[Federal Register Volume 81, Number 230 (Wednesday, November 30, 2016)]
[Proposed Rules]
[Pages 86522-86550]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28194]



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Vol. 81

Wednesday,

No. 230

November 30, 2016

Part IV





Department of Energy





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Federal Energy Regulatory Commission





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18 CFR Part 35





Electric Storage Participation in Markets Operated by Regional 
Transmission Organizations and Independent System Operators; Proposed 
Rule

  Federal Register / Vol. 81 , No. 230 / Wednesday, November 30, 2016 / 
Proposed Rules  

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 35

[Docket Nos. RM16-23-000; AD16-20-000]


Electric Storage Participation in Markets Operated by Regional 
Transmission Organizations and Independent System Operators

AGENCY: Federal Energy Regulatory Commission, Department of Energy.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is 
proposing to amend its regulations under the Federal Power Act (FPA) to 
remove barriers to the participation of electric storage resources and 
distributed energy resource aggregations in the capacity, energy, and 
ancillary service markets operated by regional transmission 
organizations (RTO) and independent system operators (ISO) (organized 
wholesale electric markets).

DATES: Comments are due January 30, 2017.

ADDRESSES: Comments, identified by docket number, may be filed in the 
following ways:
     Electronic Filing through http://www.ferc.gov. Documents 
created electronically using word processing software should be filed 
in native applications or print-to-PDF format and not in a scanned 
format.
     Mail/Hand Delivery: Those unable to file electronically 
may mail or hand-deliver comments to: Federal Energy Regulatory 
Commission, Secretary of the Commission, 888 First Street NE., 
Washington, DC 20426.

    Instructions: For detailed instructions on submitting comments and 
additional information on this process, see the Comment Procedures 
Section of this document.

FOR FURTHER INFORMATION CONTACT: 

Michael Herbert (Technical Information), Office of Energy Policy and 
Innovation, Federal Energy Regulatory Commission, 888 First Street NE., 
Washington, DC 20426, (202) 502-8929, [email protected].
Heidi Nielsen (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street NE., Washington, 
DC 20426, (202) 502-8435, [email protected].

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Introduction
II. Background
    A. Electric Storage Resource and Distributed Energy Resource 
Aggregation Participation in Organized Wholesale Electric Markets
    B. The Need for Reform
III. Discussion
    A. Elimination of Barriers to Electric Storage Resource 
Participation in Organized Wholesale Electric Markets
    1. Creation of a Participation Model for Electric Storage 
Resources
    i. Introduction
    ii. Current Rules
    iii. Comments
    iv. Proposed Reforms
    2. Requirements for the Participation Model for Electric Storage 
Resources
    a. Eligibility To Participate in Organized Wholesale Electric 
Markets
    i. Introduction
    ii. Current Rules
    iii. Comments
    iv. Proposed Reforms
    b. Bidding Parameters for Electric Storage Resources
    i. Introduction
    ii. Current Rules
    iii. Comments
    iv. Proposed Reforms
    c. Eligibility To Participate as a Wholesale Seller and 
Wholesale Buyer
    i. Introduction
    ii. Current Rules
    iii. Proposed Reforms
    d. Minimum Size Requirement
    i. Introduction
    ii. Current Rules
    iii. Comments
    iv. Proposed Reforms
    e. Energy Used To Charge Electric Storage Resources
    i. Introduction
    ii. Current Rules
    iii. Comments
    iv. Proposed Reforms
    B. Participation of Distributed Energy Resource Aggregators in 
the Organized Wholesale Electric Markets
    1. Introduction
    2. Current Rules
    3. Comments
    4. Proposed Reforms
    a. Eligibility To Participate in the Organized Wholesale 
Electric Markets Through a Distributed Energy Resource Aggregator
    b. Locational Requirements for Distributed Energy Resource 
Aggregations
    c. Distribution Factors and Bidding Parameters for Distributed 
Energy Resource Aggregations
    d. Information and Data Requirements for Distributed Energy 
Resource Aggregations
    e. Modifications to the List of Resources in a Distributed 
Energy Resource Aggregation
    f. Metering and Telemetry System Requirements for Distributed 
Energy Resource Aggregations
    g. Coordination Between the RTO/ISO, the Distributed Energy 
Resource Aggregator, and the Distribution Utility
    h. Market Participation Agreements for Distributed Energy 
Resource Aggregators
IV. Compliance
V. Information Collection Statement
VI. Regulatory Flexibility Act Certification
VII. Environmental Analysis
VIII. Comment Procedures
IX. Document Availability

I. Introduction

    1. In this Notice of Proposed Rulemaking (NOPR), the Federal Energy 
Regulatory Commission (Commission) is proposing reforms to remove 
barriers to the participation of electric storage resources \1\ and 
distributed energy resource \2\ aggregations in the organized wholesale 
electric markets.\3\ Specifically, we propose to require each RTO and 
ISO to revise its tariff to (1) establish a participation model 
consisting of market rules that, recognizing the physical and 
operational characteristics of electric storage resources, accommodates 
their participation in the organized wholesale electric markets and (2) 
define distributed energy resource aggregators as a type of market 
participant that can participate in the organized wholesale electric 
markets under the participation model that best accommodates the 
physical and operational characteristics of its distributed energy 
resource aggregation. We are taking this action pursuant to our legal 
authority under section 206 of the FPA to ensure that the RTO/ISO 
tariffs are just and reasonable and not unduly discriminatory or 
preferential.\4\
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    \1\ We define an electric storage resource as a resource capable 
of receiving electric energy from the grid and storing it for later 
injection of electricity back to the grid regardless of where the 
resource is located on the electrical system. These resources 
include all types of electric storage technologies, regardless of 
their size, storage medium (e.g., batteries, flywheels, compressed 
air, pumped-hydro, etc.), or whether located on the interstate grid 
or on a distribution system.
    \2\ We define distributed energy resources as a source or sink 
of power that is located on the distribution system, any subsystem 
thereof, or behind a customer meter. These resources may include, 
but are not limited to, electric storage resources, distributed 
generation, thermal storage, and electric vehicles and their supply 
equipment.
    \3\ We define, for present purposes, organized wholesale 
electric markets as the capacity, energy, and ancillary service 
markets operated by regional transmission organizations (RTO) and 
independent system operators (ISO).
    \4\ 16 U.S.C. 824e (2012).
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    2. Resource participation in the organized wholesale electric 
markets is currently governed by (1) participation models \5\ 
consisting of market rules designed for different types of resources 
and (2) the technical requirements for

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market services that those resources are eligible to provide. Each RTO/
ISO establishes the participation models for different types of 
resources and the technical requirements for providing services in a 
slightly different way. Sometimes RTO/ISO participation models place 
limitations on the services that certain types of resources are 
eligible to provide. For example, Stored Energy Resources are only 
allowed to provide regulation service in the Midcontinent Independent 
System Operator, Inc. (MISO). In addition, sometimes the technical 
requirements for providing a service may limit the types of resources 
that are able to provide it, such as the requirement for a resource to 
be running and synchronized to the grid to provide spinning reserves. 
Many tariffs were originally developed in an era when traditional 
generation resources were the only resources participating in the 
organized wholesale electric markets. As new and innovative resources 
have reached commercial maturity, RTOs/ISOs have updated their tariffs 
to establish participation models for these resources and, to some 
degree, reviewed the technical requirements for each service or 
determined which service the new resource could provide. If an RTO/ISO 
is not able to update its market rules before a new resource becomes 
commercially able to sell into the organized wholesale electric 
markets, the new resource may need to participate under one of the 
existing participation models developed for some other type of 
resource. Doing so may limit the market opportunities for new resources 
and correspondingly limit the potential supply of some services. For 
instance, some electric storage resources have chosen to participate as 
demand response resources simply because, absent other participation 
models, that is the participation model that more closely resembles the 
manner in which electric storage resources might participate in the 
organized wholesale electric markets. Further, new resources may have 
difficulty creating momentum for the market rule changes necessary to 
facilitate their participation and may thus need to spend considerable 
time and effort to gain entry to the organized wholesale electric 
markets. Where rules designed for traditional generation resources are 
applied to new technologies, where new technologies are required to fit 
into existing participation models, and where participation models 
focus on the eligibility of resources to provide services more so than 
the technical ability of resources to provide services, barriers can 
emerge to the participation of new technologies in the organized 
wholesale electric markets. We are therefore issuing this NOPR to 
address these barriers to the participation of electric storage 
resources and distributed energy resource aggregations in the organized 
wholesale electric markets.
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    \5\ We define a participation model as a set of tariff 
provisions that accommodate the participation of resources with 
particular physical and operational characteristics in the organized 
wholesale electric markets of the RTOs and ISOs.
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    3. First, we propose to require each RTO/ISO to revise its tariff 
to establish a participation model consisting of market rules that, 
recognizing the physical and operational characteristics of electric 
storage resources, accommodates their participation in the organized 
wholesale electric markets. As noted above, in this NOPR, we define a 
participation model as a set of tariff provisions that accommodate the 
participation of resources with particular physical and operational 
characteristics in the organized wholesale electric markets of the RTOs 
and ISOs.\6\ For example, the California Independent System Operator 
Corporation's (CAISO) tariff defines several participation models, 
including those for Participating Generators, Proxy Demand Resources, 
Reliability Demand Response Resources, and Non-Generator Resources. 
These participation models create unique rules for these different 
types of resources where they need to be distinguished from other types 
of market participants. For example, the CAISO Tariff defines Non-
Generator Resources as ``[r]esources that operate as either Generation 
or Load and that can be dispatched to any operating level within their 
entire capacity range but are also constrained by a MWh limit to (1) 
generate Energy, (2) curtail the consumption of Energy in the case of 
demand response, or (3) consume Energy.'' \7\ Since Non-Generator 
Resources are operationally unique, CAISO has created rules for them 
that include, but are not limited to, the requirement to enter into 
participating generator and participating load agreements to 
participate in the CAISO markets,\8\ the ability to participate in the 
Regulation Energy Management program,\9\ the conditions under which 
payments are rescinded due to MWh constraints,\10\ and the relevant 
bidding parameters.\11\ Given the unique attributes of electric storage 
resources, establishing a participation model consisting of market 
rules that acknowledge their unique attributes will enable them to 
effectively participate in the organized wholesale electric markets. 
This participation model could adapt existing market rules to 
incorporate the reforms proposed below and/or create a new set of rules 
to accommodate the participation of electric storage resources, 
depending on the existing market construct in each RTO/ISO.
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    \6\ See supra note 5.
    \7\ CAISO Response at 3 (citing CAISO Tariff, App. A).
    \8\ See CAISO Tariff, sections 4.6 and 4.7.
    \9\ See CAISO Tariff, section 8.4.1.2. Regulation Energy 
Management is a market feature for resources located within the 
CAISO Balancing Authority Area that require Energy from the Real-
Time Market to offer their full capacity as Regulation. CAISO 
Tariff, App. A (Definitions).
    \10\ See CAISO Tariff, sections 8.10.8.4 and 8.10.8.6.
    \11\ See CAISO Tariff, section 30.5.6.
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    4. The proposed participation model must (1) ensure that electric 
storage resources are eligible to provide all capacity, energy and 
ancillary services that they are technically capable of providing in 
the organized wholesale electric markets; (2) incorporate bidding 
parameters \12\ that reflect and account for the physical and 
operational characteristics of electric storage resources; (3) ensure 
that electric storage resources can be dispatched and can set the 
wholesale market clearing price as both a wholesale seller and 
wholesale buyer consistent with existing market rules that govern when 
a resource can set the wholesale price; (4) establish a minimum size 
requirement for participation in the organized wholesale electric 
markets that does not exceed 100 kW; and (5) specify that the sale of 
energy from the organized wholesale electric markets to an electric 
storage resource that the resource then resells back to those markets 
must be at the wholesale locational marginal price (LMP).
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    \12\ We refer to bidding parameters as the physical and 
operational constraints that a resource would identify per RTO/ISO 
requirements when submitting offers to sell capacity, energy, or 
ancillary services or bids to buy energy in the organized wholesale 
electric markets. Commission Staff referred to these as ``bid 
parameters'' in the Data Requests and Request for Comments issued on 
April 11, 2016 in Docket No. AD16-20-000.
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    5. Second, we propose to require each RTO/ISO to revise its tariff 
to allow distributed energy resource aggregators,\13\ including 
electric storage resources, to participate directly in the organized 
wholesale electric markets. Specifically, we propose to require each 
RTO/ISO to establish distributed energy resource aggregators as a type 
of market participant and allow the distributed energy resource 
aggregators to register distributed energy resource aggregations under 
the participation model in the

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RTO/ISO tariff that best accommodates the physical and operational 
characteristics of the distributed energy resource aggregation. We also 
propose to require that each RTO/ISO, to accommodate the participation 
of distributed energy resource aggregations in the organized wholesale 
electric markets, establish market rules on: (1) Eligibility to 
participate in the organized wholesale electric markets through a 
distributed energy resource aggregator; (2) locational requirements for 
distributed energy resource aggregations; (3) distribution factors and 
bidding parameters for distributed energy resource aggregations; (4) 
information and data requirements for distributed energy resource 
aggregations; (5) modifications to the list of resources in a 
distributed energy resource aggregation; (6) metering and telemetry 
system requirements for distributed energy resource aggregations; (7) 
coordination between the RTO/ISO, distributed energy resource 
aggregator, and the distribution utility; and (8) market participation 
agreements for distributed energy resource aggregators.
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    \13\ We define distributed energy resource aggregator as an 
entity that aggregates one or more distributed energy resources for 
purposes of participation in the organized wholesale capacity, 
energy, and ancillary service markets of the RTOs and ISOs.
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II. Background

A. Electric Storage Resource and Distributed Energy Resource 
Aggregation Participation in Organized Wholesale Electric Markets

