding that the participation of demand response in distributed energy resource aggregations is subject to the opt-out and opt-in requirements of Order Nos. 719 and 719-A. Those states that had opted out are none too pleased, as evidenced by NARUC’s rehearing request filed in response to Order No. 2222-A. The NOPR certainly will draw objections. In contrast, demand response supporters have sought clarification of Order No. 2222-A to ensure that “double counting” does not occur when a DER demand response resource is compensated for acting as a provider of a service, whether procured on a forward-looking basis or in real-time, and reduces an end-use customer’s load on the bulk power system, resulting in retail savings for the customer. These entities seek assurance that a behind-the-meter DER providing wholesale demand response service through serving is own on-site load be compensated at full LMP under Order No. 745.
FERC will certainly defend its change in position based on its view that “the terms of wholesale market participation are a matter under exclusive Commission jurisdiction,” such that its orders “do not infringe upon or otherwise diminish state authority.” It would appear that Order No. 2222-A and the effectively pre-ordained outcome of the new NOPR, would be the death knell of the state opt-out. The question raised here is, does it have to be?
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The Best Description of Order No. 2222? “Landmark” “Transformative” Ground-Breaking” “Barrier-Busting” “Competition-Boosting” “Game-Changing” “Bold” or “None of the Above Due to Traditional Net Metering”?
The glowing reviews and legal/trade press headlines would have one believe that DER Aggregation under Order No. 2222 will soon transform the electric industry, as DERs too small to participate directly in RTO/ISO markets will flock to third-party DER Aggregators who will sell wholesale services to organized markets. Will DER owners leap at the chance to participate in wholesale markets? The near-term answer lies in footnote 95 of Order No. 2222, leaving net metering (NEM) untouched and the (Solar Power World) map below. The map shows us four RTO/ISO states (NY, MI, IN, IL) where DERs cannot participate in “traditional” NEM, i.e., where the meter runs backward or excess power over the billing period is compensated at the retail rate). Depending on NEM compensation in such states, perhaps DER Aggregation is a meaningful option. There is a direct connection between DER participation in an aggregation and the economics of traditional (full retail compensation) NEM, the subject of NERA’s Petition for Declaratory Order. That connection has been ignored by most articles extolling Order No. 2222. (Disclaimer: Steptoe represented the New England Ratepayers Association in filing its PDO in Docket EL20-42.) The true potential of Order No. 2222 is unlikely to be met unless FERC changes the colors on the map below by asserting its full jurisdiction over wholesale power sales, whether those sales are made under PURPA’s exemption for sales from small QFs or FPA Section 205.
Order No. 2222 – FERC Sows Some Confusion as to Interconnection Jurisdiction for QFs that Are Exclusively DER Aggregation Participants
One would think the issue of jurisdiction over interconnections to distribution facilities of resources selling wholesale power could not get more complex. Order No. 2222 proves that it could. Specifically, QF interconnections to distribution, an area where jurisdiction previously had been relatively clear, has been muddled a bit. For decades, FERC has claimed that it has jurisdiction over the interconnection of QFs connected to the distribution systems of FERC-jurisdictional utilities unless the QF was only selling (or could only sell) to the utility to which it was connected and the sales were under PURPA. Order No. 2222 perhaps continues this policy. Perhaps not. FERC stated: “This final rule also does not revise the Commission’s jurisdictional approach to the interconnections of QFs that participate in distributed energy resource aggregations.[fn] [fn]See Order No. 2003, 104 FERC ¶ 61,103 at PP 813-815; Order No. 2006, 111 FERC ¶ 61,220 at PP 516-518; Order No. 845, 163 FERC ¶ 61,043.” The problem with the sentence is there is not really an “approach” for QFs “that participate in distributed energy resource aggregations.” The citations are instead to an approach that applies to QFs participating directly in wholesale markets. That said, the case for FERC jurisdiction appears more compelling than the case against FERC jurisdiction, absent further clarification.
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The Great Order No. 2222 Mystery: Why Aren’t DERs that Participate in Aggregations Subject to Public Utility Requirements?
Order No. 2222 goes to great length explaining why DER aggregators selling power are public utilities making FERC-jurisdictional sales under FPA Section 205. FERC holds “to the extent that a distributed energy resource aggregator’s transaction in RTO/ISO markets entails the injection of electric energy onto the grid and a sale of that energy for resale in wholesale electric markets, we find that the Commission has jurisdiction over such wholesale sales.” And, “to the extent a distributed energy resource aggregator makes sales of electric energy into RTO/ISO markets, it will be considered a public utility subject to the Commission’s jurisdiction.” This holding is no surprise. FERC has said for decades that sales by DERs at wholesale are FERC-jurisdictional. (The focus of this article is DERs not subject to an exemption under FPA Section 201(f).) A decade ago the Commission stated in CPUC:
We deny SMUD’s request that the Commission clarify that distribution-level facilities and distribution-level feed-in tariffs do not implicate Commission jurisdiction. The FPA grants the Commission exclusive jurisdiction to regulate sales for resale of electric energy and transmission in interstate commerce by public utilities. The Commission’s FPA authority to regulate sales for resale of electric energy and transmission in interstate commerce by public utilities is not dependent on the location of generation or transmission facilities, but rather on the definition of, as particularly relevant here, wholesale sales contained in the FPA.
FERC states it is “only exercising jurisdiction in this final rule over the sales by distributed energy resource aggregators into the RTO/ISO markets. Hence, an individual distributed energy resource’s participation in a distributed energy resource aggregation would not cause that individual resource to become subject to requirements applicable to Commission-jurisdictional public utilities.” But, it never explains why such participants are not subject to FPA Section 205. The mystery presented is why the DER participants in an aggregation that sell FERC-jurisdictional products (i.e., largely products other than demand response) are not subject to FERC jurisdiction and regulation. An explanation would better serve the public.
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