Rule2021-13442
Participation of Distributed Energy Resource Aggregations in Markets Operated by Regional Transmission Organizations and Independent System Operators
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 28, 2021
Effective
August 27, 2021
Issuing agencies
Energy DepartmentFederal Energy Regulatory Commission
Abstract
In this order, the Federal Energy Regulatory Commission (Commission) addresses arguments raised on rehearing, sets aside in part and clarifies in part Order No. 2222-A.
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[Federal Register Volume 86, Number 121 (Monday, June 28, 2021)]
[Rules and Regulations]
[Pages 33853-33861]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-13442]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Rules
and Regulations
[[Page 33853]]
DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 35
[Docket No. RM18-9-003; Order No. 2222-B]
Participation of Distributed Energy Resource Aggregations in
Markets Operated by Regional Transmission Organizations and Independent
System Operators
AGENCY: Federal Energy Regulatory Commission, Department of Energy.
ACTION: Final rule.
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SUMMARY: In this order, the Federal Energy Regulatory Commission
(Commission) addresses arguments raised on rehearing, sets aside in
part and clarifies in part Order No. 2222-A.
DATES: This rule will become effective August 27, 2021.
FOR FURTHER INFORMATION CONTACT:
David Kathan (Technical Information), Office of Energy Policy and
Innovation, Federal Energy Regulatory Commission, 888 First Street NE,
Washington, DC 20426, (202) 502-6404
Nicole Businelli (Technical Information), Office of Energy Market
Regulation, Federal Energy Regulatory Commission, 888 First Street NE,
Washington, DC 20426, (202) 502-8253
Christopher Chaulk (Legal Information), Office of the General Counsel--
Energy Markets, Federal Energy Regulatory Commission, 888 First Street
NE, Washington, DC 20426, (202) 502-6720
SUPPLEMENTARY INFORMATION:
Table of Contents
Paragraph Nos.
I. Introduction...................................... 1
II. Discussion....................................... 7
A. Order No. 719 Demand Response Opt-Out......... 7
a. Requests for Rehearing.................... 11
i. Jurisdiction.......................... 11
ii. Adequate Notice...................... 16
iii. Reasoned Decision-Making............ 19
b. Commission Determination.................. 26
B. Definition of Demand Response for Purposes of 30
Applying the Order No. 719 Opt-Out to
Heterogeneous Distributed Energy Resource
Aggregations....................................
a. Request for Clarification................. 32
b. Commission Determination.................. 35
C. Double Counting and Compensation for Behind- 37
the-Meter Distributed Energy Resources That
Reduce Load.....................................
a. Request for Clarification or Rehearing.... 39
b. Commission Determination.................. 42
III. Information Collection Statement................ 46
IV. Regulatory Flexibility Act....................... 47
V. Document Availability............................. 48
VI. Effective Date and Congressional Notification.... 51
I. Introduction
1. On September 17, 2020, the Federal Energy Regulatory Commission
(Commission) issued its final rule (final rule or Order No. 2222)
adopting reforms to remove barriers to the participation of distributed
energy resource \1\ aggregations in the Regional Transmission
Organization (RTO) and Independent System Operator (ISO) markets (RTO/
ISO markets).\2\ Specifically, the Commission found that existing RTO/
ISO market rules are unjust and unreasonable in light of barriers that
they present to the participation of distributed energy resource
aggregations in RTO/ISO markets, which reduce competition and
[[Page 33854]]
fail to ensure just and reasonable rates.\3\ To help ensure that RTO/
ISO markets produce just and reasonable rates, pursuant to the
Commission's legal authority under Federal Power Act (FPA) section
206,\4\ the Commission, in Order No. 2222, modified Sec. 35.28 \5\ of
the Commission's regulations to require each RTO/ISO to revise its
tariff to ensure that its market rules facilitate the participation of
distributed energy resource aggregations.\6\
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\1\ Order No. 2222 amended the Commission's regulations to
define a distributed energy resource as any resource located on the
distribution system, any subsystem thereof or behind a customer
meter. Participation of Distributed Energy Resource Aggregations in
Markets Operated by Regional Transmission Organizations and
Independent System Operators, Order No. 2222, 85 FR 67094 (Oct. 1,
2020), 172 FERC ] 61,247, at P 1 n.1 (2020), corrected, 85 FR 68450
(Oct. 29, 2020), order on reh'g, Order No. 2222-A, 86 FR 16511 (Mar.
24, 2011), 174 FERC ] 61,197 (2021); 18 CFR 35.28(b)(10). These
resources may include, but are not limited to, resources that are in
front of and behind the customer meter, electric storage resources,
intermittent generation, distributed generation, demand response,
energy efficiency, thermal storage, and electric vehicles and their
supply equipment. Order No. 2222, 172 FERC ] 61,247 at PP 1 n.1,
114.
\2\ For purposes of Order No. 2222, the Commission defined RTO/
ISO markets as the capacity, energy, and ancillary services markets
operated by the RTOs and ISOs. Order No. 2222, 172 FERC ] 61,247 at
P 1 n.2; see also 18 CFR 35.28(b)(11).
\3\ Order No. 2222, 172 FERC ] 61,247 at P 1.
\4\ 16 U.S.C. 824e.
\5\ 18 CFR 35.28.
\6\ Order No. 2222, 172 FERC ] 61,247 at P 1.
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2. More specifically, Order No. 2222 requires each RTO/ISO to
revise its tariff to establish distributed energy resource aggregators
as a type of market participant that can register distributed energy
resource aggregations under one or more participation models in the
RTO/ISO tariff that accommodate the physical and operational
characteristics of each distributed energy resource aggregation.\7\
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\7\ Id. P 6.
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3. On March 18, 2021, the Commission issued Order No. 2222-A, which
addressed arguments raised on rehearing, set aside in part, and
clarified in part the Commission's determinations in Order No. 2222.
While the Commission largely affirmed its findings in Order No. 2222,
the Commission set aside the 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.\8\ The
Commission stated that if a distributed energy resource aggregation is
composed solely of resources that participate as demand response
resources, then the Order No. 719 opt-out would apply to that
aggregation, but if a distributed energy resource aggregation contains
any resources that participate as another type of distributed energy
resource, then the Order No. 719 opt-out would not apply to that
aggregation.\9\ In addition, as relevant here, the Commission provided
clarification regarding restrictions to avoid double counting of
services.\10\
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\8\ Order No. 2222-A, 174 FERC ] 61,197 at P 22; see Wholesale
Competition in Regions with Organized Electric Markets, Order No.
719, 73 FR 64100 (Oct. 28, 2008), 125 FERC ] 61,071, at P 155
(2008), order on reh'g, Order No. 719-A, 74 FR 37776 (July 29,
2009), 128 FERC ] 61,059, order on reh'g, Order No. 719-B, 129 FERC
] 61,252 (2009).
\9\ Order No. 2222-A, 174 FERC ] 61,197 at PP 22-23.
\10\ Id. PP 63-64.