    6. The Commission has an ongoing interest in removing barriers to 
resources that are technically capable of participating in the 
organized wholesale electric markets and has been monitoring electric 
storage resource participation in these markets for some time. In 2010, 
Commission Staff issued a Request for Comments Regarding Rates, 
Accounting and Financial Reporting for New Electric Storage 
Technologies related to alternatives for categorizing and compensating 
storage services and, in particular, ideas on how best to develop rate 
policies that accommodate the flexibility of storage, consistent with 
the FPA.\14\ Following that request, the Commission issued several 
rulemakings that have helped alleviate some of the barriers to electric 
storage resource participation in organized wholesale electric 
markets.\15\ In addition, the Commission has addressed electric 
storage-related issues on a case-by-case basis.\16\
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    \14\ Request for Comments Regarding Rates, Accounting and 
Financial Reporting for New Electric Storage Technologies, Docket 
No. AD10-13-000 (June 11, 2010).
    \15\ See, e.g., Frequency Regulation Compensation in the 
Organized Wholesale Power Markets, Order No. 755, FERC Stats. & 
Regs. ] 31,324 (2011), reh'g denied, Order No. 755-A, 138 FERC ] 
61,123 (2012) (addressing the provision of frequency regulation in 
organized wholesale electric markets); Third-Party Provision of 
Ancillary Services; Accounting and Financial Reporting for New 
Electric Storage Technologies, Order No. 784, FERC Stats. & Regs. ] 
31,349 (2013), order on clarification, Order No. 784-A, 146 FERC ] 
61,114 (2014) (addressing third-party sales of ancillary services in 
bilateral markets); Small Generator Interconnection Agreements and 
Procedures, Order No. 792, 145 FERC ] 61,159 (2013), clarifying, 
Order No. 792-A, 146 FERC ] 61,214 (2014) (addressing 
interconnection for small generators, including electric storage 
resources).
    \16\ See, e.g., California Indep. Sys. Operator Corp., 156 FERC 
] 61,110 (2016); Nev. Hydro Co., Inc., 122 FERC ] 61,272 (2008), 
reh'g denied, 133 FERC ] 61,155 (2010); Western Grid Development, 
LLC, 130 FERC ] 61,056, reh'g denied, 133 FERC ] 61,029 (2010); 
Midwest Indep. Trans. Sys. Operator, Inc., 129 FERC ] 61,303 (2009); 
New York Indep. Sys. Operator, Inc., 127 FERC ] 61,135 (2009); 
California Indep. Sys. Operator Corp., 132 FERC ] 61,211 (2010); PJM 
Interconnection L.L.C., 151 FERC ] 61,208, order on reh'g, 152 FERC 
] 61,064 (2015), order on reh'g and compliance, 155 FERC ] 61,157, 
order on reh'g and compliance, 155 FERC ] 61,260 (2016); PJM 
Interconnection, L.L.C., 132 FERC ] 61,203 (2010); Commonwealth 
Edison Co., 129 FERC ] 61,185, at P 8 (2009).
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    7. As the capabilities of electric storage resources and 
distributed energy resources continue to improve and their costs 
continue to decline, the Commission has become concerned that these 
resources may face barriers that limit them from participating in 
organized wholesale electric markets. To further examine this issue, 
the Commission hosted a panel to discuss electric storage resources at 
the November 19, 2015 Commission meeting. Subsequently, on April 11, 
2016, Commission Staff issued data requests to each of the six RTOs/
ISOs, seeking information about the rules in the organized wholesale 
electric markets that affect the participation of electric storage 
resources (Data Requests).\17\ Concurrently, Commission Staff issued a 
Request for Comments, seeking comments on whether barriers exist to the 
participation of electric storage resources in the organized wholesale 
electric markets that may potentially lead to unjust and unreasonable 
wholesale rates (Request for Comments). In addition to the responses 
from the RTOs/ISOs, Commission Staff received 44 sets of comments from 
the entities identified in Appendix A.
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    \17\ Specifically, Commission Staff requested information 
related to (1) the eligibility of electric storage resources to 
participate in the capacity, energy, and ancillary service markets 
in the RTOs/ISOs; (2) the technical qualification and performance 
requirements for market participants; (3) the bidding parameters for 
different types of resources; (4) opportunities for distribution-
level and aggregated electric storage resources to participate in 
the organized wholesale electric markets; (5) the treatment of 
electric storage resources when they are receiving electricity for 
later injection to the grid; and (6) any forthcoming rule changes or 
other stakeholder initiatives that may affect the participation of 
electric storage resources in the organized wholesale electric 
markets.
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    8. A number of RTOs/ISOs allow participation of distributed energy 
resources, including electric storage resources, in the organized 
wholesale electric markets through distributed energy resource 
aggregations. For example, CAISO's Distributed Energy Resource Provider 
model allows for the participation of aggregated distributed energy 
resources in the energy and ancillary service markets.\18\ Other RTOs/
ISOs, including PJM Interconnection, L.L.C. (PJM), MISO, New York 
Independent System Operator, Inc.'s (NYISO), and SPP, allow aggregation 
in limited circumstances, typically linked to the requirement that the 
demand-side, generation, and electric storage resources are located 
behind the same point of interconnection or pricing node.\19\ ISO New 
England Inc. (ISO-NE) also allows limited aggregations of generators, 
Alternative Technology Regulation Resources, Asset Related Demands, and 
demand resources subject to certain parameters.\20\
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    \18\ See California Indep. Sys. Operator Corp., 155 FERC ] 
61,229 (2016) (conditionally accepting tariff provisions to 
facilitate participation of aggregations of distribution-connected 
or distributed energy resources in CAISO's energy and ancillary 
service markets).
    \19\ See PJM Response at 20; MISO Response at 16; SPP Response 
at 7.
    \20\ ISO-NE Response at 26.
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B. The Need for Reform

    9. The Commission must ensure that the rates, terms and conditions 
of jurisdictional services under the FPA are just and reasonable and 
not unduly discriminatory or preferential. Our proposal in this 
proceeding is a continuation of efforts pursuant to our authority under 
the FPA to ensure that the RTO/ISO tariffs and market rules produce 
just and reasonable rates, terms and conditions of service.\21\ The 
Commission has observed that market rules designed for traditional 
generation resources can create barriers to entry for emerging 
technologies. The Commission has responded by promulgating rules that 
recognize the operational characteristics of non-traditional resources 
such as variable energy

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resources and demand response.\22\ For example, in Order No. 719, the 
Commission required each RTO/ISO to accept bids from demand response 
resources, on a basis comparable to any other resources, for ancillary 
services that are acquired in a competitive bidding process, if the 
demand response resources met certain criteria.\23\ In Order No. 764, 
the Commission took action to remedy operational and other challenges 
associated with the integration of variable energy resources caused by 
existing practices as well as the ancillary services used to manage 
system variability that were developed at a time when virtually all 
generation on the system could be scheduled with relative precision and 
when only load exhibited significant degrees of intra-hour 
variation.\24\
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    \21\ See, e.g., Integration of Variable Energy Resources, Order 
No. 764, FERC Stats. & Regs. ] 31,331, order on reh'g, Order No. 
764-A, 141 FERC ] 61,232 (2012), order on reh'g, Order No. 764-B, 
144 FERC ] 61,222 (2013); Wholesale Competition in Regions with 
Organized Electric Markets, Order No. 719, FERC Stats. & Regs. ] 
31,281 (2008), order on reh'g, Order No. 719-A, FERC Stats. & Regs. 
] 31,292 (2009), order on reh'g, Order No. 719-B, 129 FERC ] 61,252 
(2009).
    \22\ See, e.g., Order No. 764, FERC Stats. & Regs. ] 31,331; 
Order No. 719, FERC Stats. & Regs. ] 31,281.
    \23\ Order No. 719, FERC Stats. & Regs. ] 31,281 at PP 19, 47-
48.
    \24\ Order No. 764, FERC Stats. & Regs. ] 31,331.
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    10. In this proceeding, we propose to require RTOs/ISOs to address 
barriers to participation of electric storage resources in the 
organized wholesale electric markets. As noted above, in this NOPR, we 
define an electric storage resource as a resource capable of receiving 
electric energy from the grid and storing it for later injection of 
electricity back to the grid regardless of where the resource is 
located on the electrical system.\25\ These resources include all types 
of electric storage technologies, regardless of their size, storage 
medium (e.g., batteries, flywheels, compressed air, pumped-hydro, 
etc.), or whether located on the interstate grid or on a distribution 
system.\26\ Electric storage resources include a number of different 
technologies that can serve as a sink for, or source of, electricity. 
Electric storage resources' ability to charge and discharge electricity 
provides these resources with significant operational flexibility, and 
they can be designed to provide a variety of grid services, including 
bulk energy services (e.g., capacity and energy) and ancillary services 
(e.g., regulation and reserves).\27\
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    \25\ See supra note 1.
    \26\ Id.
    \27\ Sandia National Laboratories, DOE/EPRI Electricity Storage 
Handbook in Collaboration with NRECA, Report No. SAND2015-1002, 
Chapter 1 (Feb. 2015) (Sandia Report).
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    11. The RTOs/ISOs have taken different approaches to integrating 
electric storage resources into their organized wholesale electric 
markets. While electric storage resources (including batteries, 
flywheels, and pumped-hydro facilities) are already providing energy 
and ancillary services in some organized wholesale electric markets, 
these resources often must use existing participation models designed 
for traditional generation or load resources that do not recognize 
electric storage resources' unique physical and operational 
characteristics. Some organized wholesale electric markets have defined 
participation models in their tariffs for electric storage resources, 
but those models limit the services that electric storage resources may 
provide.\28\ For example, these models often allow eligible electric 
storage resources to participate only in the regulation market. Other 
organized wholesale electric market rules are designed for electric 
storage resources with very specific characteristics, such as pumped-
hydro facilities or resources with less than a one-hour maximum run 
time. Smaller electric storage resources are also generally restricted 
to participating in the organized wholesale electric markets as demand 
response, which can limit their ability to employ their full 
operational range, prohibit them from injecting power onto the grid, 
and preclude them from providing certain services that they are capable 
of providing such as operating reserves.
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    \28\ See, e.g., Midwest Indep. Trans. Sys. Operator, Inc., 129 
FERC ] 61,303 at PP 40, 64 (Commission ``note[d] that the Midwest 
ISO [SER] proposal is intended to implement a specific technology, 
the fly-wheel technology developed by Beacon Power''; and SER 
category was ``specifically designed for a specific technology that 
provides short-term Stored Resources only in the regulating reserve 
market''); MISO FERC Electric Tariff, section 1.S (Stored Energy 
Resources); NYISO Services Tariff, section 2.12 (defining Limited 
Energy Storage Resource as a ``Generator authorized to offer 
Regulation Service only and characterized by limited Energy storage, 
that is, the inability to sustain continuous operation at maximum 
Energy withdrawal or maximum Energy injection for a minimum period 
of one hour.''). NYISO limits Limited Energy Storage Resources to 
providing regulation service only and Demand Side Resources and 
Generators that can sustain operation for longer than one hour are 
not eligible to be Limited Energy Storage Resources. NYISO Response 
at 3-4.
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    12. We take action in this NOPR so that electric storage resources 
will be able to participate in the organized wholesale electric markets 
to the extent they are technically capable of doing so based on rules 
that take into account their unique characteristics and not based on 
market rules designed for the unique characteristics of other types of 
resources. Requiring electric storage resources to use participation 
models designed for a different type of resource may fail to recognize 
electric storage resources' physical and operational characteristics 
and their capability to provide energy, capacity and ancillary services 
in the organized wholesale electric markets. Current tariffs that do 
not recognize the operational characteristics of electric storage 
resources serve to limit the participation of electric storage 
resources in the organized wholesale electric markets and result in 
inefficient use of these resources (i.e., electric storage resources 
may be dispatched to provide one service when they could, absent market 
rule limitations, provide another service more economically). As a 
result, resources, including electric storage resources, do not get 
dispatched efficiently, thereby impacting the competitiveness of the 
market outcomes. Limiting the services an electric storage resource is 
eligible to provide and limiting the efficiency in which it is 
dispatched to provide services may also inhibit developers' incentives 
to design their electric storage resources to provide all capacity, 
energy and ancillary services these resources could otherwise provide. 
This further reduces competition for providing those services in the 
organized wholesale electric markets. Effective integration of electric 
storage resources into the organized wholesale electric markets would 
enhance competition and, in turn, help to ensure that these markets 
produce just and reasonable rates.
    13. We are also concerned that existing RTO/ISO tariffs impede the 
participation of distributed energy resources in the organized 
wholesale electric markets by providing limited opportunities for 
distributed energy resource aggregations. Distributed energy resources 
include a variety of constantly evolving technologies (including, but 
not limited to, electric storage resources, distributed generation, 
thermal storage, and electric vehicles and their supply equipment) that 
are connected to the power grid at distribution-level voltages. While 
these distributed energy resources can at times effectively supply the 
capacity, energy, and ancillary services that are exchanged in the 
organized wholesale electric markets, they can at times be too small to 
participate in these markets individually. In addition, responses to 
the Data Requests and Request for Comments demonstrate that current 
organized wholesale electric market rules often limit the services 
distributed energy resources are eligible to provide, in many cases 
only allowing these resources to be used as demand response or load-
side resources when they are located behind a customer

[[Page 86526]]

meter \29\ or by imposing prohibitively expensive or otherwise 
burdensome requirements.\30\
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    \29\ See, e.g., MISO Response at 15 (noting that electric 
storage resources connected to the distribution system can 
participate in its markets as Load Modifying Resources and Demand 
Response Resources--Types I or II); PJM Response at 3-6 (stating 
that, if an electric storage resource is located behind a customer 
meter, then PJM considers it demand response, which is not studied 
for deliverability and is not eligible to inject energy into the 
distribution or PJM transmission system and noting that any 
injection would subject it to generator interconnection 
obligations).
    \30\ See Energy Storage Association Comments at 29 (stating that 
metering and telemetry requirements and interconnection processes 
can pose prohibitively high transaction costs for the small project 
sizes that characterize behind-the-meter storage, which creates 
undue burdens on behind-the-meter storage participation in most 
RTOs/ISOs and noting that the ability to bid aggregated distributed 
resources into wholesale markets is not possible in some RTOs/ISOs 
and is unclear in others (such as NYISO, which does not allow 
aggregations to meet the 1 MW size for a Limited Energy Storage 
Resource)). Energy Storage Association also asserts that at present 
most RTOs/ISOs do not allow behind-the-meter storage to net inject 
power to provide wholesale generator services. Id. See also NextEra 
Comments at 11 (stating that every RTO/ISO prohibits behind-the-
meter resources from having net injections to the grid).
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    14. As with electric storage resources, we preliminarily find that 
the barriers to the participation of distributed energy resources 
through distributed energy resource aggregations in the organized 
wholesale electric markets may, in some cases, unnecessarily restrict 
competition, which could lead to unjust and unreasonable rates. 
Effective wholesale competition encourages entry and exit and promotes 
innovation, incentivizes the efficient operation of resources, and 
allocates risk appropriately between consumers and producers. Removing 
these barriers will enhance the competitiveness, and in turn the 
efficiency, of organized wholesale electric markets and thereby help to 
ensure just and reasonable and not unduly discriminatory or 
preferential rates for wholesale electric services. We also note that 
participation of electric storage resources in the organized wholesale 
electric markets allows for more efficient operation of large thermal 
generators, enhances reliability, provides congestion relief, improves 
integration of variable energy resources, and reduces the burden on the 
transmission system.\31\
---------------------------------------------------------------------------

    \31\ Among the benefits cited by a recent report by the Lawrence 
Berkeley National Laboratory are (1) a less costly, cleaner, and 
more competitive bulk power system and (2) greater reliability 
through consumer reliance upon distributed energy resources to 
provide resilience from bulk power and system and distribution 
service interruptions. Lawrence Berkeley National Laboratory, 
Electric Industry Structure and Regulatory Responses in a High 
Distributed Energy Resources Future, at 26-28 (Report 1, Nov. 2015), 
https://emp.lbl.gov/sites/all/files/lbnl-1003823_0.pdf (Berkeley Lab 
Report). See also DNV-GL, A Review of Distributed Energy Resources: 
New York Independent System Operator, at 18 (Sept. 2014) (DNV-GL 
Report), http://www.nyiso.com/public/webdocs/media_room/publications_presentations/Other_Reports/Other_Reports/A_Review_of_Distributed_Energy_Resources_September_2014 (``Benefit 
streams commonly attributed to distributed energy resources include, 
among others: Avoided expansion of generation, transmission, or 
distribution facilities, power outage mitigation or critical power 
support during power outages (resiliency) and power quality 
improvement (enhanced reliability); U.S. Department of Energy, The 
Potential Benefits of Distributed Generation and Rate-related Issues 
that May Impede Their Expansion: A Study Pursuant to Section1817 of 
the Energy Policy Act of 2005 (Feb. 2007), https://www.ferc.gov/legal/fed-sta/exp-study.pdf.; IEA, Re-powering Markets: Market 
design and regulation during the transition to low-carbon power 
systems, at 33 (2016) (``active management of renewable resources 
connected to distribution networks can help reduce or delay 
distribution network investments'').
---------------------------------------------------------------------------

    15. Distributed energy resource aggregations are often limited to 
participating in organized wholesale electric markets as demand 
response, which can limit the aggregations' design and operations, as 
well as the services they may provide. However, advancements in 
metering, telemetry, and communication technologies support the 
aggregation of distributed energy resources, allowing these resources 
to meet the minimum size requirements to participate in the organized 
wholesale electric markets under participation models other than demand 
response. Additionally, demand response models often prohibit 
distributed energy resources from injecting power back onto the grid or 
increasing consumption if there is an operational requirement for such 
performance.\32\ By requiring RTOs/ISOs to allow the participation of 
distributed energy resource aggregations, aggregators will be able to 
bundle distributed energy resources to meet RTO/ISO qualification and 
performance requirements, and the RTOs/ISOs will be able to capitalize 
on the aggregation's full operational range. The recent proliferation 
of, and technological advancements in, distributed energy technologies, 
as well as their decreasing costs, create opportunities for distributed 
energy resource aggregations to be eligible to provide a variety of 
services to the organized wholesale electric markets.\33\
---------------------------------------------------------------------------

    \32\ See PJM Response at 5 (stating that, like other types of 
resources that participate in PJM's markets only by providing load 
reductions, demand-side electric storage resources are not studied 
by PJM through the generation interconnection process and are not 
allowed to inject energy beyond the customer's meter and onto the 
distribution or transmission system, as applicable).
    \33\ The Berkeley Lab Report notes that technological and 
procedural innovation and advancements are leading to substantial 
reduction in the cost of some of these resources, such as through a 
continued long-term downward trend in the installed cost of solar 
PV. Berkeley Lab Report at 50, App. A. It adds that there is a wide 
range of forecasts of the potential for distributed energy resources 
over the coming decades, some of which suggest that penetrations 
could be significant. Estimated increases range from a current 11 
percent distributed energy resource penetration rate to 19 percent 
of required capacity (MW) in the Eastern Interconnection under a 
base case analysis by 2030; and a projection of a 37.5 percent 
penetration in the Western Interconnection by 2032. Id. at 51 
(citing Western Electricity Coordinating Council, SPSC Study High 
EE/DR/DG (Sept. 19, 2013), https://www.wecc.biz/_layouts/15/WopiFrame.aspx?sourcedoc=/Reliability/2032_HighEEDSMDG_StudyReport.docx&action=default&DefaultItemOpen=1; 
Navigant Consulting, Inc., Assessment of Demand-Side Resources 
Within the Eastern Interconnection, March 2013, http://bit.ly/EISPCdsr).
---------------------------------------------------------------------------

    16. Accordingly, we propose to require the RTOs/ISOs to revise 
their tariffs to: (1) Establish a participation model consisting of 
market rules that, recognizing the physical and operational 
characteristics of electric storage resources, accommodates their 
participation in the organized wholesale electric markets and (2) 
define distributed energy resource aggregators as a type of market 
participant that can participate in the organized wholesale electric 
markets under the participation model that best accommodates the 
physical and operational characteristics of its distributed energy 
resource aggregation. These proposed requirements will clarify how 
electric storage resources and distributed energy resources of all 
types and sizes may provide services in the organized wholesale 
electric markets that they are technically capable of providing.

III. Discussion

A. Elimination of Barriers to Electric Storage Resource Participation 
in Organized Wholesale Electric Markets

1. Creation of a Participation Model for Electric Storage Resources
i. Introduction
    17. Resource participation in organized wholesale electric markets 
is currently governed by (1) participation models consisting of market 
rules designed for different types of resources and (2) the technical 
requirements for market services that those resources are eligible to 
provide. As noted above, in this NOPR, we define a participation model 
as a set of tariff provisions that accommodate the participation of 
resources with particular physical and operational characteristics in 
the organized wholesale electric markets of the RTOs and ISOs.\34\ 
While these participation models are designed to

[[Page 86527]]

accommodate the unique characteristics of different resources, new 
technologies may be required to fit into existing participation models 
when market rules for their unique characteristics have not been 
developed. Moreover, even where participation models for new 
technologies, such as electric storage resources, do exist, they may 
unnecessarily limit a resource's ability to qualify for the 
participation model or to provide certain services using it, despite 
the technical capabilities of the resource.
---------------------------------------------------------------------------

    \34\ See supra note 5.
---------------------------------------------------------------------------

    18. The Commission previously has allowed flexibility for each RTO/
ISO to approach the integration of electric storage resources in its 
organized wholesale electric markets differently. RTOs/ISOs developed 
most of their participation models before electric storage resources 
achieved their current technical capability and commercial viability, 
so some markets rely on these existing models for the participation of 
electric storage resources. For example, ISO-NE indicates that, for an 
electric storage resource to be eligible to provide all wholesale 
services, it must register as a Generator Asset,\35\ which is a 
participation model designed for traditional generation and which may 
not reflect the distinct operational characteristics or capabilities of 
electric storage resources. Alternatively, some RTOs/ISOs have created 
participation models for electric storage resources that limit the 
participation of those resources to the regulation market or are 
designed for electric storage resources with very specific 
characteristics, such as pumped-hydro facilities or resources with less 
than a one-hour maximum run time.\36\ However, other RTOs/ISOs have 
created participation models for electric storage resources to provide 
a wider variety of services in the organized wholesale electric markets 
(such as PJM's Energy Storage Resource model \37\ and CAISO's Non-
Generator Resource model \38\). Establishing a robust participation 
model for electric storage resources will help remove barriers to the 
participation of electric storage resources in the organized wholesale 
electric markets and ensure that electric storage resources can provide 
the services that they are technically capable of providing.
---------------------------------------------------------------------------

    \35\ ISO-NE Response at 3-5.
    \36\ MISO Response at 2 (stating that MISO's Stored Energy 
Resource model is limited to regulation service); and NYISO Response 
at 3-4 (stating that NYISO limits Limited Energy Storage Resources 
to providing regulation service only).
    \37\ An Energy Storage Resource is defined as a ``flywheel or 
battery storage facility solely used for short term storage and 
injection of energy at a later time to participate in the PJM energy 
and/or Ancillary Services markets as a Market Seller.'' PJM Response 
at 6 (citing PJM Tariff, Att. K, section 1.3.).
    \38\ See supra note 7.
---------------------------------------------------------------------------

ii. Current Rules
    19. In their responses to the Data Requests, the RTOs/ISOs describe 
opportunities for electric storage resources to provide various energy 
and ancillary service market services. For example, in CAISO, electric 
storage resources are eligible to participate in the energy and 
ancillary service markets as Participating Generators, Non-Generator 
Resources, Pumped Storage Hydro Units, or Demand Response Resources, 
even as part of distributed energy resource aggregations.\39\ Under 
ISO-NE's market rules, electric storage resources can provide all 
services when they qualify as a generator, provide all services except 
10-minute spinning and 10-minute non-spinning reserves when they 
qualify as demand response, and provide regulation as an Alternative 
Technology Regulation Resource.\40\
---------------------------------------------------------------------------

    \39\ CAISO Response at 2-8. See California Indep. Sys. Operator 
Corp., 155 FERC ] 61,229.
    \40\ ISO-NE Response at 3-5.
---------------------------------------------------------------------------

    20. In MISO, electric storage resources are eligible to participate 
as a Stored Energy Resource (which is only eligible to provide 
regulation), a Generation Resource, a Use-Limited Resource that is 
unable to operate continuously on a daily basis, and several types of 
demand response resources (some of which are limited in the products 
that they are eligible to provide).\41\ NYISO allows electric storage 
resources to qualify as Energy Limited Resources, Limited Energy 
Storage Resources (which are eligible to provide regulation service 
only), or demand response resources.\42\ PJM allows electric storage 
resources to participate as generation resources or demand-side 
resources (which are not eligible to provide non-synchronized 
reserves).\43\ Finally, SPP allows electric storage resources to 
qualify as Demand Response Resources, Dispatchable Resources, External 
Resources, External Dynamic Resources, and Quick-Start Resources, if 
they can sustain output for 60 minutes.\44\
---------------------------------------------------------------------------

    \41\ MISO Response at 7-8.
    \42\ NYISO Response at 1-6.
    \43\ PJM Response at 4.
    \44\ SPP Response at 3-4.
---------------------------------------------------------------------------

    21. Some RTOs/ISOs concede that their existing participation models 
may fail to address the characteristics of certain electric storage 
resources.\45\ CAISO urges the Commission to preserve some flexibility 
for the RTOs/ISOs to develop market rules and participation models that 
respond to electric storage developments.\46\
---------------------------------------------------------------------------

    \45\ MISO Response at 3; NYISO Response at 17.
    \46\ CAISO Response at 1-2.
---------------------------------------------------------------------------

iii. Comments
    22. Numerous commenters argue that the lack of a participation 
model that accommodates the participation of electric storage resources 
creates barriers to their participation in organized wholesale electric 
markets. For example, Alevo asserts that the lack of a defined asset 
class for electric storage resources poses a barrier to their 
participation, limiting market efficiency and competition and 
increasing costs.\47\ Advanced Energy Economy claims that the failure 
to account for the unique attributes, characteristics, and benefits of 
advanced energy technologies prevents projects from obtaining 
financing.\48\ More specifically, Energy Storage Association asserts 
that NYISO's Behind-the-Meter Net Generator design still effectively 
excludes participation of electric storage resources because it does 
not account for electric storage functionality.\49\
---------------------------------------------------------------------------

    \47\ Alevo Comments at 4, 7-17 (pointing to its analyses of the 
benefits that electric storage resource participation could provide 
to energy, capacity, and ancillary service markets).
    \48\ Advanced Energy Economy Comments at 7.
    \49\ Energy Storage Association Comments at 29-30.
---------------------------------------------------------------------------

    23. Many commenters request that the Commission require the RTOs/
ISOs to establish a participation model for electric storage resources 
that allows them to provide all services.\50\ Alevo argues that such a 
participation model should not limit duration of discharge or services 
provided,\51\ while NY Battery and Energy Storage Consortium states 
that it should utilize appropriate bidding parameters and resource 
modeling for electric storage resources.\52\ California Energy Storage 
Alliance asks the Commission to direct the RTOs/ISOs to develop a 
market model specific to behind-the-meter electric storage resources, 
which would allow them to respond to market signals to provide any 
wholesale market service (e.g., frequency regulation, demand response, 
spinning reserve) without restrictions, with its market participation 
governed by minimum performance requirements.\53\ Electric Vehicle R&D 
Group supports the creation of a separate participation model for 
electric storage resources that

[[Page 86528]]

allows for bidirectional power flow.\54\ Duke Energy also encourages 
modifications to market rules to facilitate electric storage resource 
deployment, subject to reliability requirements and non-preferential 
treatment.\55\
---------------------------------------------------------------------------

    \50\ Id. at 8-9, 24; NY Battery and Energy Storage Consortium 
Comments at 5; Ormat Comments at 2-3; Electric Vehicle R&D Group 
Comments at 3.
    \51\ Alevo Comments at 8.
    \52\ NY Battery and Energy Storage Consortium Comments at 5.
    \53\ California Energy Storage Alliance Comments at 4-5.
    \54\ Electric Vehicle R&D Group Comments at 3.
    \55\ Duke Energy Comments at 4.
---------------------------------------------------------------------------

    Other commenters explain how the existing participation models for 
demand response resources, under which electric storage resources 
sometimes participate in the organized wholesale electric markets, do 
not adequately accommodate electric storage resource participation. 
Advanced Microgrid Solutions asserts that the compensation methods 
under demand response resource participation models should not be 
applied to electric storage resources because, unlike the demand 
reductions that demand response resources provide, the energy that 
electric storage resources deliver is purchased in the form of energy 
consumed during another time such that any net-benefit test is 
unnecessary.\56\ Energy Storage Association, SolarCity, and California 
Energy Storage Alliance contend that the baselines used to measure 
demand response resource deliveries present a barrier to electric 
storage resource participation under demand response participation 
models and can limit the ability of behind-the-meter electric storage 
resources to provide their full capability into wholesale markets.\57\ 
SolarCity further argues that requiring behind-the-meter electric 
storage resources to participate as demand response creates a barrier 
for these resources, as they are physically and economically capable of 
providing electricity beyond the customer's load.\58\ Tesla contends 
that customer-sited resources (such as electric storage resources) are 
interactive grid resources that are often relegated to act as less 
flexible demand response resources when participating in organized 
wholesale electric markets.\59\ Energy Storage Association argues that 
wholesale demand response constructs can prohibit behind-the-meter 
electric storage resources from offering other services.\60\
---------------------------------------------------------------------------

    \56\ Advanced Microgrid Solutions Comments at 5.
    \57\ Energy Storage Association Comments at 28; SolarCity 
Comments at 8; California Energy Storage Alliance Comments at 4.
    \58\ SolarCity Comments at 4.
    \59\ Tesla Comments at 4.
    \60\ Energy Storage Association Comments at 28.
---------------------------------------------------------------------------

    24. Many commenters also state that behind-the-meter electric 
storage resources should be permitted to inject power beyond the retail 
meter. Energy Storage Association and NextEra argue that no RTO/ISO 
allows behind-the-meter storage to net inject power to provide 
wholesale generator services.\61\ Similarly, Advanced Energy Economy 
and Solar Grid Storage argue that PJM's restriction on the injection of 
energy past a customer's retail meter during operations for providing 
ancillary services in their markets is a barrier to storage.\62\ Solar 
Grid Storage argues that PJM's ``no injection'' barrier effectively 
excludes all residential customers with storage from participation in 
the PJM ancillary service markets, despite the growing potential of 
this customer segment to provide meaningful resources to that organized 
market.\63\
---------------------------------------------------------------------------