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4. On April 19, 2021, the Edison Electric Institute (EEI); the
Louisiana Public Service Commission and the Mississippi Public Service
Commission (together, the Southern Regulators); the National
Association of Regulatory Utility Commissioners (NARUC); the North
Carolina Utilities Commission (the North Carolina Commission); and the
MISO Transmission Owners \11\ filed timely requests for rehearing of
Order No. 2222-A. On April 19, 2021, Advanced Energy Economy and
Advanced Energy Management Alliance (together, AEE/AEMA) filed a
request for clarification, or in the alternative, rehearing of Order
No. 2222-A. On April 19, 2021, Voltus, Inc. (Voltus) filed a request
for clarification of Order No. 2222-A. On April 30, 2021, the
Midcontinent Independent System Operator, Inc. (MISO) filed an answer
in response to the rehearing requests. On May 4, 2021, ISO New England
Inc. (ISO-NE) filed an answer to AEE/AEMA's request. On May 14, 2021,
AEE/AEMA filed an answer in response to ISO-NE's answer. On May 28,
2021, AEE/AEMA filed an answer in response to the requests for
rehearing and MISO's answer.\12\
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\11\ The MISO Transmission Owners consist of Ameren Services
Company, as agent for Union Electric Company d/b/a Ameren Missouri,
Ameren Illinois Company d/b/a Ameren Illinois and Ameren
Transmission Company of Illinois; Big Rivers Electric Corporation;
Central Minnesota Municipal Power Agency; City Water, Light & Power
(Springfield, IL); Cleco Power LLC; Cooperative Energy; Dairyland
Power Cooperative; Duke Energy Business Services, LLC for Duke
Energy Indiana, LLC; East Texas Electric Cooperative; Entergy
Arkansas, LLC; Entergy Louisiana, LLC; Entergy Mississippi, LLC;
Entergy New Orleans, LLC; Entergy Texas, Inc; Great River Energy;
GridLiance Heartland LLC; Hoosier Energy Rural Electric Cooperative,
Inc.; Indiana Municipal Power Agency; Indianapolis Power & Light
Company; Lafayette Utilities System; MidAmerican Energy Company;
Minnesota Power (and its subsidiary Superior Water, L&P); Missouri
River Energy Services; Montana-Dakota Utilities Co.; Northern
Indiana Public Service Company LLC; Northern States Power Company, a
Minnesota corporation, and Northern States Power Company, a
Wisconsin corporation, subsidiaries of Xcel Energy Inc.;
Northwestern Wisconsin Electric Company; Otter Tail Power Company;
Prairie Power, Inc.; Illinois Power Cooperative; Southern Indiana
Gas & Electric Company (d/b/a Vectren Energy Delivery of Indiana);
Southern Minnesota Municipal Power Agency; Wabash Valley Power
Association, Inc.; and Wolverine Power Supply Cooperative, Inc.
\12\ Rule 713(d)(1) of the Commission's Rules of Practice and
Procedure, 18 CFR 385.713(d)(1), prohibits an answer to a request
for rehearing. Accordingly, we reject ISO-NE's, MISO's, and AEE/
AEMA's answers.
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5. Pursuant to Allegheny Defense Project v. FERC,\13\ the rehearing
requests filed in this proceeding may be deemed denied by operation of
law. However, as permitted by section 313(a) of the FPA,\14\ we modify
the discussion in Order No. 2222-A and set aside the decision, in part,
and clarify in part, as discussed below.\15\
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\13\ 964 F.3d 1 (D.C. Cir. 2020) (en banc).
\14\ 16 U.S.C. 825l(a) (``Until the record in a proceeding shall
have been filed in a court of appeals, as provided in subsection
(b), the Commission may at any time, upon reasonable notice and in
such manner as it shall deem proper, modify or set aside, in whole
or in part, any finding or order made or issued by it under the
provisions of this chapter.'').
\15\ Allegheny Def. Project, 964 F.3d at 16-17.
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6. Specifically, we set aside the decision in Order No. 2222-A to
decline to extend the opt-out and opt-in requirements of Order Nos. 719
and 719-A to demand response resources participating in heterogeneous
distributed energy resource aggregations. We also provide further
clarification regarding appropriate restrictions to avoid double
counting of services and the compensation of demand response resources
that participate in heterogeneous distributed energy resource
aggregations, as discussed further below.
II. Discussion
A. Order No. 719 Demand Response Opt-Out
7. In Order No. 2222, the Commission stated that the final rule
does not affect the ability of relevant electric retail regulatory
authorities (RERRA) to prohibit retail customers' demand response from
being bid into RTO/ISO markets by aggregators pursuant to Order No.
719.\16\ The Commission also stated that, because the definition of a
distributed energy resource includes demand response resources, an
aggregator of demand response could participate as a distributed energy
resource aggregator, but that the final rule does not affect existing
demand response rules.\17\ The Commission further found 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.\18\ The Commission therefore clarified that if the
RERRA for a demand response resource has either chosen to opt out or
has not opted in, then the demand response resource may not participate
in a distributed energy resource aggregation.
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\16\ Order No. 2222, 172 FERC ] 61,247 at P 59 (citing 18 CFR
35.28(g)(1)(iii)).
\17\ Id. P 118.
\18\ Id. P 145.
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8. In Order No. 2222-A, the Commission set aside in part the
Commission's conclusion 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
[[Page 33855]]
719-A.\19\ The Commission stated that, upon reconsideration, it
declined to extend this opt-out to demand response resources that
participate in heterogeneous distributed energy resource aggregations--
i.e., distributed energy resource aggregations that are made up of
different types of resources including demand response.\20\ The
Commission found that heterogeneous distributed energy resource
aggregations that include demand response resources do not fall
squarely within the Order No. 719 opt-out, as set forth in the
Commission's regulations, because they are not solely aggregations of
retail customers.\21\ The Commission stated that the Order No. 719 opt-
out will continue to apply to aggregations made up solely of resources
that participate as demand response resources, consistent with the
Commission's regulations.\22\
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\19\ Order No. 2222-A, 174 FERC ] 61,197 at P 22.
\20\ Id. PP 22-23.
\21\ Id. P 23 (citing 18 CFR 35.28(g)(1)(iii); 18 CFR
35.28(b)(10), (g)(12); Order No. 2222, 172 FERC ] 61,247 at P 114);
id. P 28 (concluding that if a distributed energy resource
aggregator aggregates only demand response resources, it is
materially indistinct from the aggregations of retail customers
subject to the Order No. 719 opt-out).
\22\ Id. P 22 (emphasis in original).
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9. The Commission found that extending the Order No. 719 opt-out to
demand response resources in heterogeneous distributed energy resource
aggregations would undermine the potential of Order No. 2222 to break
down barriers to competition, which would interfere with the
Commission's responsibility to ensure that wholesale rates are just and
reasonable.\23\ Specifically, the Commission concluded that extending
the Order No. 719 opt-out to demand response resources that seek to
participate in heterogeneous distributed energy resource aggregations
would undermine the ability of aggregations to take advantage of the
different resources' operational attributes and complementary
capabilities.\24\ The Commission stated that ensuring that demand
response resources can combine with other forms of distributed energy
resources has the potential to increase both the number and the variety
of distributed energy resource aggregations.\25\ The Commission
explained that, in addition to enhancing competition, diversity in
distributed energy resource aggregations facilitates these non-
traditional resources' ability to provide a wide range of services in
RTO/ISO markets.\26\ The Commission stated that applying the Order No.
719 opt-out to aggregations that contain a combination of demand
response and other types of distributed energy resources could prevent
distributed energy resource aggregators from incorporating the
complementary capabilities of existing and future demand response
technologies. The Commission also found that precluding demand response
from participating in heterogeneous distributed energy resource
aggregations would undermine the Commission's goal of ``ensur[ing] a
technology-neutral approach to distributed energy resource
aggregations, which will ensure that more resources are able to
participate in such aggregations, thereby helping to enhance
competition and ensure just and reasonable rates.'' \27\
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\23\ Id. P 23 (citing Order No. 2222, 172 FERC ] 61,247 at PP 1,
3, 142; Nat'l Ass'n of Regul. Util. Comm'rs v. FERC, 964 F.3d 1177,
1189 (D.C. Cir. 2020) (NARUC)).
\24\ Id. P 24.
\25\ Id. P 25.
\26\ Id. P 26 (citing Order No. 2222, 172 FERC ] 61,247 at P
141).
\27\ Id. P 27 (quoting Order No. 2222, 172 FERC ] 61,247 at P
26).
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10. The Commission stated that it did not propose to overturn the
Order No. 719 opt-out in this rulemaking and, to the extent that
parties asked the Commission to do so on rehearing, it found that such
requests were out of scope.\28\ The Commission also clarified that the
small utility opt-in adopted in Order No. 2222 still applies to all
distributed energy resource aggregations, including those containing
demand response resources.