    \61\ Id. at 29; NextEra Comments at 11. NextEra explains that a 
net injection is when the output of an electric storage resource 
exceeds the customer's load that it is sited with and the electric 
storage resource exports power back to the grid.
    \62\ Advanced Energy Economy Comments at 16-17; Solar Grid 
Storage Comments at 2.
    \63\ Solar Grid Storage Comments at 3.
---------------------------------------------------------------------------

    25. Some commenters call for the creation of a ``load increase'' 
participation model for electric storage resources that allows electric 
storage resources to be dispatched to receive electricity from the 
grid. For example, National Hydropower Association states that pumped-
storage projects are not adequately valued because they are regarded as 
either a generator or a load, which results in the undervaluation of 
these projects and no new major plants being built in the last 30 
years.\64\ National Hydropower Association asks the Commission to 
consider adding pumped-storage as a dispatchable ``load increase'' 
demand response resource.\65\
---------------------------------------------------------------------------

    \64\ National Hydropower Association Comments at 5-6.
    \65\ Id. at 6.
---------------------------------------------------------------------------

iv. Proposed Reforms
    26. As numerous commenters state, existing RTO/ISO rules that 
govern participation of electric storage resources in some organized 
wholesale electric markets fail to ensure that electric storage 
resources that are technically capable of providing specific services 
are permitted to do so. Providing a participation model that recognizes 
the unique characteristics of electric storage resources will help 
eliminate barriers to their participation in the organized wholesale 
electric markets and promote competition and economic efficiency. We 
therefore propose to require each RTO/ISO to revise its tariff to 
include a participation model consisting of market rules that, 
recognizing the physical and operational characteristics of electric 
storage resources, accommodates their participation in organized 
wholesale electric markets.
    27. As the costs of electric storage resources continue to decline 
and their technical potential expands, the ability of these resources 
to provide operational and economic benefits to the organized wholesale 
electric markets will increase. We preliminarily find that it is 
important to remove barriers to participation now so that the 
competitive benefits are realized without delay.
    28. We thus preliminarily find that it is necessary to take action 
to remove barriers to the participation of electric storage resources 
in organized wholesale electric markets by requiring that the RTOs/ISOs 
revise their tariffs to establish a participation model consisting of 
market rules that, recognizing the physical and operational 
characteristics of electric storage resources, accommodates their 
participation in the organized wholesale electric markets. In addition, 
to accommodate the physical and operational characteristics of electric 
storage resources, we propose to require that this participation model 
satisfy each of the following requirements (as discussed in detail in 
Section III.A.2 of this NOPR):

    a. Electric storage resources must be eligible to provide all 
capacity, energy and ancillary services that they are technically 
capable of providing in the organized wholesale electric markets;
    b. The bidding parameters incorporated in the participation 
model must reflect and account for the physical and operational 
characteristics of electric storage resources;
    c. Electric storage resources can be dispatched and can set the 
wholesale market clearing price as both a wholesale seller and a 
wholesale buyer consistent with existing rules that govern when a 
resource can set the wholesale price;
    d. The minimum size requirement for electric storage resources 
to participate in the organized wholesale electric markets must not 
exceed 100 kW; and
    e. The sale of energy from the organized wholesale electric 
markets to an electric storage resource that the resource then 
resells back to those markets must be at the wholesale LMP.

    29. To further ensure that the proposed participation model for 
electric storage resources will accommodate both existing and future 
electric storage resource technologies, we propose that each RTO/ISO 
define the criteria in its tariff that a resource must meet to qualify 
to use this participation model based on the physical and operational 
attributes of electric storage resources, namely their ability to both 
charge and discharge energy. As such, the qualification

[[Page 86529]]

criteria for the proposed participation model must not limit 
participation to any particular type of electric storage resource or 
other technology. In addition, those qualification criteria should 
ensure that the RTO/ISO is able to dispatch the resource in a way that 
recognizes its physical constraints and optimizes its benefits to the 
RTO/ISO. We do not at this time propose to define the qualification 
criteria that each RTO/ISO use but rather propose to provide the RTOs/
ISOs with flexibility to propose qualification criteria that best suit 
their proposed participation models. However, we invite comment on 
whether the Commission should establish the qualification criteria and, 
if so, what specific qualification criteria the Commission should 
require.
    30. We are not proposing to limit the use of this participation 
model exclusively to electric storage resources as defined herein. 
While the requirements for the proposed participation model set forth 
here are designed to accommodate the physical and operational 
characteristics of electric storage resources, we acknowledge that 
there may be other types of resources whose physical or operational 
characteristics could qualify under the proposed participation model. 
This may be particularly true for the distributed energy resource 
aggregations considered in Section III.B below.\66\
---------------------------------------------------------------------------

    \66\ For example, resources such as thermal storage that can 
both increase and decrease their energy consumption could aggregate 
with other distributed energy resources with common physical or 
operational characteristics and qualify as a market participant 
using the participation model proposed here.
---------------------------------------------------------------------------

    31. In addition to including a participation model for electric 
storage resources in its tariff, we propose that each RTO/ISO propose 
any necessary additions or modifications to its existing tariff 
provisions to specify: (1) Whether resources that qualify to use the 
participation model for electric storage resources will participate in 
the organized wholesale electric markets through existing or new market 
participation agreements; and (2) whether particular existing market 
rules apply to resources participating under the electric storage 
resource participation model. CAISO, for example, has adopted numerous 
tariff revisions for its Non-Generator Resource participation 
model.\67\
---------------------------------------------------------------------------

    \67\ See, e.g., CAISO Tariff, sections 4.6 (Relationship Between 
CAISO and supply resources), 4.7 (Relationship between CAISO and 
participating loads), 8.4.1.2 (availability of Regulation Energy 
Management to Scheduling Coordinators for Non-Generator Resources), 
8.10.8.4 (Rescission of Ancillary Service Capacity Payments for Non-
Generator Resources), 8.10.8.6 (Rescission of Payments for 
Regulation Up and Regulation Down Capacity), 11.8 (Bid cost recovery 
for scheduling coordinators for Non-Generator Resources), 27.9 (MWh 
Constraints for Non-Generator Resources), 30.5.6 (bid components of 
Non-Generator Resource bids), 31.2 (Day-ahead market power 
mitigation process), 34.1.5 (Mitigating of Bids in the real time 
market), 40.10.3.2 Flexible Capacity Category--Base Ramping 
Resources (addressing inclusion of Non-Generator Resources), 
40.10.3.3 Flexible Capacity Category--Peak Ramping Resources 
(addressing inclusion of Non-Generator Resources), 40.10.3.4 
Flexible Capacity Category--Super-Peak Ramping Resources (addressing 
inclusion of Non-Generator Resources), 40.10.6.1 (Day-Ahead and 
Real-Time Availability providing for certain Non-Generator Resources 
bidding requirements).
---------------------------------------------------------------------------

    32. Finally, we recognize that there are implementation costs for 
creating a new participation model for electric storage resources. 
While we believe the participation model and its characteristics 
described below will benefit the participation of electric storage 
resources in the organized wholesale electric markets, we acknowledge 
that the RTOs/ISOs will need to develop rules that govern the 
participation model as well as make software changes to reflect how 
these resources will be modeled and dispatched when they participate in 
the markets. We therefore seek comment from the RTOs/ISOs on the 
changes that would be required to implement the proposed participation 
model for electric storage resources as well as the associated costs 
and how those costs could be minimized.
2. Requirements for the Participation Model for Electric Storage 
Resources
a. Eligibility To Participate in Organized Wholesale Electric Markets
i. Introduction
    33. Electric storage resources have the potential to provide a 
diverse array of services to the organized wholesale electric markets 
and to be designed to meet various technical requirements. However, in 
many cases, the existing participation models that electric storage 
resources are eligible to use in the RTOs/ISOs preclude electric 
storage resources from providing all of the services that they are 
technically capable of providing. In other instances, barriers may 
emerge as a result of the existing technical requirements for providing 
certain services that may not be appropriate for fast and controllable 
technologies such as electric storage resources. Market rules that were 
designed for traditional generation technologies or that otherwise 
prevent new technologies from providing services that they are 
technically capable of providing can have detrimental impacts on the 
competitiveness of the organized wholesale electric markets.
ii. Current Rules
    34. Several of the RTOs/ISOs identify limitations on the services 
that electric storage resources may provide, depending on the 
participation model an electric storage resource elects to use. ISO-NE 
states that the non-dispatchability of Settlement Only Resources and 
non-dispatchable generators prohibits such resources from providing 
operating reserves. In addition, resources that cannot provide energy 
within 10 minutes cannot provide 10-minute spinning or 10-minute non-
spinning reserves.\68\ ISO-NE also states that demand response 
resources with one or more controllable generators, including storage 
resources, are not eligible to provide 10-minute spinning reserve. In 
ISO-NE, electric storage resources can only provide regulation as an 
Alternative Technology Regulation Resource.\69\
---------------------------------------------------------------------------

    \68\ ISO-NE Response at 11.
    \69\ Id. at 3-5.
---------------------------------------------------------------------------

    35. MISO states that a Stored Energy Resource is not qualified for 
capacity, energy, ramp capability and contingency reserves.\70\ MISO 
states that Demand Response Resource--Type I is not eligible for 
regulating reserve and ramp capability products and that Dispatchable 
Intermittent Resources are a subset of Generation Resources that are 
not eligible to provide regulating reserves and contingency reserves. 
MISO states that the Load Modifying Resource category is designed to 
provide energy in emergency conditions and is only intended for the 
provision of capacity. MISO also states that Emergency Demand Response 
can only provide emergency energy, on a voluntary basis.
---------------------------------------------------------------------------

    \70\ MISO Response at 7-8.
---------------------------------------------------------------------------

    36. NYISO states that Limited Energy Storage Resources are limited 
to selling only regulation service in the ancillary service market.\71\ 
NYISO further states that Emergency Demand Response Program resources 
are only eligible to provide energy, Special Case Resources are only 
eligible to provide energy and capacity, and Demand Side Ancillary 
Services Program Resources are only eligible to provide ancillary 
services. PJM states that demand response resources, including electric 
storage resources, are ineligible to provide non-synchronized reserves 
because demand response resources are already synchronized to the grid 
when consuming power, and so would always

[[Page 86530]]

be classified as sync reserves when curtailing.\72\
---------------------------------------------------------------------------

    \71\ NYISO Response at 6-7.
    \72\ PJM Response at 4.
---------------------------------------------------------------------------

iii. Comments
    37. Many commenters point to organized wholesale electric markets 
where electric storage resources cannot participate, or cannot 
participate fully, because market rules are either designed for 
traditional generation or they place unnecessary limitations on 
electric storage resources. Both Advanced Energy Economy and NextEra 
argue that a resource's eligibility to provide a particular service 
should be based on whether it has the technical attributes necessary to 
provide that service rather than on its participation model.\73\ EEI 
argues that RTOs/ISOs may need to modify their tariffs to account for 
electric storage resources because many existing market rules went into 
place prior to the relatively recent advances in electric storage 
technology.\74\ Likewise, Alevo contends that applying market rules to 
electric storage resources that were designed for transmission, 
generation, and demand assets unfairly disadvantages electric storage 
resources.\75\ SolarCity claims that market rules that prevent the 
participation of electric storage resources in multiple markets, 
particularly for ancillary services, discriminate against behind-the-
meter electric storage resources that can provide multiple services 
concurrently by preventing them from stacking multiple value 
streams.\76\ SolarCity suggests that the provision of one wholesale 
market product should not preclude provision of other wholesale market 
products when resources are technically capable of providing multiple 
services.
---------------------------------------------------------------------------

    \73\ Advanced Energy Economy Comments at 10-11; NextEra Comments 
at 5.
    \74\ EEI Comments at 4.
    \75\ Alevo Comments at 8.
    \76\ SolarCity Comments at 5.
---------------------------------------------------------------------------

    38. Some commenters note concerns with the eligibility of electric 
storage resources to provide services in specific markets. According to 
AES Companies, Indianapolis Power & Light Company's Harding Street 
Battery Energy Storage System, a fully-developed grid-scale battery, 
cannot participate in MISO's markets because of the limitations placed 
on the services Stored Energy Resources are eligible to provide and the 
way they are dispatched.\77\ AES Companies further note that MISO's 
Stored Energy Resource definition specifically disallows capacity 
accreditation, even though some electric storage resources have 
sufficient discharge duration to provide capacity and ancillary 
services.\78\ Similarly, Minnesota Energy Storage Alliance contends 
that none of the participation models that allow electric storage 
resources to participate in MISO's capacity, energy, and ancillary 
service markets facilitate participation of battery storage 
technologies and, in some cases, they limit the products an electric 
storage resource can provide.\79\ In contrast, Manitoba Hydro, which 
operates hydroelectric facilities with reservoir storage that 
participate in the MISO market as Use-Limited Resources, states that 
MISO's current market rules are not barriers to electric storage 
resource participation.\80\
---------------------------------------------------------------------------

    \77\ AES Companies Comments at 9-10 (citing MISO Response at 3).
    \78\ Id. at 2, 14.
    \79\ Minnesota Energy Storage Alliance Comments at 2, 4. For 
example, Minnesota Energy Storage Alliance contends that MISO's 
Demand Response Resource--Type I classification is inappropriate for 
advanced electric storage resources because it is designed for 
resources that respond as a single block, on or off, and cannot 
provide regulating reserve and ramping products.
    \80\ Manitoba Hydro Comments at 4.
---------------------------------------------------------------------------

    39. NY Battery and Energy Storage Consortium asserts that NYISO's 
market rules prevent electric storage resources from fully 
participating in NYISO's markets, noting that electric storage 
resources with less than 60 minutes of output duration can only 
participate as Limited Energy Storage Resources and can only provide 
regulation.\81\ NY Transmission Owners also argue that NYISO's rules do 
not reflect the ability of certain electric storage resources to 
provide their maximum output for regulation service over a multi-hour 
period and do not allow them to participate in the energy and ancillary 
service markets.\82\
---------------------------------------------------------------------------

    \81\ NY Battery and Energy Storage Consortium Comments at 5.
    \82\ NY Transmission Owners Comments at 3.
---------------------------------------------------------------------------

    40. According to Energy Storage Association, resources that 
participate under CAISO's Proxy Demand Response participation model are 
prohibited from providing frequency regulation, even though they may be 
technically capable of doing so.\83\ Finally, NextEra notes that ISO-
NE, NYISO, and MISO prohibit an electric storage resource offering 
regulation from offering any other service, even though a longer-
duration electric storage resource could provide regulation from a 
portion of its capacity while providing other reserve services or 
energy from the remainder of its capacity.\84\
---------------------------------------------------------------------------

    \83\ Energy Storage Association Comments at 28.
    \84\ NextEra Comments at 5 (citing MISO Response at 7; ISO NE 
Response at 3; NYISO Response at 7).
---------------------------------------------------------------------------

    41. Other commenters focus on technical requirements that limit the 
ability of electric storage resource to provide certain services. NRECA 
states that minimum technical requirements should not create undue 
barriers to resources capable of performing a service.\85\ Similarly, 
APPA states that RTOs/ISOs should establish reasonable qualification 
criteria on a resource-specific basis.\86\ NY Battery and Energy 
Storage Consortium argues that distributed electric storage resources, 
both grid-connected and customer-sited, face barriers to market 
participation due to eligibility rules and qualification/performance 
requirements that should be eliminated.\87\
---------------------------------------------------------------------------

    \85\ NRECA Comments at 6-7.
    \86\ APPA Comments at 10-11.
    \87\ NY Battery and Energy Storage Consortium Comments at 6.
---------------------------------------------------------------------------

    42. Some commenters focus on the technical requirements in the 
regulation markets. Viridity explains that, while the rapid ramp rates 
of electric storage resources allow them to provide regulation service, 
their discharge is of limited duration, so RTOs/ISOs should utilize 
these resources for short periods.\88\ According to Viridity, requiring 
such resources to provide regulation service over longer periods is 
inconsistent with the nature of frequency response and is detrimental 
to the life span and effectiveness of these resources. NextEra contends 
that, despite implementation of Order No. 755 (which removed certain 
barriers to the ability of fast-acting resources to provide frequency 
regulation service), MISO and SPP continue to rely on the slow ramping 
automatic generation control signal developed for traditional 
generation resources for regulation service.\89\ NextEra notes that 
advanced electric storage technologies can respond faster than these 
slower regulation signals allow. NextEra points out that, in contrast, 
NYISO matches the dispatch of regulation resources to the specific 
ramping capabilities of each resource.\90\
---------------------------------------------------------------------------

    \88\ Viridity Comments at 3-4.
    \89\ NextEra Comments at 9 (citing https://www.misoenergy.org/Library/Repository/Communication%20Material/Market%20Enhancements/Market%20Roadmap/Market%20Roadmap%20Priorities.pdf) (noting that 
MISO is pursuing an automatic generation control enhancement that 
would implement a faster signal similar to those used by other RTOs/
ISOs).
    \90\ Id. at 9.
---------------------------------------------------------------------------

    43. Other commenters contend that reliability standards may 
preclude electric storage resources from providing certain ancillary 
services. Specifically, Energy Storage Association states that NYISO 
suggested that the Northeast Power Coordinating Council's (NPCC) 
qualification criteria may prohibit grid-connected electric storage

[[Page 86531]]

resources from providing synchronized reserves because inverter-based 
resources like electric storage cannot comply with the required 
settings inherent to synchronous generators.\91\ Similarly, ISO-NE 
states that demand response resources are precluded from providing 10-
minute spinning reserve per the ISO-NE tariff definition, which is 
based on the NPCC requirement that loads cannot provide synchronized 
reserve if the reduction in load is dependent on starting a 
generator.\92\
---------------------------------------------------------------------------

    \91\ Energy Storage Association Comments at 14, 27.
    \92\ ISO-NE Response at 11.
---------------------------------------------------------------------------

    44. National Electrical Manufacturers Association argues that, in 
ancillary service markets, spinning reserves are limited to online, 
synchronized spinning generation resources. According to National 
Electrical Manufacturers Association, electric storage systems capable 
of providing fast-reacting, synchronized electricity should be allowed 
to compete fully to provide spinning reserves.\93\ Wellhead asks the 
Commission to require changes to NERC definitions so that non-
synchronous resources are not categorically excluded from providing 
reserves. Wellhead notes that, under the NERC definition of ``Spinning 
Reserves,'' the phrase ``unloaded generation that is synchronized'' 
does not clearly allow electric storage resources to participate as 
spinning reserves. Wellhead also notes that NERC's definition of 
``Operating Reserves--Spinning'' also does not clearly allow for market 
participation of electric storage resources because they are not 
generation synchronized to the system.\94\
---------------------------------------------------------------------------

    \93\ National Electrical Manufacturers Association Comments at 
3.
    \94\ Wellhead Comments at 3-4.
---------------------------------------------------------------------------

    45. Commenters also note that the requirement in some RTOs and ISOs 
to have an energy schedule to provide ancillary services is a barrier 
to electric storage resource participation in ancillary service 
markets. Commenting on MISO's market rules, Energy Storage Association 
argues that electric storage resources should not have to offer energy 
to participate in certain ancillary service markets because, unlike 
traditional generators, electric storage resources are able to ramp 
immediately to provide spinning reserve and ramping service without 
having to provide energy to do so.\95\ Energy Storage Association 
explains that requiring an electric storage resource to offer energy 
greatly diminishes its capability to provide services in the ancillary 
service markets because storage resources are energy-limited.
---------------------------------------------------------------------------

    \95\ Energy Storage Association Comments at 13-14 (citing MISO 
Response at 11, n.9 (referring to Business Practice Manual sections 
that describe requirements for these products, which state 
``Committed Generation Resources'' are eligible to provide these 
products), 14, 27).
---------------------------------------------------------------------------

    46. For the capacity markets, commenters ask the Commission to 
clarify that an electric storage resource should be allowed to de-rate 
its capacity (i.e., offer a quantity less than its nameplate capacity) 
to ensure it can satisfy the minimum run-time requirement.\96\ Energy 
Storage Association states, for example, that, in the NYISO and MISO 
capacity markets, an electric storage resource with a run-time duration 
of less than four hours relative to its nameplate capacity should be 
able to qualify for capacity at a lower power level than it would be 
able to sustain for four hours at nameplate output. More specifically, 
NY Battery and Energy Storage Consortium states that a 10 MW/2-hour 
storage resource should be able to qualify for 5 MW of capacity as long 
as it can sustain 5 MW for 4 hours.
---------------------------------------------------------------------------

    \96\ Id. at 22-23; NY Battery and Energy Storage Consortium 
Comments at 6; RES Americas Comments at 4.
---------------------------------------------------------------------------

    47. In contrast, some commenters, such as APPA, state that 
eligibility is not a significant problem for electric storage 
resources.\97\ Similarly, Electric Power Supply Association argues that 
the RTO/ISO responses to the Data Requests show that electric storage 
resources can fully participate in the organized wholesale electric 
markets.\98\ The PJM Market Monitor also claims there are no market 
rules that artificially preclude participation by electric storage 
resources in any of PJM's markets.\99\ The PJM Market Monitor states 
that electric storage resources can make offers directly into PJM's 
wholesale markets to provide energy, capacity, and ancillary services 
or can participate as demand response resources.
---------------------------------------------------------------------------

    \97\ APPA Comments at 10.
    \98\ Electric Power Supply Association Comments at 9.
    \99\ PJM Market Monitor Comments at 4.
---------------------------------------------------------------------------

iv. Proposed Reforms
    48. We propose to require RTOs/ISOs to modify their tariffs to 
establish a participation model consisting of market rules for electric 
storage resources under which a participating resource is eligible to 
provide any capacity, energy, and ancillary service that it is 
technically capable of providing in the organized wholesale electric 
markets. In addition, we propose that electric storage resources should 
be able, as part of the participation model, to be eligible to provide 
services that the RTOs/ISOs do not procure through a market mechanism, 
such as blackstart, primary frequency response, and reactive power, if 
they are technically capable. Where compensation for these services 
exists, electric storage resources should also receive such 
compensation commensurate with the service provided.
    49. We also propose to require each RTO/ISO to revise its tariff to 
clarify that an electric storage resource may de-rate its capacity to 
meet minimum run-time requirements to provide capacity or other 
services. This proposed requirement will help ensure that electric 
storage resources are able to provide all services that they are 
technically capable of providing by accommodating their physical and 
operational characteristics, while still maintaining the quality and 
reliability of services they seek to provide. In RTOs/ISOs with 
capacity markets, we propose that the de-rated capacity value for 
electric storage resources be consistent with the quantity of energy 
that must be offered into the day-ahead energy market for resources 
with capacity obligations. We preliminarily find that this reform will 
remove a barrier to the participation of electric storage resources in 
the organized wholesale electric markets related to minimum run-time 
requirements and help ensure that the resources that do de-rate their 
capacity will be able to meet their capacity supply obligations if 
called upon.
    50. We preliminarily conclude that a market participant's 
eligibility to provide a particular reserve service should not be 
conditioned on requirements that were designed for synchronous 
generators, specifically the requirement to be online and synchronized 
to the grid to be eligible to provide ancillary services. Newer 
technologies, particularly electric storage resources, tend to be 
capable of faster start-up times and higher ramp rates than traditional 
synchronous generators and are therefore able to provide ramping, 
spinning, and regulating reserve services without already being online 
and running. Therefore, we preliminarily find that participation in 
ancillary service markets should be based on a resource's ability to 
provide services when it is called upon rather than on the real-time 
operating status of the resource.
    51. However, we acknowledge that all of the RTOs/ISOs co-optimize 
energy and ancillary services dispatch and pricing and therefore may 
condition eligibility to provide ancillary services on having an energy 
schedule. As a result, it is not clear whether

[[Page 86532]]

eliminating the requirement for a resource to be online and 
synchronized to the grid would be impactful given the continued need to 
have an energy schedule. Therefore we seek comment on whether the 
requirement to have an energy schedule to provide ancillary services 
could be adjusted so that electric storage resources and other 
technically-capable resources could participate in the ancillary 
service markets independent of offering energy to the RTO/ISO. 
Specifically, we seek comment on whether dispatch and pricing of energy 
and ancillary services would continue to be internally consistent if a 
resource were not required to offer to provide energy in order to offer 
to provide ancillary services. Further, we seek comment on whether the 
capability of resources to provide an ancillary service absent an 
energy schedule can be determined in the regular performance tests that 
the RTO/ISO conducts and whether a resource's start-up time and ramp 
capability are generally represented in bidding parameters and would 
adequately guarantee the resource's ability to provide other services 
absent energy market participation. Additionally, we seek comment on 
the extent of software changes necessary to factor the elimination of 
such an energy schedule requirement into the RTO/ISO co-optimization 
models.
    52. Several commenters also identified concerns with how 
definitions in the Glossary of Terms used in NERC reliability standards 
could potentially limit participation of electric storage resources and 
other non-synchronous resources in the reserve markets. While it 
appears that some of the Glossary of Terms definitions were created for 
synchronous generation, it is unclear the extent to which these 
definitions could potentially limit participation of non-synchronous 
resources in the organized wholesale electric markets. Therefore, we 
seek comment on whether and to what extent the Commission-approved NERC 
Glossary of Terms and associated Reliability Standards or regional 
reliability requirements may create barriers to the participation of 
electric storage resources or other non-synchronous technologies in the 
organized wholesale electric markets.
b. Bidding Parameters for Electric Storage Resources
i. Introduction
    53. Bidding parameters allow resources participating in the 
organized wholesale markets to identify their physical and operational 
characteristics so that the RTO/ISO can model and dispatch the resource 
consistent with its operational constraints. Due to an electric storage 
resource's ability to both receive and provide electricity at varying 
speeds and duration and to transition between operating modes, it may 
be more efficient for the RTOs/ISOs to model, optimize, and dispatch 
electric storage resources differently than they do traditional 
generation. By requiring electric storage resources to use bidding 
parameters developed for traditional generators or other supply 
resources, RTOs/ISOs may fail to effectively utilize these resources, 
possibly precluding electric storage resources from providing all of 
the services that they are physically and technically capable of 
providing in a way that optimizes their operational capabilities and 
maximizes the benefits they provide. This barrier to electric storage 
resource participation in organized wholesale electric markets could 
lead to over-procurement of less efficient resources and increased cost 
to load.
ii. Current Rules
    54. Under current market rules, resource bidding parameters vary 
greatly between the RTOs/ISOs. Some RTOs/ISOs require the same bidding 
parameters from all resources offering into a specific market, 
regardless of the participation model under which these resources 
participate, while others tie bidding parameters to specific 
participation models. For example, ISO-NE requires the same bidding 
parameters from all resources, including electric storage resources, 
participating in its capacity, forward reserve, and regulation 
markets.\100\ In ISO-NE's energy market, bidding parameters reflect the 
physical characteristics of each participation model such as maximum 
daily starts, maximum consumption for dispatch asset related demand, 
and minimum time between reduction for demand response resources. 
Similarly, SPP requires all resources participating in its day-ahead 
and real-time markets under any participation model to provide a 
specific set of bidding parameters to validate their offers.\101\
---------------------------------------------------------------------------

    \100\ ISO-NE Response at 24-25.
    \101\ SPP Response at 5-6.
---------------------------------------------------------------------------

    55. CAISO's market rules also require a defined list of parameters 
for all bids. In addition, however, CAISO requires supplemental 
parameters depending on the participation model under which a resource 
is participating in its market (i.e., Participating Generator, 
Participating Load, or Non-Generator Resource).\102\ Specifically, 
CAISO explains that bids for participating loads, which include pumping 
load or Pumped-Storage Hydro Units, may include pumping level (in 
megawatts (MW)), minimum load bid (generation mode of a pumped-storage 
hydro unit), load distribution factor, ramp rate, energy limit, pumping 
cost, and pump shut-down costs.\103\ CAISO notes that, unlike under the 
generator resource model, these resources must submit lower and upper 
charge limits. Moreover, the Commission recently accepted revisions to 
CAISO's tariff to allow scheduling coordinators representing non-
generator resources to include state-of-charge as a bidding 
parameter.\104\
---------------------------------------------------------------------------

    \102\ CAISO Response at 13-14 (citing CAISO Tariff, section 30).
    \103\ Id. at 13-14 (citing CAISO Tariff, section 30.5.2.3).
    \104\ California Indep. Sys. Operator Corp., 156 FERC ] 61,110.
---------------------------------------------------------------------------

    56. Electric storage resources participating in NYISO's markets 
must generally submit the same bidding parameters as other resources, 
with some exceptions.\105\ Limited Energy Storage Resources providing 
regulation service exchange a ``state of charge management'' signal 
with the NYISO to facilitate the efficient use of their capabilities. 
NYISO does not require Limited Energy Storage Resources, unlike other 
generators, to provide regulation capacity response rates, normal 
response rates, or emergency response rates with their regulation 
service bids. In addition, in NYISO, electric storage resources acting 
as a component of a Demand Side Ancillary Services Program resource may 
only submit one normal response rate equaling the electric storage 
resource's emergency response rate, while traditional generators may 
submit up to three normal response rates.
---------------------------------------------------------------------------