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\28\ Id. P 28.
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a. Requests for Rehearing
i. Jurisdiction
11. Some petitioners argue that the Commission's opt-out finding in
Order No. 2222-A violated the Commission's jurisdiction under the FPA
or usurped state authority.\29\ The Southern Regulators argue that the
Commission failed to properly balance the jurisdictional limitations of
the FPA with the states' exclusive jurisdiction over retail issues in
its decision to exercise authority over retail demand response.\30\
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\29\ NARUC Request for Rehearing at 3, 5; Southern Regulators
Request for Rehearing at 12.
\30\ Southern Regulators Request for Rehearing at 12.
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12. The Southern Regulators argue that the Commission contravened
EPSA because, in their view, the Supreme Court concluded that it is
precisely a state's right to opt out of participation by retail
customers in an RTO demand response wholesale market that ensures the
balance of federal and state power under the FPA.\31\ The Southern
Regulators argue that EPSA requires a careful balancing of the
interests of the states and those of the Commission in order to
determine whether the Commission has and/or should exercise
jurisdiction under the FPA. The Southern Regulators argue that in Order
No. 2222-A the Commission disregarded the concept of cooperative
federalism upon which the Court relied to reach its decision, a concept
fundamental to the balance of overlapping jurisdiction under the
FPA.\32\ The Southern Regulators argue that the Court concluded that,
when it comes to retail customer participation in wholesale markets,
states have the last word.\33\ The Southern Regulators argue that the
Commission's historic practice in areas where federal and state
jurisdiction overlap has been to recognize that balance, as it did in
Order No. 1000.\34\ The Southern Regulators argue that Order No. 2222-A
offers no discussion of or replacement for the state opt-out authority
that would evidence the Commission's ``compliance with Sec. 824(b)'s
allocation of federal and state authority.'' \35\
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\31\ Id. at 13 (citing FERC v. EPSA, 136 S. Ct. 760, 779-80
(2016) (EPSA)).
\32\ Id. at 12.
\33\ Id. at 14 (citing EPSA, 136 S. Ct. at 780).
\34\ Id. at 13-14 (citing Transmission Planning and Cost
Allocation by Transmission Owning and Operating Public Utilities,
Order No. 1000, 76 FR 49842 (Aug. 11, 2011), 136 FERC ] 61,051, at
PP 225-27, 287 (2011), order on reh'g, Order No. 1000-A, 77 FR 32184
(May 31, 2012), 139 FERC ] 61,132, at P 392, order on reh'g and
clarification, Order No. 1000-B, 77 FR 64890 (Oct. 24, 2012), 141
FERC ] 61,044 (2012), aff'd sub nom. S.C. Pub. Serv. Auth. v. FERC,
762 F.3d 41 (D.C. Cir. 2014)).
\35\ Id. at 15 (quoting EPSA, 136 S. Ct. at 780).
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13. The North Carolina Commission similarly argues that the
Commission did not account for the long-standing authority of the
states and the traditional, cooperative roles played by federal and
state regulators in promoting adequate, reliable, safe, clean, and
affordable electric services.\36\ The North Carolina Commission argues
that the cooperative federalism inherent in the FPA and the regulation
of wholesale and retail electric service requires a role for both
federal and state regulators.\37\ The North Carolina Commission
maintains that the Commission's action does not encourage utility
participation in an RTO/ISO or encourage a state commission to allow a
utility's RTO/ISO participation.\38\
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\36\ North Carolina Commission Request for Rehearing at 10.
\37\ Id. at 11.
\38\ Id. at 10.
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14. NARUC argues that, by eliminating the opt-out for demand
response resources in heterogeneous aggregations, the Commission
usurped authority from states that used the Order
[[Page 33856]]
No. 719 opt-out and built a legal framework for that regulatory
scheme.\39\ NARUC argues that Order No. 2222-A allows a demand response
resource to disregard the judgment of state regulators by joining a
third-party aggregation with other types of resources.\40\ In addition,
NARUC argues, the order allows third-party aggregators of demand
response resources to add a solitary unit of a different type of
distributed energy resource to its aggregations to circumvent state
law.
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\39\ NARUC Request for Rehearing at 3, 5.
\40\ Id. at 6.
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15. NARUC disputes the Commission's position that ``[b]ecause the
terms of wholesale market participation are a matter under exclusive
Commission jurisdiction, today's order does not infringe upon or
otherwise diminish state authority.'' \41\ NARUC argues that the
Commission's action in Order No. 2222-A is unlike the Commission's
decisions in Order Nos. 841 and 2222 because there were no state
regulations already in place.\42\ NARUC explains that there was no need
prior to Order No. 841 for states to prohibit storage resources on the
distribution system or behind the meter from participating in wholesale
markets because that was not possible before the order.\43\ NARUC
points out that the challenge to Order No. 841 in NARUC was a facial
challenge and argues that NARUC does not address as-applied
challenges.\44\ NARUC explains that prior to Order No. 2222-A, some
states had regulations that applied to demand response aggregations on
the distribution system or behind the meter because Order No. 719
permitted such participation in the wholesale markets.\45\ NARUC argues
that Order No. 2222-A takes away this authority over demand response
resources.\46\
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\41\ Id. (quoting Order No. 2222-A, 174 FERC ] 61,197 at P 12
n.36).
\42\ Id. at 5.
\43\ Id. at 6.
\44\ Id. (citing NARUC, 964 F.3d at 1188-89).
\45\ Id. at 6-7 (emphasis in original).
\46\ Id. at 7.
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ii. Adequate Notice
16. Multiple petitioners argue that the Commission violated the
Administrative Procedure Act (APA) by effectively eliminating the Order
No. 719 opt-out without providing adequate notice and without
soliciting comments and evidence from RERRAs that have adopted and
relied upon that opt-out.\47\ The Southern Regulators and NARUC argue
that the procedurally proper method to modify the opt-out is in the
proceeding in Docket No. RM21-14-000 that was noticed for this
purpose.\48\ The Southern Regulators argue that nothing in the Notice
of Proposed Rulemaking in Docket No. RM16-23-000 \49\ indicated an
effort or intent by the Commission to reconsider the Order No. 719 opt-
out.\50\
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\47\ Southern Regulators Request for Rehearing at 10; EEI
Request for Rehearing at 4; North Carolina Commission Request for
Rehearing at 8-9.
\48\ Southern Regulators Request for Rehearing at 10; NARUC
Request for Rehearing at 8.
\49\ Electric Storage Participation in Markets Operated by
Regional Transmission Organizations and Independent System
Operators, 81 FR 86522 (Nov. 30, 2016), 157 FERC ] 61,121 (2016)
(NOPR).
\50\ Southern Regulators Request for Rehearing at 10.
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17. The Southern Regulators argue that they were prejudiced by the
Commission's failure to provide notice that the Order No. 719 opt-out
was at risk in Docket No. RM18-9.\51\ The Southern Regulators and the
North Carolina Commission explain that they have provisions restricting
aggregators of retail customers in their respective jurisdictions.\52\
The Southern Regulators maintain that, because the NOPR offered no hint
that the opt-out was in jeopardy, they had no reason to oppose
elimination of the opt-out in the rulemaking docket or actively
participate in the other portions of the rulemaking affecting demand
response resources.
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\51\ Id. at 11.
\52\ Southern Regulators Request for Rehearing at 11; North
Carolina Commission Request for Rehearing at 2-3.
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18. In addition, NARUC and the Southern Regulators argue that
eliminating the Order No. 719 opt-out for demand response resources in
heterogeneous aggregations is outside the scope of Order No. 2222.\53\
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\53\ NARUC Request for Rehearing at 8; Southern Regulators
Request for Rehearing at 7.