    \105\ NYISO Response at 12 (citing NYISO's Market Participant 
User's Guide (Dec. 2015)).
---------------------------------------------------------------------------

    57. In MISO, bidding parameters vary between markets and 
participation models. MISO's market rules allow common bidding 
parameters for each participation model, with a few exceptions.\106\ 
For example, since MISO manages the state of charge for Stored Energy 
Resources, it requires the following additional bidding parameters for 
these resources: Hourly maximum energy storage level; hourly maximum 
energy charge rate; hourly maximum energy discharge rate; hourly energy

[[Page 86533]]

storage loss rate; and hourly full charge energy withdrawal rate.
---------------------------------------------------------------------------

    \106\ MISO Response at 14-15 (citing MISO FERC Electric Tariff, 
section 4.2.6 (Stored Energy Resource Offer)).
---------------------------------------------------------------------------

    58. Bidding parameters in PJM also vary between markets and 
participation models.\107\ Additionally, pumped storage resources 
offering into the PJM energy markets may either self-schedule or have 
PJM dispatch their unit pursuant to the pumped storage optimization 
tool. In either case, the resource must submit the following 
parameters: initial storage; final storage; maximum storage; minimum 
storage; pumping efficiency factor; and min/max generating and pumping 
limits.\108\
---------------------------------------------------------------------------

    \107\ PJM Response at 18 (citing PJM Operating Agreement, 
Schedule 1, section 6.6(f)).
    \108\ Id. (citing PJM Manual 11, Attachment B).
---------------------------------------------------------------------------

iii. Comments
    59. Some commenters focus on the current bidding parameters for 
electric storage resources. NRECA states that the Commission should not 
mandate bidding parameters for specific electric storage 
resources.\109\ APPA states that, at this early stage of electric 
storage resource development, the required bidding parameters should 
not be so prescriptive as to determine the technologies allowed to 
deploy, which may constrain the ability of load-serving entities to 
adopt the least-cost solution.\110\
---------------------------------------------------------------------------

    \109\ NRECA Comments at 7.
    \110\ APPA Comments at 11.
---------------------------------------------------------------------------

    60. In contrast, NextEra suggests that each RTO/ISO evaluate how 
bidding parameters could allow electric storage resources to 
participate fully in the energy, ancillary service, and capacity 
markets.\111\ NextEra states that the specific bidding parameters 
developed for pumped hydro are inadequate for batteries and other 
advanced electric storage technologies. California Energy Storage 
Alliance also urges evaluation of existing market bidding parameters to 
identify revisions focused on the unique characteristics of electric 
storage resources and their ability to act as both generation and 
load.\112\ Energy Storage Association and NY Battery and Energy Storage 
Consortium agree, recommending that RTOs/ISOs establish a participation 
model that incorporates appropriate bidding parameters and resource 
modeling for electric storage resources.\113\
---------------------------------------------------------------------------

    \111\ NextEra Comments at 10-11.
    \112\ California Energy Storage Alliance Comments at 1-2.
    \113\ Energy Storage Association Comments at 8-12; NY Battery 
and Energy Storage Consortium Comments at 5.
---------------------------------------------------------------------------

    61. Some commenters address the physical and operational 
characteristics of electric storage resources that create a need for 
bidding parameters in a participation model for electric storage 
resources that may differ from those required under participation 
models for more traditional resources. For example, Alevo argues that 
electric storage resources are not certain that they can participate in 
RTO/ISO markets given modeling and bidding parameter limitations in the 
current RTO/ISO market clearing and dispatch engines.\114\ Alevo and 
Energy Storage Association state that the RTOs'/ISOs' market modeling, 
which Alevo argues is based on traditional resource types that only 
withdraw electricity from or inject electricity to the grid, does not 
accommodate electric storage resources' charge and discharge 
cycles.\115\ Alevo further contends that no current bidding parameters 
offer charge and discharge signals that would allow electric storage 
resources to provide peaking services.\116\ Similarly, RES Americas 
contends that accounting for injections and withdrawals of energy to 
and from the grid in bidding parameters would improve optimization and 
dispatch across all asset classes.\117\
---------------------------------------------------------------------------

    \114\ Alevo Comments at 20.
    \115\ Id.; Energy Storage Association Comments at 9.
    \116\ Alevo Comments at 20.
    \117\ RES Americas Comments at 4.
---------------------------------------------------------------------------

    62. A few commenters address bidding parameters in specific 
organized wholesale electric markets. Energy Storage Association states 
that MISO's Stored Energy Resource, ISO-NE's Alternative Technology 
Regulation Resource, and NYISO's Limited Energy Storage Resource 
participation models explicitly allow electric storage resource 
participation.\118\ According to Energy Storage Association, these 
participation models offer the bidding parameters and modeling 
mechanisms (such as energy-neutral signal or state-of-charge 
management) necessary for electric storage resource participation. 
Minnesota Energy Storage Alliance and AES Companies, however, believe 
that MISO's current dispatch algorithms do not effectively use electric 
storage resources because they were designed for flywheels, while 
advanced battery systems have the ability to continuously charge and 
discharge.\119\
---------------------------------------------------------------------------

    \118\ Energy Storage Association Comments at 9-10.
    \119\ Minnesota Energy Storage Alliance Comments at 4; AES 
Companies Comments at 21.
---------------------------------------------------------------------------

    63. Other commenters discuss bidding parameters that relate to 
specific services in the organized wholesale electric markets. National 
Hydropower Association states that bidding parameters should reflect 
electric storage resources' ability to respond to transients with 
automatic voltage regulation, power system stability, and generator 
droop.\120\ National Hydropower Association claims that the NERC 
standards often require these services, but RTOs/ISOs do not include 
them in any bid evaluation parameters.
---------------------------------------------------------------------------

    \120\ National Hydropower Association Comments at 4.
---------------------------------------------------------------------------

    64. Some commenters focus on state of charge as a bidding parameter 
for electric storage resources. Alevo, NextEra, SolarCity, and Energy 
Storage Association agree that bidding parameters need to reflect an 
electric storage resource's state of charge.\121\ Alevo states that the 
inability of the RTOs'/ISOs' dispatch and clearing engines to manage 
hourly and sub-hourly dispatch and consider electric storage resources' 
states of charge is a barrier to electric storage resource 
participation.\122\ Alevo and Energy Storage Association recommend 
including a state of charge bidding parameter in market engine 
optimization and dispatch modeling because an electric storage 
resource's energy level at any given moment affects the services it is 
capable of providing in the subsequent interval.\123\ NextEra asserts 
that, although some RTOs/ISOs manage batteries' state of charge when 
providing regulation service, it is unclear how electric storage 
resources (or the RTOs/ISOs) can reflect their state of charge in the 
unit commitment and dispatch algorithms when providing other 
services.\124\
---------------------------------------------------------------------------

    \121\ Alevo Comments at 20; NextEra Comments at 10; SolarCity 
Comments at 9; Energy Storage Association Comments at 11.
    \122\ Alevo Comments at 20.
    \123\ Id.; Energy Storage Association Comments at 11.
    \124\ NextEra Comments at 10-11. NextEra points to CAISO's 
proposal to allow energy storage resources to submit their state of 
charge as a bid parameter in the day-ahead market. This proposal was 
accepted by the Commission. See California Indep. Sys. Operator 
Corp., 156 FERC ] 61,110 at P 10.
---------------------------------------------------------------------------

    65. Some commenters focus on the ability of electric storage 
resources to manage their own state of charge. SolarCity states that 
RTOs/ISOs should allow electric storage resources to manage their state 
of charge rather than relying on RTO/ISO accounting estimates of their 
state of charge, which could lead to faulty dispatch instructions.\125\ 
Likewise, NextEra recommends that the RTOs/ISOs should allow electric 
storage resources to choose between RTO/ISO-management and self-
management of state of charge.\126\ Energy Storage Association asks 
that RTOs/ISOs clarify how they would model, optimize, dispatch, and 
settle electric storage resources using

[[Page 86534]]

negative generation and state of charge parameters so that electric 
storage resources understand how they will bid into the market, receive 
dispatch signals, respond to those signals, and be compensated.\127\ 
AES Companies state that electric storage resources should be permitted 
to optimize their own state of charge because MISO's operating software 
ignores the benefits of constant charge and availability.\128\
---------------------------------------------------------------------------

    \125\ SolarCity Comments at 9.
    \126\ NextEra Comments at 10-11. See also Ormat Comments at 3.
    \127\ Energy Storage Association Comments at 7.
    \128\ AES Companies Comments at 21.
---------------------------------------------------------------------------

iv. Proposed Reforms
    66. We propose to require each RTO/ISO to revise its tariff to 
include a participation model for electric storage resources that 
incorporates bidding parameters that reflect and account for the 
physical and operational characteristics of electric storage resources. 
The lack of a state-of-charge bidding parameter and the lack of ability 
for electric storage resources to identify their maximum energy charge 
rate and maximum energy discharge rate could result in electric storage 
resources being dispatched in a manner that limits their operational 
effectiveness. While some existing bidding parameters were developed 
for older electric storage technologies (such as pumped-hydro 
facilities), newer storage technologies (such as battery storage) have 
greater flexibility to transition between charging and discharging. 
Therefore, bidding parameters designed for slower storage technologies 
or other types of generation resources that are not capable of charging 
and discharging energy may limit the opportunity for faster electric 
storage resources to participate in the organized wholesale electric 
markets. Appropriate bidding parameters will allow electric storage 
resources to provide all services they are technically capable of 
providing and allow the RTOs/ISOs to procure these services more 
efficiently.
    67. Specifically, we propose that the RTOs/ISOs establish state of 
charge, upper charge limit, lower charge limit, maximum energy charge 
rate, and maximum energy discharge rate as bidding parameters for the 
participation model for electric storage resources that participating 
resources must submit, as applicable. The state of charge will allow 
resources using the participation model for electric storage resources 
to identify their forecasted state of charge at the end of a market 
interval,\129\ as defined by the RTO/ISO, while the upper and lower 
charge limits will prevent the operator from trying to give or take too 
much energy from the resource. We expect that the state of charge would 
be telemetered in real time when the RTO/ISO is managing the state of 
charge, as discussed further below, so that the upper and lower charge 
limits are not exceeded, but do not propose any specific telemetry 
requirements. The maximum energy charge rate and maximum energy 
discharge rate will be used to indicate how quickly the resource can 
receive electricity from or inject it back to the grid. We 
preliminarily find that these are the minimum bidding parameters 
necessary for RTOs/ISOs to effectively dispatch electric storage 
resources because they provide the RTOs/ISOs with the information about 
the physical and operational characteristics of electric storage 
resources that allow these resources to provide the services that they 
are technically capable of providing.
---------------------------------------------------------------------------

    \129\ See, e.g., CAISO Tariff, Att. A, section 30.5.6 (stating 
that scheduling coordinators representing Non-Generator Resources 
may submit bids including the state of charge for the day-ahead 
market to indicate the forecasted starting physical position of the 
Non-Generator Resource.).
---------------------------------------------------------------------------

    68. We also propose to require that the participation models for 
electric storage resources include the following bidding parameters 
that market participants may submit, at their discretion, for their 
resource based on its physical constraints or desired operation: 
minimum charge time, maximum charge time, minimum run time, and maximum 
run time.\130\ We preliminarily conclude that these optional bidding 
parameters are necessary to reflect the wide range of physical and 
operational characteristics of existing and future electric storage 
technologies. Specifically, electric storage technologies such as 
pumped-hydro facilities that seek to provide energy in the organized 
wholesale electric markets have some physical and operational 
characteristics that are closer to those of traditional generation than 
those of small electric storage resources designed primarily to provide 
regulation service. The optional bidding parameters that we propose 
here would allow electric storage resources to indicate their 
operational constraints to the RTO/ISO and would help these resources 
to manage any costs or operational constraints that they incur when 
transitioning between charging and discharging electricity. For 
example, the opportunity to submit these optional bidding parameters 
could allow an electric storage resource to prevent excessive 
variability in its operations to help optimize the services that it is 
available to provide and to preserve the life of the electric storage 
resource.
---------------------------------------------------------------------------

    \130\ We acknowledge that some of these optional bidding 
parameters may not be necessary for resources participating under 
the proposed participation model for electric storage resources that 
provide certain information to the RTO/ISO through telemetry.
---------------------------------------------------------------------------

    69. Also, where the RTO/ISO has reserved for itself the right to 
manage the state of charge of an electric storage resource, we propose 
to require that the RTOs/ISOs allow electric storage resources to self-
manage their state of charge and upper and lower charge limits. An 
electric storage resource that opts to self-manage its state of charge 
and upper and lower charge limits would keep its state of charge at an 
optimal level through its own bidding strategy, rather than the RTO/ISO 
market processes ensuring that dispatch does not violate its physical 
constraints. The Commission recently accepted revisions to the CAISO 
tariff that allow non-generator resources to self-manage their energy 
limits and state-of-charge in real-time.\131\
---------------------------------------------------------------------------

    \131\ California Indep. Sys. Operator, Corp., 156 FERC ] 61,110 
at P 10.
---------------------------------------------------------------------------

    70. Of course, an electric storage resource that self-manages its 
state of charge is subject to any penalties for deviating from a 
dispatch schedule to the extent the resource manages its state of 
charge by deviating from the dispatch schedule. While RTOs/ISOs may be 
in a better position to effectively manage the state of charge for an 
electric storage resource that, for example, exclusively provides 
regulation service in the organized wholesale electric markets, some 
electric storage resources may be interested in providing multiple 
service or providing services to another party, such as to a load with 
which it is co-located. Affording electric storage resources the option 
to manage their state of charge would allow these resources to optimize 
their operations to provide all of the services that they are 
technically capable of providing, similar to the operational 
flexibility that traditional generators have to manage the wholesale 
services that they offer. However, we seek comment on whether there are 
conditions under which an RTO/ISO should not allow an electric storage 
resource to manage its state of charge and upper and lower charge 
limits.
    71. While the inclusion of these bidding parameters would allow for 
more efficient use of electric storage resources, their implementation 
also requires the RTOs/ISOs to program these bidding parameters into 
their modeling and dispatch software. The difficulty of implementing 
these bidding parameters would likely vary from RTO/ISO to RTO/ISO. 
Therefore, we seek

[[Page 86535]]

comment on the time and resources that would be necessary for the RTOs/
ISOs to incorporate these bidding parameters, including the optional 
bidding parameters, into their modeling and dispatch software.
c. Eligibility To Participate as a Wholesale Seller and Wholesale Buyer
i. Introduction
    72. The ability of electric storage resources to receive and 
provide electricity positions them to be both buyers and sellers in the 
organized wholesale electric markets. As the Commission has previously 
recognized, a market functions effectively only when both supply and 
demand can meaningfully participate.\132\ Improving electric storage 
resources' opportunity to participate as both wholesale sellers of 
services and wholesale buyers of energy could improve market efficiency 
by allowing the RTO/ISO to dispatch these resources in accordance with 
their most economically efficient use (i.e., as supply when the market 
clearing price for energy is higher than their offer and as demand when 
the market clearing price is lower than their bid). Moreover, allowing 
electric storage resources to participate in the organized wholesale 
electric markets as dispatchable load would allow these resources, 
under certain circumstances, to set the price in these markets, better 
reflecting the value of the marginal resource and ensuring that 
electric storage resources are dispatched in accordance with the 
highest value service that they are capable of providing during a set 
market interval.
---------------------------------------------------------------------------

    \132\ Demand Response Compensation in Organized Wholesale Energy 
Markets, Order No. 745, FERC Stats. & Regs. ] 31,322, at P 1, order 
on reh'g, Order No. 745-A, 137 FERC ] 61,215 (2011).
---------------------------------------------------------------------------

ii. Current Rules
    73. Each RTO's/ISO's market rules that govern the eligibility of 
electric storage resources to participate in the organized wholesale 
electric markets as a demand resource are different. For example, CAISO 
explains that an electric storage resource interconnected to the CAISO 
grid with a participating generator agreement and participating load 
agreement can submit offers to sell and bids to buy energy in the 
wholesale market.\133\ According to SPP, submitting bids to purchase 
energy in its market is within the resource owner's discretion.\134\ 
SPP notes that electric storage resources may submit virtual bids in 
the day-ahead market at any location and a fixed or price-sensitive bid 
at their registered load. In contrast, PJM explains that electric 
storage resources do not submit wholesale bids to buy electricity.\135\
---------------------------------------------------------------------------

    \133\ CAISO Response at 16.
    \134\ SPP Response at 7.
    \135\ PJM Response at 22.
---------------------------------------------------------------------------

    74. ISO-NE states that, because it is dispatchable, an electric 
storage resource participating as a Dispatchable Asset Related Demand 
resource may submit bids to buy energy in both the day-ahead and real-
time energy markets; however, if it is participating as a load asset or 
an Asset Related Demand, it may submit bids to buy energy in the day-
ahead market but would be a price taker in real-time.\136\
---------------------------------------------------------------------------

    \136\ ISO-NE Response at 28 (citing ISO-NE Tariff, section 
I.2.2).
---------------------------------------------------------------------------

    75. MISO explains that, in the day-ahead market, electric storage 
resources may submit bids to buy energy at the LMP when they need to 
recharge as dispatchable demand or may submit virtual bids.\137\ MISO 
further explains that in the real-time market, most load buys energy as 
fixed demand and only Demand Response Resources--Type II can submit 
demand response offers to buy energy.
---------------------------------------------------------------------------

    \137\ MISO Response at 16.
---------------------------------------------------------------------------

    76. NYISO states that Energy Limited Resources obtain charging 
energy through negative MW value generation offers, rather than a bid 
to buy energy.\138\ NYISO explains that demand-side resources 
participating in the Special Case Resource Program, Emergency Demand 
Response Program, Demand Side Ancillary Services Program, or Day-Ahead 
Demand Response Program do not submit bids to buy energy in the 
wholesale markets unless the resource is a load-serving entity, in 
which case it purchases its entire load. NYISO states that a demand-
side resource may submit price-responsive load bids to take advantage 
of off-peak prices to charge its electric storage resource. NYISO adds 
that electric storage resources are not required to bid to buy 
electricity from the NYISO market, but, like any load, may bid into the 
day-ahead market as a price cap load bid.\139\
---------------------------------------------------------------------------

    \138\ NYISO Response at 14-15.
    \139\ Id. at 15 (citing NYISO Services Tariff, section 21.1).
---------------------------------------------------------------------------

    77. The eligibility for an electric storage resource to set the 
price in the organized wholesale electric markets also varies among the 
RTOs/ISOs. For example, CAISO states that an electric storage resource 
that is the marginal resource may set the price of energy and ancillary 
services in CAISO's markets based on its economic bid.\140\ PJM states 
that, with the exception of demand-side resources in the non-
synchronized reserve market, electric storage resources may set the 
price as either a generation or as a demand-side resource in the 
capacity, energy, and ancillary service markets.\141\ SPP states that 
any resource, including an electric storage resource, qualified to 
participate in an SPP market may set the price for the relevant 
market.\142\
---------------------------------------------------------------------------

    \140\ CAISO Response at 10.
    \141\ PJM Response at 10.
    \142\ SPP Response at 4.
---------------------------------------------------------------------------

    78. ISO-NE states that, in each of its markets, electric storage 
resources may be able to set the clearing price, depending on the 
participation model that they are using to participate.\143\ ISO-NE 
explains that only dispatchable resources (i.e., dispatchable generator 
assets and dispatchable asset related demand) may set the clearing 
price in the real-time energy market. ISO-NE explains that, in the day-
ahead energy market, an electric storage resource may set the price by 
offering into the market as a generator resource, Asset Related Demand, 
or Dispatchable Asset Related Demand. ISO-NE adds that, by qualifying 
as a new generator resource or as a demand resource, an electric 
storage resource may bid its qualified MWs into the capacity market and 
set the clearing price. ISO-NE notes that an electric storage resource 
or aggregation of electric storage resources may set the regulation 
market clearing prices by offering as an Alternative Technology 
Regulation Resource. ISO-NE states that an electric storage resource 
may also set the market-clearing regulation price by offering into the 
regulation market as a generator resource or Dispatchable Asset Related 
Demand.
---------------------------------------------------------------------------

    \143\ ISO-NE Response at 12-13. ISO-NE explains that, today, 
Real-Time Demand Response assets are price-takers in the real-time 
energy market but that, with the full integration of demand response 
into the energy market scheduled for June 1, 2018, demand response 
resources will have the potential to set market clearing prices.
---------------------------------------------------------------------------

    79. MISO states that electric storage resources may set prices for 
products in the market(s) in which they are eligible to participate. 
MISO explains that, for example, an electric storage resource 
registered as a Load Modifying Resource may set the price in the 
capacity market. MISO states that an electric storage resource 
registered as a Stored Energy Resource may set the price for regulating 
reserve.\144\
---------------------------------------------------------------------------

    \144\ MISO Response at 10.
---------------------------------------------------------------------------

    80. NYISO explains that supply offers of electric storage resources 
that participate as Energy Limited Resources may set the price for 
capacity, energy, and ancillary services; Limited Energy Storage 
Resources may set the price for regulation service. NYISO explains that 
Special Case Resources and Emergency

[[Page 86536]]

Demand Response Program resource energy offers do not directly set the 
price; rather, when these resources are dispatched, the NYISO's 
scarcity pricing rules are triggered in the zone(s) in which they are 
activated and may alter energy and certain ancillary services 
prices.\145\
---------------------------------------------------------------------------

    \145\ NYISO Response at 8.
---------------------------------------------------------------------------

iii. Proposed Reforms
    81. We propose to require each RTO/ISO to revise its tariff to 
ensure that electric storage resources can be dispatched and can set 
the wholesale market clearing price as both a wholesale seller and 
wholesale buyer consistent with existing rules that govern when a 
resource can set the wholesale price. This proposal includes the 
requirements that the RTOs/ISOs accept wholesale bids from electric 
storage resources to buy energy so that the economic preferences of the 
electric storage resources are fully integrated into the market, the 
electric storage resource can set the price as a load resource where 
market rules allow, and the electric storage resource can be available 
to the RTO/ISO as a dispatchable demand asset. However, we note that 
these requirements must not prohibit electric storage resources from 
participating in organized wholesale electric markets as price takers, 
consistent with the existing rules for self-scheduled load resources. 
We also clarify that, while resources are not dispatched when they 
clear the capacity markets, we are proposing that resources using the 
participation model for electric storage resources be able to set the 
price in the capacity markets, where applicable.
    82. To optimize the capabilities of electric storage resources and 
for the RTOs/ISOs to use them efficiently, it is important for the 
RTOs/ISOs to be able to symmetrically utilize the capabilities of these 
resources to both receive electricity from the grid and inject it back 
to the grid. In other words, they must be able to dispatch electric 
storage resources as supply when the market clearing price exceeds 
their offers to sell and to dispatch electric storage resources as 
demand when their bids to buy exceed the market clearing price. The 
bidirectional capabilities of electric storage resources are what make 
them unique, and allowing electric storage resources to participate in 
the organized wholesale electric markets as both wholesale sellers and 
wholesale buyers will help optimize the value that they provide and 
enhance price formation, as they will be dispatched in accordance with 
their most economic use.
    83. We preliminarily conclude that the proposed requirement to 
participate as a supply and demand resource simultaneously (i.e., 
submit bids to buy and offers to sell during the same market interval) 
is necessary to maximize the value that electric storage resources can 
provide in the organized wholesale electric markets, allowing the 
markets to identify whether it is more economic to dispatch an electric 
storage resource as supply or demand during a given market interval. We 
expect that, through its bidding strategy, a resource using the 
electric storage resource participation model would be able to prevent 
any conflicting dispatch signals to itself. However, we seek comment on 
whether there should be a mechanism that identifies bids and offers 
coming from the same resource that ensures the price for the offer to 
sell is not lower than the price for the bid to buy during the same 
market interval so that an RTO/ISO does not accept both the offer and 
bid of a resource using the electric storage resource participation 
model for that interval.
    84. Generally, in the organized wholesale electric markets, 
resources that cannot be dispatched by the RTO/ISO do not set wholesale 
prices. This is because the marginal clearing prices are based on the 
shadow price of the next unit of incremental production, and a resource 
that cannot be dispatched by the RTO/ISO cannot provide that 
incremental unit of production. Therefore, we propose that, for a 
resource using the proposed participation model for electric storage 
resources to be able to set prices in the organized wholesale electric 
markets as either a wholesale seller or a wholesale buyer, it must be 
available to the RTO/ISO as a dispatchable resource. We believe this 
proposal is consistent with RTO/ISO rules on price setting and are 
further proposing that the ability for resources using the 
participation model for electric storage resources to set the price be 
consistent with existing rules that govern when a resource can set the 
wholesale price. However, we seek comment on whether any existing RTO/
ISO rules may unnecessarily limit the ability of resources using the 
participation model for electric storage resources to set prices in the 
organized wholesale electric markets.
    85. We note that resources using the proposed participation model 
for electric storage resources that elect to submit economic bids as a 
wholesale buyer and participate as dispatchable demand resources would 
still be able to self-schedule their charging and be price takers. 
However, it is also possible that the RTO/ISO could dispatch an 
electric storage resource as load when the wholesale price for energy 
is above the price of their bid to buy (a circumstance under which they 
would lose the opportunity to earn greater revenues as a supply 
resource). Therefore, to help alleviate any potential financial risk to 
these resources when being dispatched as a demand resource, we seek 
comments on whether the proposed participation model for electric 
storage resources should allow make-whole payments when a resource 
participating under this participation model is dispatched as load and 
the price of energy is higher than the resource's bid price.
d. Minimum Size Requirement
i. Introduction
    86. Depending on the technology, electric storage resources range 
in size from 1 kW to 1 GW,\146\ and most of them tend to be under 1 
MW.\147\ RTO/ISO market rules may restrict electric storage resources 
from participating in the organized wholesale electric markets based on 
minimum size requirements \148\ that may have been designed for 
different types of resources. This is particularly true for smaller 
electric storage resources, which may be limited to participating in 
the organized wholesale electric markets as demand response resources. 
Such restrictions can limit these resources' ability to employ their 
full operational range because they are prohibited from injecting 
electricity into the grid in excess of their host load and preclude 
them from providing services such as reserves.
---------------------------------------------------------------------------

    \146\ Sandia Report at 29, Figure 19 (Positioning of Energy 
Storage Technologies).
    \147\ U.S. Department of Energy, Grid Energy Storage at 12 (Dec. 
2013) (stating that most storage systems are in the 10 kW to 10 MW 
range, with the largest proportion of those resources in the 100 kW 
to 1 MW range).
    \148\ We use the term ``minimum size requirement'' to 
collectively describe minimum capacity requirements to qualify to 
use a given participation model, ``minimum offer requirements'' for 
offers to sell services in the organized wholesale electric markets, 
and ``minimum bid requirements'' for bids to buy energy in these 
markets. When we are referring to a specific category of minimum 
size requirement, we will use that specific term.
---------------------------------------------------------------------------

ii. Current Rules
    87. Under existing market rules, minimum capacity, minimum offer 
and minimum bid requirements for electric storage resources to 
participate in the organized wholesale electric markets vary across the 
RTOs/ISOs, with minimum size requirements ranging from 100 kW to 5 MW. 
PJM and SPP have minimum offer requirements of 100 kW for all 
resources, with other

[[Page 86537]]

RTO/ISO minimum size requirements varying across participation models 
and markets.\149\
---------------------------------------------------------------------------

    \149\ PJM Response at 10 (citing PJM Tariff, Att. DD, section 
5.6); SPP Response at 5 (citing SPP Tariff, Att. AE section 1.1 
(definition of ``Offer'')).
---------------------------------------------------------------------------

    88. CAISO states that the minimum capacity requirement for demand 
response resources is 100 kW and that all resources other than demand 
response have minimum capacity requirements of 500 kW. Resources can 
meet these minimum capacity requirements through aggregation.\150\ 
Alternatively, ISO-NE minimum capacity requirements range from 100 kW 
for demand response resources, to 1 MW for Alternative Technology 
Regulation Resources, to 5 MW for generators seeking to provide demand 
response in the regulation market.\151\ Under MISO tariff rules, 
minimum capacity requirements vary from 100 kW for Load Modifying 
Resources, to 1 MW for demand response resources, to 5 MW for 
generators.\152\ MISO states that it has not determined a minimum size 
for Stored Energy Resources but believes a minimum of 1 MW is 
appropriate.\153\ In NYISO, the minimum size requirement is 100 kW for 
demand response resources and 1 MW for Energy Limited Resources and 
Limited Energy Storage Resources.\154\
---------------------------------------------------------------------------

    \150\ CAISO Response at 10-11 (citing CAISO Tariff, App. K, Part 
A 1.1.1; Part B1.1; Part C1.1).
    \151\ ISO-NE Response at 13-14 (citing ISO-NE Tariff, App. E2, 
section I-III).
    \152\ MISO Response at 10.
    \153\ Id. at 16-17.
    \154\ NYISO Response at 9.
---------------------------------------------------------------------------