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iii. Reasoned Decision-Making
19. Several petitioners argue that the Commission acted arbitrarily
and capriciously by departing from its policy in Order Nos. 719 and
719-A in Order. No. 2222-A without acknowledgment, an adequate
explanation, or an examination of the policy considerations in support
of the opt-out.\54\ The MISO Transmission Owners further argue that the
Commission did not adequately address how it will enforce the policy of
avoiding unduly burdening states and retail regulators or why the
policy considerations are no longer relevant.\55\ The Southern
Regulators contend that the Commission's reasons for eliminating the
opt-out in Order No. 2222-A were present at the time Order No. 719 was
issued, and that the Commission has not explained why those reasons now
require elimination of the opt-out.\56\
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\54\ See, e.g., MISO Transmission Owners Rehearing Request at 6;
NARUC Rehearing Request at 8; North Carolina Commission Rehearing
Request at 5; Southern Regulators Rehearing Request at 9.
\55\ MISO Transmission Owners Rehearing Request at 8-9, 11.
\56\ Southern Regulators Rehearing Request at 8-9.
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20. Next, several petitioners claim that the Commission failed to
acknowledge the states' role in overseeing demand response activities
within their borders.\57\ The MISO Transmission Owners assert that the
Commission failed to consider the effect that limiting the opt-out will
have on states' ability to control consumer costs, and the Southern
Regulators argue that the Commission's opt-out decision unreasonably
restricts the ability of states to protect retail customers.\58\
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\57\ See, e.g., MISO Transmission Owners Rehearing Request at 9-
10 (citing EPSA, 136 S. Ct. at 779).
\58\ MISO Transmission Owners Rehearing Request at 9-10;
Southern Regulators Rehearing Request at 15.
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21. Next, some petitioners argue that the Commission relies on a
false distinction between heterogeneous and homogeneous distributed
energy resource aggregations to justify eliminating state opt-out
authority.\59\
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\59\ E.g., Southern Regulators Rehearing Request at 19.
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22. NARUC challenges the Commission's finding that ``heterogeneous
distributed energy resource aggregations that include demand response
resources do not fall squarely within the Order No. 719 opt-out, as set
forth in our regulations because they are not solely aggregations of
retail customers,'' because the definition of ``aggregator of retail
customers'' that the Commission relies upon does not say that the
aggregations are exclusively retail loads, just ``mostly.'' \60\ NARUC
argues that the Commission acted capriciously by changing the treatment
of demand response resources on the distribution system and behind the
meter without further evidence of the types of load involved or inquiry
into the experience of states that have employed the opt-out.\61\
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\60\ NARUC Rehearing Request at 7 (quoting Order No. 2222-A, 174
FERC ] 61,197 at P 23).
\61\ Id. at 8.
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23. Some petitioners also object to the Commission's
characterization of demand response resources in declining to extend
the opt-out to heterogeneous distributed energy resource aggregations.
The Southern Regulators criticize the Commission's reliance on the
ability of distributed energy resources to take advantage of operating
attributes and complementary
[[Page 33857]]
capabilities.\62\ The MISO Transmission Owners argue that, in allowing
demand response resources to participate through a heterogeneous
aggregation, the Commission did not distinguish between injection and
non-injection resources, as it previously did when maintaining the opt-
out in Order Nos. 841 and 2222.\63\
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\62\ Southern Regulators Rehearing Request at 20 (citing Order
No. 2222-A, 174 FERC ] 61,197 at P 24).
\63\ MISO Transmission Owners Rehearing Request at 7 (citing
Order No. 841-A, 167 FERC ] 61,154 at P 53).
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24. Several petitioners further argue that the Commission's
decision is arbitrary and capricious because it would allow distributed
energy resource aggregations comprised primarily of demand response
resources to evade state regulations.\64\
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\64\ EEI Rehearing Request at 4; MISO Transmission Owners
Rehearing Request at 6 n.13; North Carolina Commission Rehearing
Request at 7-8.
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25. Finally, EEI argues that it was arbitrary and capricious for
the Commission to remove the opt-out without allowing an opportunity
for public comment in Docket No. RM21-14-000, where the Commission has
opened a far-reaching inquiry about removing the demand response opt-
out from its regulations.\65\ EEI and the MISO Transmission Owners
argue that the Commission has effectively undermined that inquiry in
Docket No. RM21-14-000.\66\
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\65\ EEI Rehearing Request at 1-2; MISO Transmission Owners
Rehearing Request at 11.
\66\ EEI Rehearing Request at 4; MISO Transmission Owners
Rehearing Request at 8.
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b. Commission Determination
26. Upon reviewing the requests for rehearing, we set aside our
prior decision not to extend the Order No. 719 opt-out to demand
response resources that participate in heterogeneous distributed energy
resource aggregations. As discussed below, we find that these issues
are better addressed in Docket No. RM21-14-000.\67\
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\67\ The Commission has broad discretion in how to manage its
proceedings. See Vt. Yankee Nuclear Power Corp. v. Natural Res. Def.
Council, Inc., 435 U.S. 519, 524-25 (1978) (recognizing that
agencies have broad discretion over the formulation of their
procedures); S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41, 81 (D.C.
Cir. 2014) (affirming the Commission's discretion in how to manage
the proceedings before it); Tenn. Gas Pipeline Co. v. FERC, 972 F.2d
376, 381 (D.C. Cir. 1992) (``The agency is entitled to make
reasonable decisions about when and in what type of proceeding it
will deal with an actual problem.'') (citing Mobil Oil Expl. &
Producing Se. Inc. v. United Distrib. Cos., 498 U.S. 211, 230 (1991)
(``An agency enjoys broad discretion in determining how best to
handle related, yet discrete, issues in terms of procedures . . .
.'')).
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27. As an initial matter, we disagree with the arguments on
rehearing that the Commission's interpretation of the Order No. 719
opt-out in Order No. 2222-A would have exceeded the Commission's
jurisdiction under the FPA. The Southern Regulators rely on EPSA to
argue that the Commission failed to properly balance the jurisdictional
limitations of the FPA. We disagree. EPSA held that the Commission's
regulation of demand response participation in wholesale markets is a
practice that directly affects wholesale rates.\68\ Further, the Court
also held that the Commission's regulation of demand response resources
does not regulate retail sales in violation of FPA section 201(b).\69\
As the D.C. Circuit explained in NARUC, the Court in EPSA ``did not
condition its holdings on the existence of an opt-out.'' \70\
Accordingly, we continue to conclude that the Commission was not
legally required either to grant the opt-out in Order No. 719 or to
extend that opt-out in this proceeding.\71\
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\68\ EPSA, 136 S. Ct. at 774 (referring to the Commission's
jurisdiction under FPA sections 205 and 206 to regulate practices
affecting jurisdictional rates); see also Order No. 2222, 172 FERC ]
61,247 at P 41 (discussing EPSA's application to this proceeding).
\69\ EPSA, 136 S. Ct. at 784; see also Order No. 2222, 172 FERC
] 61,247 at P 41.
\70\ NARUC, 964 F.3d at 1189-90; see Elec. Storage Participation
in Mkts. Operated by Reg'l Transmission Orgs. and Indep. Sys.
Operators, Order No. 841, 83 FR 9580 (Mar. 6, 2018), 162 FERC ]
61,127 (2018), order on reh'g and clarification, Order No. 841-A, 84
FR 23902 (May 23, 2019), 167 FERC ] 61,154, at P 40 (2019), aff'd
sub nom. NARUC, 964 F.3d 1177 (explaining that the Court in EPSA
described how its ``analysis of FERC's regulatory authority
proceeds'' without referring to an opt-out, and explaining that,
when the Court stated that it viewed the opt-out merely as the
``finishing blow'' to EPSA's already losing arguments that the
Commission ``aimed to obliterate [states'] regulatory authority or
override their pricing policies,'' that statement was not a
determinative part of its analysis) (quoting EPSA, 136 S. Ct. at
773, 779).
\71\ See Order No. 2222, 172 FERC ] 61,247 at P 59 (explaining
that the Commission was not obligated to provide an opt-out in Order
No. 719 but did so as an exercise of its discretion); see also
NARUC, 964 F.3d at 1187 (``[B]ecause FERC has the exclusive
authority to determine who may participate in the wholesale markets,
the Supremacy Clause . . . requires that [s]tates not interfere.'').
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28. Nonetheless, we acknowledge that, in implementing the opt-out
in Order No. 719, a number of states broadly prohibited demand response
participation in RTO/ISO markets,\72\ and that those states--and other
entities affected by the opt-out--may not have anticipated that this
proceeding would call into question those broad prohibitions. Given the
importance of these issues, which affect both federal and state
regulatory interests,\73\ we believe that the better course is to
provide them full consideration through the Notice of Inquiry (NOI)
issued contemporaneously with Order No. 2222-A. The record under
development in that proceeding bears on many of those federal and state
interests and will provide an opportunity for all interested views to
be heard and considered by the Commission.\74\ Specifically, the NOI
[[Page 33858]]
states that the Commission is ``exploring whether to revise the
Commission's regulations to remove the [Order No. 719 opt-out],
recognizing that the Commission, when it established the [Order No. 719
opt-out], balanced the interests and concerns of state and local
regulatory authorities with the Commission's goal of removing barriers
to demand response resource participation in RTO/ISO markets.
Circumstances may have changed in the years since the issuance of Order
Nos. 719 and 719-A, such that the balance reflected in those orders
adopting the [Order No. 719 opt-out] may have shifted and the RTO/ISO
market rules reflecting the [Order No. 719 opt-out] may no longer be
just and reasonable.'' \75\ To ensure an adequate opportunity for
interested entities to comment on the Order No. 719 opt-out in light of
our decision to set aside Order No. 2222-A in part, concurrently with
this decision, the Commission is issuing a notice extending the comment
periods in Docket No. RM21-14-000.\76\
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\72\ See, e.g., North Carolina Commission Request for Rehearing
at 2-3 (quoting 2010 North Carolina Commission decision ordering
that ``under North Carolina law and its traditional regulatory
structure, Dominion's retail customers cannot participate in PJM's
wholesale markets through its demand response programs individually
or through aggregation by a third party not regulated by the
Commission''); Southern Regulators Request for Rehearing at 11 n.33
(citing Notice of Intent of Entergy Mississippi, LLC to Change Rates
by Filing Market Valued Demand Response Rider, 2019 WL 5212152, at
*1 (Miss. Pub. Serv. Comm'n Sept. 10, 2019) (``The Commission
further finds that [Market Valued Demand Response] Schedule MVDR-1
is the only vehicle through which end-use retail customers and/or
[aggregators of retail customers] will be permitted to participate
as DR resources in the MISO wholesale market. Entergy Mississippi
will be the sole Market Participant [ ] in MISO for all DR resources
provided by Participants in [Entergy Mississippi's] service
territory.'')).
\73\ Compare Order No. 2222-A, 174 FERC ] 61,197 (Christie,
Comm'r, dissenting at P 6) (``Providing such flexibility to the
states and other RERRAs [to fully opt-out] would allow them to
manage the deployment of behind-the-meter [distributed energy
resources] in ways necessary to meet their own unique
challenges.''); NARUC Request for Rehearing at 6-7 (arguing that the
Commission in Order No. 2222-A took away the authority of those
states that had regulations that applied to wholesale market
participation of demand response aggregations on the distribution
system or behind the meter); with Order No. 2222-A, 174 FERC ]
61,197 at P 23 (``find[ing] that extending the Order No. 719 opt-out
to demand response resources in heterogeneous distributed energy
resource aggregations would undermine the potential of Order No.
2222 to break down barriers to competition'').
\74\ For example, the Commission in the NOI asked: ``What are
the potential benefits of removing the [Order No. 719 opt-out],
including any benefits not considered by the Commission in Order
Nos. 719 and 719-A, and considering any changed circumstances that
may be relevant?'' Participation of Aggregators of Retail Demand
Response Customers in Markets Operated by Regional Transmission
Organizations and Independent System Operators, 86 FR 15933 (Mar.
25, 2021), 174 FERC ] 61,198, at P 24 (2021) (question five)
(emphasis added); see id. P 25 (question 9) (``To what extent has
the [Order No. 719 opt-out] prevented interference with the
operation of existing retail demand response programs, or avoided
placing an undue burden on state and local retail regulatory
entities, as noted in Order No. 719?''); id. P 24 (question 6)
(``What are the potential benefits of creating more consistency
between the participation models for [aggregators of retail
customers] and distributed energy resource aggregators by removing
the [Order No. 719 opt-out]? In light of market participation
opportunities for energy efficiency resources, electric storage
resources, and distributed energy resource aggregations, would
eliminating the [Order No. 719 opt-out] established in Order Nos.
719 and 719-A enhance clarity for market participants and prevent
disputes regarding the eligibility of resource aggregations to
participate in wholesale markets?''); id. (question 8) (``Is there
any other evidence to suggest that RTO/ISO market rules reflecting
the [Order No. 719 opt-out] are no longer just and reasonable?'').
\75\ Id. P 21.
\76\ Notice of Extension of Time for Filing Initial and Reply
Comments, Participation of Aggregators of Retail Demand Response
Customers in Markets Operated by Regional Transmission Organizations
and Independent System Operators, Docket No. RM21-14-000 (June 17,
2021) (extending time to and including July 23, 2021 to file initial
comments, and to and including August 23, 2021 to file reply
comments).
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29. Because we set aside our prior decision in Order No. 2222-A to
not extend the Order No. 719 opt-out to demand response resources that
participate in heterogeneous distributed energy resource aggregations,
we find that, as the Commission stated in Order No. 2222, ``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. Therefore, if the relevant electric retail
regulatory authority where a demand response resource is located has
either chosen to opt out or has not opted in [pursuant to Order Nos.
719 and 719-A], then the demand response resource may not participate
in a distributed energy resource aggregation.'' \77\
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\77\ Order No. 2222, 172 FERC ] 61,247 at P 145.
---------------------------------------------------------------------------
B. Definition of Demand Response for Purposes of Applying the Order No.
719 Opt-Out to Heterogeneous Distributed Energy Resource Aggregations
30. Order No. 2222 requires each RTO/ISO to revise its tariff to
allow market participation by heterogeneous distributed energy resource
aggregations.\78\ The Commission found that requiring each RTO/ISO to
allow heterogeneous aggregations will further enhance competition in
RTO/ISO markets by ensuring that complementary resources, including
those with different physical and operational characteristics, can meet
qualification and performance requirements such as minimum run times,
which will help ensure that these markets produce just and reasonable
rates.
---------------------------------------------------------------------------
\78\ Id. P 142.
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31. In Order No. 2222-A, for purposes of applying the opt-out, the
Commission clarified the definition of heterogeneous aggregations as
``those that are made up of different types of resources including
demand response as opposed to those made up solely of demand
response.'' \79\ The Commission found that ``[t]he opt-out will
continue to apply to aggregations made up solely of resources that
participate as demand response resources, consistent with [its]
regulations'' (i.e., consistent with the opt-out requirements of Order
No. 719). The Commission clarified that, ``if an individual distributed
energy resource can be configured to engage in either demand response
or injection of energy onto the grid to make wholesale sales (e.g., a
behind-the-meter generator), it may choose to participate in the
wholesale markets by reducing a customer's metered load on the grid
from the customer's expected consumption (i.e., as a demand response
resource subject to Order No. 719) or it may choose to participate by
injecting energy onto the grid to make wholesale sales (i.e., as a
different type of distributed energy resource).'' \80\ The Commission
stated that, ``if a distributed energy resource aggregation is composed
solely of resources that participate as demand response resources, then
the Order No. 719 opt-out would apply to that aggregation.'' But, the
Commission stated, ``if a distributed energy resource aggregation
contains any resources that participate as another type of distributed
energy resource, then the Order No. 719 opt-out would not apply to that
aggregation.''
---------------------------------------------------------------------------
\79\ Order No. 2222-A, 174 FERC ] 61,197 at P 22.
\80\ Id. P 29.
---------------------------------------------------------------------------
a. Request for Clarification
32. Voltus requests clarification that demand response paired with
a behind-the-meter distributed energy resource constitutes a
heterogeneous distributed energy resource aggregation not subject to
the Order No. 719 opt-out.\81\ Voltus argues that the Commission stated
that resources ``made up solely of demand response'' are subject to the
opt-out. Voltus maintains that the Commission could have easily stated
that demand response paired with behind-the-meter distributed energy
resources to reduce load is a demand response resource subject to the
opt-out, but it did not draw this distinction.\82\
---------------------------------------------------------------------------
\81\ Voltus Request for Clarification at 1, 4.
\82\ Id. at 5.
---------------------------------------------------------------------------
33. Voltus argues that clarification is necessary because paragraph
29 of Order No. 2222-A has caused MISO to propose that an aggregation
of demand response using behind-the-meter generation and/or storage to
reduce load would be subject to the Order No. 719 opt-out.\83\ Voltus
argues that this conclusion is based on an overly broad reading of a
single paragraph, which draws no distinction regarding whether a
distributed energy resource acts to reduce load. Voltus maintains that
it would be needlessly complicated if a resource could evade the opt-
out because it is configured to inject but never actually does.\84\
---------------------------------------------------------------------------
\83\ Id. at 1, 4, 5.
\84\ Id. at 5.
---------------------------------------------------------------------------
34. Voltus argues that classifying demand response paired with
behind-the-meter resources as a heterogeneous aggregation is consistent
with AEE/AEMA's request for clarification that a behind-the-meter
distributed energy resource used to serve onsite load should be paid at
the locational marginal price (LMP), as required by Order No. 745.
Voltus argues that LMP payments are proper because Order No. 2222-A did
not change Order No. 745's payment structure for resources that reduce
load to the bulk power system.\85\
---------------------------------------------------------------------------
\85\ Id. at 6.
---------------------------------------------------------------------------
b. Commission Determination
35. Because we set aside the Commission's decision in Order No.
2222-A to decline to extend the Order No. 719 opt-out to heterogeneous
distributed energy resource aggregations, we find that Voltus's request
for clarification is largely moot.
36. Nevertheless, with respect to potential confusion underlying
Voltus's request for clarification, we note that the Commission has
stated previously that load reductions in demand response programs can
be facilitated by a variety of technologies and still constitute demand
response.\86\ Thus, we clarify
[[Page 33859]]
that a behind-the-meter resource that is solely used to facilitate
demand response, i.e., deployed solely to reduce customer load from
expected consumption, would itself be considered a demand response
resource.\87\
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\86\ See, e.g., Demand Response Supporters v. N.Y. Indep. Sys.
Operator, Inc., 155 FERC ] 61,151, at P 13 (2016) (``[A] reduction
in metered load on the grid, even a reduction facilitated by behind-
the-meter generation, is still a reduction and thus is appropriately
considered demand response as defined in section 35.28(d)(4).'');
Demand Response Compensation in Organized Wholesale Energy Markets,
Order No. 745, 76 FR 16658 (Mar. 24, 2011), 134 FERC ] 61,187, order
on reh'g and clarification, Order No. 745-A, 137 FERC ] 61,215, at P
66 (2011), reh'g denied, Order No. 745-B, 138 FERC ] 61,148 (2012),
vacated sub nom. Elec. Power Supply Ass'n v. FERC, 753 F.3d 216
(D.C. Cir. 2014), rev'd & remanded sub nom. EPSA, 136 S. Ct. 760
(``[T]he manner in which a customer is able to produce such a load
reduction from its validly established baseline (whether by shifting
production, using internal generation, consuming less electricity,
or other means) does not change the effect or value of the reduction
to the wholesale grid.'').
\87\ See 18 CFR 35.28(b)(4).
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C. Double Counting and Compensation for Behind-the-Meter Distributed
Energy Resources That Reduce Load
37. In Order No. 2222, the Commission clarified that the
requirements in Order No. 745 would apply to demand response resources
participating in heterogeneous aggregations.\88\ The Commission also
stated that ``this final rule does not affect existing demand response
rules.'' \89\ In Order No. 2222-A, the Commission stated that ensuring
that demand response resources can combine with other forms of
distributed energy resources has the potential to increase both the
number and the variety of distributed energy resource aggregations,
thereby enhancing competition and furthering its mandate to ensure that
Commission-jurisdictional rates are just and reasonable.\90\
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\88\ Order No. 2222, 172 FERC ] 61,247 at P 145. In Order No.
2222, the Commission stated that ``[d]emand response means a
reduction in the consumption of electric energy by customers from
their expected consumption in response to an increase in the price
of electric energy or to incentive payments designed to induce lower
consumption of electric energy.'' Id. P 2 n.8 (citing 18 CFR
35.28(b)(4)).
\89\ Id. P 118.
\90\ Order No. 2222-A, 174 FERC ] 61,197 at P 25 (citing 16
U.S.C. 824e).
---------------------------------------------------------------------------
38. With respect to double counting, the Commission in Order No.
2222 required each RTO/ISO to include any appropriate restrictions on
distributed energy resource participation in RTO/ISO markets through
distributed energy resource aggregations, if narrowly designed to avoid
counting more than once the services provided by distributed energy
resources in RTO/ISO markets.\91\ The Commission stated that, for
instance, if a distributed energy resource is offered into an RTO/ISO
market and is not added back to a utility's or other load serving
entity's load profile, then that resource will be double counted as
both load reduction and a supply resource.\92\ In Order No. 2222-A, the
Commission clarified that, when the Commission stated that ``if a
distributed energy resource is offered into an RTO/ISO market and is
not added back to a utility's or other load serving entity's load
profile, then that resource will be double counted as both load
reduction and a supply resource,'' \93\ the Commission was indicating
that, for planning purposes, double counting of services would occur if
the same distributed energy resource reduces the amount of a service
that an RTO/ISO procures on a forward-looking basis in a certain time
period while also acting as a provider of that same service in that
same delivery period.
---------------------------------------------------------------------------
\91\ Order No. 2222, 172 FERC ] 61,247 at PP 160-161.
\92\ Id. P 161.
\93\ Order No. 2222-A, 174 FERC ] 61,197 at P 63 (citing Order
No. 2222, 172 FERC ] 61,247 at P 161).
---------------------------------------------------------------------------
a. Request for Clarification or Rehearing
39. AEE/AEMA seek clarification--or, in the alternative,
rehearing--that behind-the-meter distributed energy resources used to
serve onsite load, therefore reducing power consumption from the bulk
power system, should be compensated at full locational marginal price
(LMP) in compliance with Order No. 745 with no need to eliminate retail
savings generated by the distributed energy resource, and that payment
of full LMP to behind-the-meter distributed energy resources does not
constitute double counting.\94\ AEE/AEMA ask the Commission to confirm
that double counting does not occur when a distributed energy resource
participating in an aggregation 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.\95\
---------------------------------------------------------------------------
\94\ AEE/AEMA Request for Clarification at 2-3, 5-6.
\95\ Id. at 2, 5.
---------------------------------------------------------------------------
40. AEE/AEMA maintain that the Supreme Court in EPSA held that the
Commission has authority to authorize RTOs/ISOs to pay demand response
resources full LMP.\96\ AEE/AEMA contend that the Commission has
clarified that payment of full LMP to demand response resources does
not constitute double counting--regardless of the existence of behind-
the-meter distributed energy resources or other manner of load
reduction to the bulk power system.\97\ AEE/AEMA argue that the
principles of Order No. 745 apply to all reductions in load from the
perspective of the bulk power system, regardless of the method or
methods used to achieve that reduction, even though Order No. 2222
defined demand response resources more narrowly as reductions to usage
by a customer.\98\
---------------------------------------------------------------------------
\96\ Id. at 3-4 (citing EPSA, 136 S. Ct. 760).
\97\ Id. at 4 (citing Order No. 745, 134 FERC ] 61,187 at PP 64,
66).
\98\ Id. at 5 (citing Order No. 745-A, 137 FERC ] 61,215 at P
66; Order No. 2222, 172 FERC ] 61,247 at P 2 n.8).
---------------------------------------------------------------------------
41. AEE/AEMA state that their members are encountering continued
confusion in ongoing RTO/ISO stakeholder processes regarding the double
counting restrictions in Order No. 2222, specifically regarding
compensation for wholesale market services provided by
aggregations.\99\ AEE/AEMA argue that, absent clarification, RTO/ISO
compliance submissions may not fully comply with Order Nos. 745 and
2222-A and may result in significant stakeholder discussions that could
delay implementation of new participation rules and deployment of
distributed energy resources.\100\ AEE/AEMA assert that Order No. 2222
proposals that pay demand response resources less than full LMP would
not enhance competition or ensure just and reasonable rates.\101\
---------------------------------------------------------------------------
\99\ Id. at 2, 6.
\100\ Id. at 6.
\101\ Id.
---------------------------------------------------------------------------
b. Commission Determination
42. We grant, in part, AEE/AEMA's request for clarification. As an
initial matter, we disagree with AEE/AEMA's claim that Order No. 2222
modified the definition of demand response. In Order Nos. 745 and 2222,
the Commission cited to the same definition of demand response
contained in the Commission's regulations.\102\ Further, we disagree
with AEE/AEMA's suggestion that all reductions in load from the
perspective of the bulk power system should be compensated consistent
with Order No. 745. Only those reductions that meet the definition of
demand response in the Commission's regulations and are used to reduce
customer load from a validly established baseline pursuant to Order
Nos. 745 and 745-A must be compensated consistent with those
orders.\103\
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\102\ Order No. 745, 134 FERC ] 61,187 at P 2 n.2; Order No.
2222, 172 FERC ] 61,247 at P 2 n.8 (citing 18 CFR 35.28(b)(4))
(``Demand response means a reduction in the consumption of electric
energy by customers from their expected consumption in response to
an increase in the price of electric energy or to incentive payments
designed to induce lower consumption of electric energy.'').
\103\ See supra P 36.
---------------------------------------------------------------------------
43. We clarify that payment of full LMP in the energy market to
behind-the-
[[Page 33860]]
meter distributed energy resources participating as demand response
resources in distributed energy resource aggregations does not
constitute double counting, so long as the requirements of Order No.
745, including the net benefits test, are satisfied.\104\ Order No.
2222 provided that the requirements of Order No. 745 apply to demand
response resources participating in heterogeneous aggregations.\105\ In
Order No. 745, the Commission found that when a demand response
resource is participating in an RTO/ISO market and dispatch of that
demand response resource is cost-effective as determined by the net
benefits test, that demand response resource must be compensated in the
energy market at the LMP.\106\ Accordingly, in circumstances in which
the net benefits test is satisfied, paying LMP to behind-the-meter
distributed energy resources participating as demand response resources
in distributed energy resource aggregations, without reflecting the
savings load realized from not having to purchase electricity, does not
reflect a double payment.\107\ We will evaluate, on compliance, any
proposed distributed energy resource aggregation compensation rules
regarding demand response for consistency with the requirements of
Order No. 745. However, with respect to compensation issues beyond the
scope of Order No. 745, such as if a behind-the-meter resource
participates as another type of distributed energy resource, we will
not prejudge RTO/ISO proposals but rather evaluate them on compliance.
---------------------------------------------------------------------------
\104\ See Order No. 2222, 172 FERC ] 61,247 at P 145.
\105\ Id.
\106\ Order No. 745-A, 137 FERC ] 61,215 at P 64 (citing Order
No. 745, 134 FERC ] 61,187 at P 61).
\107\ See id.
---------------------------------------------------------------------------
44. With respect to the participation of demand response resources
in distributed energy resource aggregations, we clarify that, if an
individual distributed energy resource is a behind-the-meter generator,
it may participate within a distributed energy resource aggregation as
a demand response resource or as a different type of distributed energy
resource. If the distributed energy resource participates as demand
response, the requirements in Order No. 745 would apply, and the RTOs/
ISOs are required to allow that distributed energy resource to
aggregate with other types of distributed energy resources in a
heterogeneous distributed energy resource aggregation.\108\ If the
behind-the-meter resource participates as another type of distributed
energy resource (i.e., not as a demand response resource), the
requirements in Order No. 745 would not apply.
---------------------------------------------------------------------------
\108\ See Order No. 2222, 172 FERC ] 61,247 at P 142 (requiring
RTOs/ISOs to allow heterogeneous DER aggregations); id. P 145
(clarifying that the requirements in Order No. 745 apply to demand
response resources participating in heterogeneous aggregations).
---------------------------------------------------------------------------
45. We reiterate, however, that we will evaluate each RTO's/ISO's
``proposal submitted on compliance to determine whether it meets the
goals of this final rule to allow distributed energy resources to
provide all services that they are technically capable of providing
through aggregation,'' \109\ and accordingly, whether it appropriately
compensates distributed energy resources for providing such services.
---------------------------------------------------------------------------
\109\ Order No. 2222, 172 FERC ] 61,247 at P 130.
---------------------------------------------------------------------------
III. Information Collection Statement
46. The burden estimates have not changed from the final rule.
IV. Regulatory Flexibility Act
47. The Regulatory Flexibility Act of 1980 (RFA) \110\ generally
requires a description and analysis of final rules that will have
significant economic impact on a substantial number of small entities.
Pursuant to section 605(b) of the RFA, we still conclude that this rule
will not have a significant economic impact on a substantial number of
small entities.
---------------------------------------------------------------------------
\110\ 5 U.S.C. 601-612.
---------------------------------------------------------------------------
V. Document Availability
48. In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
internet through the Commission's Home Page (<a href="http://www.ferc.gov">http://www.ferc.gov</a>). At
this time, the Commission has suspended access to the Commission's
Public Reference Room due to the President's March 13, 2020
proclamation declaring a National Emergency concerning the Novel
Coronavirus Disease (COVID-19).
49. From the Commission's Home Page on the internet, this
information is available on eLibrary. The full text of this document is
available on eLibrary in PDF and Microsoft Word format for viewing,
printing, and/or downloading. To access this document in eLibrary, type
the docket number excluding the last three digits of this document in
the docket number field.
50. User assistance is available for eLibrary and the Commission's
website during normal business hours from FERC Online Support at (202)-
502-6652 (toll free at 1-866-208-3676) or email at
<a href="/cdn-cgi/l/email-protection#670102150408090b0e090214121717081513270102150449000811"><span class="__cf_email__" data-cfemail="e98f8c9b8a86878580878c9a9c9999869b9da98f8c9b8ac78e869f">[email protected]</span></a>, or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at
<a href="/cdn-cgi/l/email-protection#116164737d78723f6374777463747f7274637e7e7c51777463723f767e67"><span class="__cf_email__" data-cfemail="25555047494c460b5740434057404b4640574a4a4865434057460b424a53">[email protected]</span></a>.
VI. Effective Date and Congressional Notification
51. This rule is effective August 27, 2021.
By the Commission.
Commissioner Chatterjee is concurring with a separate statement
attached.
Commissioner Danly is concurring with a separate statement
attached.
Commissioner Christie is concurring in part and dissenting in part
with a separate statement attached.
Issued: June 17, 2021.
Debbie-Anne A. Reese,
Deputy Secretary.
Department of Energy
Federal Energy Regulatory Commission
Participation of Distributed Energy Resource Aggregations in Markets
Operated by Regional Transmission Organizations and Independent System
Operators
Docket No. RM18-9-003
CHATTERJEE, Commissioner, concurring:
1. I concur with today's order because it continues to find that
the Commission was under no legal obligation to provide the Order No.
719 opt-out.\1\
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\1\ Participation of Distributed Energy Resource Aggregations in
Markets Operated by Regional Transmission Organizations and
Independent System Operators, Order No. 2222-B, 175 FERC ] 61,227 at
P 27 (2021). See Order No. 2222, 172 FERC ] 61,247 at P 59
(explaining that the Commission was not obligated to provide an opt-
out in Order No. 719 but did so as an exercise of its discretion);
see also NARUC, 964 F.3d at 1187 (``[B]ecause FERC has the exclusive
authority to determine who may participate in the wholesale markets,
the Supremacy Clause . . . requires that [s]tates not interfere.'').
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2. I write separately to reiterate and emphasize my support for
eliminating the Order No. 719 opt-out, which has for years prevented
demand response resources in many states from participating in our
wholesale markets. The outdated Order No. 719 opt-out cannot be
reconciled with the competitive principles underpinning Order No. 2222
and the Commission's statutory responsibility to ensure rates subject
to the Commission's jurisdiction are just and reasonable and not unduly
discriminatory or preferential.\2\ There is no reasonable explanation
as to why the Commission should maintain the Order No. 719 opt-out and
treat demand response resources differently from all other distributed
energy resources.
[[Page 33861]]
Accordingly, to ensure consumers can realize the full benefits of Order
No. 2222 and the wholesale market services demand response resources
can provide, I urge the Commission to press forward to eliminate the
Order No. 719 opt-out once and for all.
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\2\ 16 U.S.C. 824e.
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For these reasons, I respectfully concur.
Neil Chatterjee,
Commissioner.
Department of Energy
Federal Energy Regulatory Commission
Participation of Distributed Energy Resource Aggregations in Markets
Operated by Regional Transmission Organizations and Independent System
Operators
Docket No. RM18-9-003
DANLY, Commissioner, concurring:
1. I agree with the Commission's order today granting rehearing to
extend the states' existing rights to opt-out of wholesale demand
response programs \1\ including demand response resources that
participate in ``heterogeneous distributed energy resource
aggregations.'' \2\ In other words, states can choose to prohibit
demand response resources within their boundaries from participating in
multi-state, wholesale distributed energy resource programs. This order
represents the correct division of authority between state and federal
jurisdiction.
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\1\ See Wholesale Competition in Regions with Organized Electric
Markets, Order No. 719, 125 FERC ] 61,071, at P 155 (2008), order on
reh'g, Order No. 719-A, 128 FERC ] 61,059, order on reh'g, Order No.
719-B, 129 FERC ] 61,252 (2009).
\2\ Participation of Distributed Energy Res. Aggregations in
Mkts. Operated by Reg'l Transmission Orgs. & Indep. Sys. Operators,
175 FERC ] 61,227, at P 26 (2021) (Order).
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2. I write separately to highlight that even if the Commission is
correct that it has jurisdiction over distributed energy resource
aggregations--including those ``aggregations'' comprised of a single
resource \3\--the Commission still should have chosen not to exercise
such jurisdiction in Order No. 2222.\4\ This order on rehearing returns
authority over demand response resources--which often are included in
distributed energy resource aggregations--to the states, letting the
states choose whether demand response resources can participate in
wholesale distributed energy resource aggregations. This correctly
preserves the traditional allocation of authority between the
individual states and the federal government.
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\3\ See Participation of Distributed Energy Res. Aggregations in
Mkts. Operated by Reg'l Transmission Orgs. & Indep. Sys. Operators,
Order No. 2222, 85 FR 67,094 (Oct. 21, 2020), 172 FERC ] 61,247, at
P 1 n.1 (2020), corrected, 85 FR 68,450 (Oct. 29, 2020), order on
reh'g, Order No. 2222-A, 174 FERC ] 61,197 (2021) (Danly, Comm'r,
dissenting) (discussing single resource ``aggregations''); 18 CFR
35.28(b)(10) (2020).
\4\ See Order, 175 FERC ] 61,227 at P 27 (discussing case law on
jurisdiction).
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For these reasons, I respectfully concur.
James P. Danly,
Commissioner.
Department of Energy
Federal Energy Regulatory Commission
Participation of Distributed Energy Resource Aggregations in Markets
Operated by Regional Transmission Organizations and Independent System
Operators
Docket No. RM18-9-003
CHRISTIE, Commissioner, concurring in part and dissenting in part:
1. I concur with the first sentence of Paragraph 26 and other
provisions of the order which set ``aside our prior decision [in Order
No. 2222-A] not to extend the Order No. 719 opt-out to demand response
resources that participate in heterogeneous distributed energy resource
aggregations . . . .'' \1\
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\1\ Participation of Distributed Energy Resource Aggregations in
Markets Operated by Regional Transmission Organizations and
Independent System Operators, Order No. 2222, 85 FR 67094 (Oct. 1,
2020), 172 FERC ] 61,247 (2020), corrected, 85 FR 68450 (Oct. 29,
2020), order on reh'g, Order No. 2222-A, 174 FERC 61,197 (2021),
order on reh'g and clarification, Order No. 2222-B, 175 FERC ]
61,227, at P 26 (2021).
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2. As the second sentence in Paragraph 26 and other provisions in
today's order indicate, however, there is no decision affirmatively to
preserve those Order No. 719 opt-out provisions; \2\ on the contrary,
the prospect of ultimately removing even these opt-out provisions is
very much alive as a result of the NOI proceeding in Docket No. RM21-
14-000.\3\
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\2\ Order No. 2222-B at P 26.
\3\ Participation of Aggregators of Retail Demand Response
Customers in Markets Operated by Regional Transmission Organizations
and Independent System Operators, Notice of Inquiry, 174 FERC ]
61,198 (2021) (NOI); see also Order No. 2222-B at P 28.
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3. Beyond the parts of this order that restore, at least
temporarily, those opt-out provisions, I dissent from the remainder of
the order, because I would have voted against Order No. 2222 had I been
a member of the Commission at that time and I did vote against Order
No. 2222-A. As I said in my dissent to the latter:
Today the majority . . . sides against the consumers who for years
to come will almost surely pay billions of dollars for grid
expenditures likely to be rate-based in the name of ``Order 2222
compliance.''
. . .
Sadly, instead of making the states, municipal and public-power
authorities and electric co-operatives truly equal partners in managing
the timing and conditions of deployment of behind-the-meter DERs in
ways that are sensitive to local needs and challenges--both technical
and economic--today's order denies them any meaningful control by
prohibiting any opt-out or opt-in options except in relatively tiny
circumstances. This order--and its predecessor--intentionally seize
from the states and other authorities their historic authority to
balance the competing interests of deploying new technologies while
maintaining grid reliability and protecting consumers from unaffordable
costs . . . .\4\
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\4\ Order No. 2222-A (Christie, Comm'r, dissenting at PP 1, 3
(emphasis in original) (footnotes omitted) (available at <a href="https://www.ferc.gov/news-events/news/item-e-1-commissioner-mark-c-christie-dissent-regarding-participation-distributed">https://www.ferc.gov/news-events/news/item-e-1-commissioner-mark-c-christie-dissent-regarding-participation-distributed</a>)).
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4. To ameliorate at least some of the damaging effects caused by
Order Nos. 2222 and 2222-A, I would authorize states and other RERRAs
the right to exercise an opt-out from the requirements of those orders,
if not permanently then at least for some period of years to enable
them better to prepare for the impacts on retail customers and
distribution grids they now face.
For these reasons, I respectfully concur in part and dissent in
part.
Mark C. Christie,
Commissioner.
[FR Doc. 2021-13442 Filed 6-25-21; 8:45 am]
BILLING CODE 6717-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.