    89. The RTOs/ISOs also define minimum bid requirements for load 
resources to buy energy from the organized wholesale electric markets. 
In CAISO, the minimum bid requirement is 10 kW, the same as for 
traditional generators.\155\ In MISO and SPP, the minimum bid 
requirements are 100 kW.\156\ In ISO-NE, energy market bids cannot be 
smaller than 100 kW.\157\ In NYISO, the minimum bid requirement is 1 
MW, with the option to aggregate to meet that requirement.\158\ 
Electric storage resources do not submit bids to buy energy in the PJM 
wholesale markets.\159\
---------------------------------------------------------------------------

    \155\ CAISO Response at 16.
    \156\ MISO Response at 17; SPP Response at 8.
    \157\ ISO-NE Response at 29.
    \158\ NYISO Response at 15.
    \159\ PJM Response at 22.
---------------------------------------------------------------------------

iii. Comments
    90. Several commenters address the minimum size requirements to 
participate in the RTO/ISO markets, questioning whether the RTOs/ISOs 
based those standards on technological requirements and system needs. 
For example, NY Battery and Energy Storage Consortium argues that the 
minimum size requirement for participation in organized wholesale 
electric markets should be lowered.\160\ Public Interest Organizations 
claim that minimum size requirements for electric storage resources to 
participate in the organized wholesale electric markets may be a 
barrier to distributed electric storage resources, especially those 
that are small. Public Interest Organizations contend that, while the 
opportunity to offer distributed energy resource aggregations into the 
markets could help mitigate this concern, that opportunity is lacking 
or unclear in some RTOs/ISOs.\161\
---------------------------------------------------------------------------

    \160\ NY Battery and Energy Storage Consortium Comments at 6.
    \161\ Public Interest Organizations Comments at 5.
---------------------------------------------------------------------------

    91. Several commenters specifically cite the variability in the 
minimum size requirements of the various RTO/ISO market participation 
models as a barrier to electric storage resource participation. Energy 
Storage Association contends that minimum size requirements for 
electric storage resources may prohibit storage participation and lead 
to inconsistencies across regions.\162\ Advanced Energy Economy argues 
that it is not clear why the minimum size requirements for providing 
services should vary from RTO/ISO to RTO/ISO and that these market rule 
variations are a barrier to electric storage resource participation in 
the organized wholesale electric markets.\163\ Public Interest 
Organizations assert that disparate requirements in the RTO/ISO reports 
indicate that some of these minimum limits may be arbitrary.\164\
---------------------------------------------------------------------------

    \162\ Energy Storage Association Comments at 29.
    \163\ Advanced Energy Economy Comments at 10-11.
    \164\ Public Interest Organizations Comments at 5.
---------------------------------------------------------------------------

    92. Other commenters identify specific minimum size requirements in 
certain RTO/ISO markets as barriers to the participation of electric 
storage resources in those markets. Minnesota Energy Storage Alliance 
claims that MISO's 1 MW minimum size requirement for demand response 
resources is not appropriate due to the lower minimum size requirements 
in other RTOs/ISOs.\165\ Minnesota Energy Storage Alliance further 
states that removing this requirement would allow electric storage 
resources to more readily participate, providing economic justification 
for project development and increasing MISO's operational flexibility. 
NY Battery and Energy Storage Consortium asserts that NYISO's 1 MW size 
requirement limits behind-the-meter electric storage resources from 
participating in NYISO's day-ahead market, despite having the technical 
capability to perform.\166\
---------------------------------------------------------------------------

    \165\ Minnesota Energy Storage Alliance notes that size 
restrictions do not apply to the load-modifying resource 
classification, but such resources are only eligible to provide 
capacity for MISO-declared emergency events and cannot provide 
energy or ancillary services. Minnesota Energy Storage Alliance 
Comments at 3-4.
    \166\ NY Battery and Energy Storage Consortium Comments at 5-6.
---------------------------------------------------------------------------

    93. Solar City and Viridity ask the Commission to consider 
requiring all RTOs/ISOs to set a minimum requirement of 100 kW for 
electric storage resource participation in their markets.\167\ Solar 
City argues that a 100 kW minimum size requirement will ensure that 
electric storage resources can provide value to markets at relatively 
modest levels of penetration and participate in organized wholesale 
energy markets even when locational requirements reduce the area over 
which resources can be aggregated.\168\
---------------------------------------------------------------------------

    \167\ SolarCity Comments at 9; Viridity Comments at 3.
    \168\ SolarCity Comments at 9.
---------------------------------------------------------------------------

iv. Proposed Reforms
    94. We propose that the minimum size requirement to participate in 
the organized wholesale electric markets under the proposed electric 
storage resource participation model must not exceed 100 kW. While we 
acknowledge that minimum size requirements may be necessary to ensure 
that the RTOs/ISOs can effectively model and dispatch the resources 
participating in their markets, large minimum size requirements create 
a barrier to the participation of smaller electric storage resources. 
We preliminarily conclude that requiring that the minimum size 
requirement not exceed 100 kW balances the benefits of increased 
competition with the ability of RTO/ISO market clearing software to 
effectively model and dispatch smaller resources often located on the 
distribution system. Thus, we propose to require each RTO/ISO to revise 
its tariffs to include a participation model for electric storage 
resources that establishes a minimum size requirement for participation 
in the organized wholesale electric markets that does not exceed 100 
kW. This would include any minimum capacity requirements, minimum offer 
requirements, and minimum bid requirements for resources participating 
in these markets under the electric storage resource participation 
model.

[[Page 86538]]

e. Energy Used To Charge Electric Storage Resources
i. Introduction
    95. Electric storage resources must absorb electricity (i.e., 
charge) to sell that electricity, net of losses, back to an RTO/ISO as 
energy or ancillary services. The manner in which an electric storage 
resource charges (consumes) energy and discharges (produces) energy 
will determine whether the electric storage resource is engaging in a 
sale for resale subject to our jurisdiction.
ii. Current Rules
    96. For the most part, the RTOs/ISOs indicate that electric storage 
resources that are charging to later provide wholesale services in 
their markets already pay LMP for that electricity. CAISO states that 
all electric storage resources participating in its wholesale markets 
pay LMP for their charging energy.\169\ ISO-NE states that electric 
storage resources purchasing energy directly from the wholesale market 
pay the LMP for the electricity they receive.\170\ MISO states that any 
resources eligible to participate in MISO's capacity, energy, and 
ancillary service markets pay LMP for the electricity they 
receive.\171\ NYISO states that Energy Limited Resources using electric 
storage resource technology and Limited Energy Storage Resources will 
pay the wholesale price for the electricity they consume to meet a 
regulation service schedule or to charge the resource if the resource 
is either in front-of-the-meter (a generator) or a direct NYISO 
customer (a load-serving entity). NYISO notes that, if the resource is 
behind-the-meter and served by a separate load-serving entity, then it 
would pay the load-serving entity's retail rate.\172\ PJM states that 
an electric storage resource would pay wholesale LMP if the resource is 
taking power off the system solely to inject into the energy or 
ancillary service markets at a later time.\173\ SPP states that, in its 
real-time market, electric storage resources pay the real-time LMP for 
their load consumption, although they may also be subject to retail 
rules for electric consumption.\174\
---------------------------------------------------------------------------

    \169\ CAISO Response at 17.
    \170\ ISO-NE Response at 29-30.
    \171\ MISO Response at 17.
    \172\ NYISO Response at 16.
    \173\ PJM Response at 23.
    \174\ SPP Response at 7.
---------------------------------------------------------------------------

iii. Comments
    97. Several commenters address the issue of the price that electric 
storage resources should pay for charging electricity when that 
electricity is for later use in the organized wholesale electric 
markets. For example, Alevo argues that it is not clear whether an 
electric storage resource connected at the distribution level will pay 
the LMP for its charging electricity, even if it is charging to provide 
a wholesale service.\175\ Electric Vehicle R&D Group and NextEra 
contend that current RTO/ISO tariffs do not provide enough clarity on 
the price that storage pays for electricity,\176\ and that the RTOs/
ISOs should revise their tariffs to settle discharging and recharging 
resources at LMP.\177\ Similarly, Tesla asks the Commission to clarify 
that electricity stored for resale is not a retail sale and thus should 
be settled at the wholesale LMP.\178\
---------------------------------------------------------------------------

    \175\ Alevo Comments at 29.
    \176\ Electric Vehicle R&D Group Comments at 13.
    \177\ NextEra Comments at 13.
    \178\ Tesla Comments at 5-6.
---------------------------------------------------------------------------

    98. In contrast, Manitoba Hydro asserts that dispatchable electric 
storage resources should either pay a lower LMP than non-dispatchable 
resources or should receive a storage capacity credit for their 
services because a MWh received by a storage resource for later 
injection is different than a MWh consumed by traditional load.\179\ 
Minnesota Energy Storage Alliance similarly requests that dispatchable 
electric storage resources pay a lower LMP or be compensated for the 
service.\180\ AES Companies contend that it is inappropriate for an 
electric storage resource to pay LMP when it is directed to charge and 
that such a payment is a disincentive to new storage installation.\181\
---------------------------------------------------------------------------

    \179\ Manitoba Hydro Comments at 10-12.
    \180\ Minnesota Energy Storage Alliance Comments at 5.
    \181\ AES Companies Comments at 23.
---------------------------------------------------------------------------

    99. SoCal Edison argues that behind-the-meter electric storage 
resources should not be allowed to charge at a wholesale rate and 
discharge to serve a retail customer to allow the retail customer to 
avoid paying the retail rate for its consumption.\182\ Addressing this 
concern, some commenters suggest that metering and accounting practices 
can be designed to delineate between wholesale and retail 
activities.\183\
---------------------------------------------------------------------------

    \182\ SoCal Edison Comments at 8.
    \183\ Independent Energy Producers Association Comments, Att. at 
7; Minnesota Energy Storage Alliance Comments at 5.
---------------------------------------------------------------------------

iv. Proposed Reforms
    100. The Commission has found that the sale of energy from the grid 
that is used to charge electric storage resources for later resale into 
the energy or ancillary service markets constitutes a sale for 
resale.\184\ As such, the just and reasonable rate for that wholesale 
sale of energy used to charge the electric storage resource is the RTO/
ISO market's wholesale price for energy or LMP. We thus propose to 
require each RTO/ISO to revise its tariff to specify that the sale of 
energy from the organized wholesale electric markets to an electric 
storage resource that the resource then resells back to those markets 
must be at the wholesale LMP.
---------------------------------------------------------------------------

    \184\ See Norton Energy Storage, L.L.C., 95 FERC ] 61,476, at 
62,701-02 (2001) (citations omitted) (``[T]he use of compressed air 
as a medium for the storage of energy in an energy storage facility 
is a new technology. However, we find that a compressed air energy 
storage facility is analogous to a pumped storage hydroelectric 
facility, in that compressed air is used in a conversion/storage 
cycle just as water is used in a pumped storage hydroelectric 
facility in the conversion/storage cycle. . . . [T]he Commission 
views the pumping energy not as being consumed, but rather as being 
converted and stored, as water in the upper reservoir, for later re-
conversion . . . back to electric energy. It is this conversion/
storage cycle that distinguishes energy storage facilities, whether 
pumped storage hydroelectric facilities or compressed air energy 
storage facilities, from facilities that consume electricity (in the 
form of station power or otherwise). The fact that pumping energy or 
compression energy is not consumed means that the provision of such 
energy is not a sale for end use that this Commission cannot 
regulate. Rather, based on Norton's representations in its petition, 
we find that deliveries of compression energy to the Norton energy 
storage facility as part of energy exchange transactions employing 
the conversion/storage cycle are wholesale transactions subject to 
our exclusive authority under the FPA.''). See also PJM 
Interconnection, L.L.C., 132 FERC at 62,053 (``Like pumping energy 
and compression energy, the energy used to charge Energy Storage 
Resources will be stored for later delivery and not used for 
operating the electric equipment on the site of a generation 
facility or associated buildings as Station Power is used.'').
---------------------------------------------------------------------------

    101. The proposed clarification also provides developers and 
operators of electric storage resources certainty about the price that 
they will be charged for purchasing charging electricity in the 
organized wholesale electric markets when they will use that 
electricity to provide wholesale services. We note that this proposed 
clarification is consistent with most current RTO/ISO practices as 
reflected in their responses.
    102. We recognize SoCal Edison's concern that behind-the-meter 
electric storage resources should not be allowed to charge at a 
wholesale rate and discharge to serve a retail customer as a means for 
the retail customer to avoid paying the retail rate. This situation 
could be even more complex if the retail customer in question also uses 
a behind-the-meter generator in conjunction with its storage device. 
Given the comments in the record indicating that metering and 
accounting practices can be designed to delineate between

[[Page 86539]]

wholesale and retail activities,\185\ we seek comment on whether such 
metering and accounting practices would need to be established in the 
RTO/ISO tariffs to facilitate compliance with this proposal or whether 
it is possible to determine the end use for energy used to charge an 
electric storage resource under existing requirements.
---------------------------------------------------------------------------

    \185\ Independent Energy Producers Association Comments, Att. at 
7; Minnesota Energy Storage Alliance Comments at 5.
---------------------------------------------------------------------------

B. Participation of Distributed Energy Resource Aggregators in the 
Organized Wholesale Electric Markets

1. Introduction
    103. There has been significant industry attention paid to the 
development of distributed energy resources and the potential for such 
resources to contribute to grid services. More recently, the discussion 
has focused on new distributed energy resources that are smaller, 
interconnected to lower voltage networks, and geographically dispersed. 
These new distributed energy resources are enabled by increasing 
deployment of and improvements in metering, telemetry, and 
communication technologies. With such advances, more localized power 
and energy services and more supply resources and potential market 
participants have emerged. We are interested in removing barriers in 
current RTO/ISO market rules that would prevent these new, smaller 
distributed energy resources that are technically capable of 
participating in the organized wholesale electric markets from doing 
so.
    104. As noted above, in this NOPR, we define distributed energy 
resources as a source or sink of power that is located on the 
distribution system, any subsystem thereof, or behind a customer 
meter.\186\ These resources may include, but are not limited to, 
electric storage resources, distributed generation, thermal storage, 
and electric vehicles and their supply equipment.\187\
---------------------------------------------------------------------------

    \186\ See supra note 2.
    \187\ Id.
---------------------------------------------------------------------------

    105. As a general matter, distributed energy resources tend to be 
too small to participate directly in the organized wholesale electric 
markets on a stand-alone basis. First, they often do not meet the 
minimum size requirements to participate in these markets under 
existing participation models. Second, they may have difficulty 
satisfying all of the operational performance requirements of the 
various participation models due to their small size. Allowing these 
resources to participate in the organized wholesale electric markets 
through distributed energy resource aggregations can help to remove 
these barriers to their participation, providing a means for these 
resources to, in the aggregate, satisfy minimum size and performance 
requirements that they could not meet on a stand-alone basis.
    106. The Commission recently accepted CAISO's proposal \188\ to 
allow distributed energy resource aggregations in its markets. In 
addition, the RTOs/ISOs have implemented some models for aggregated 
resources to participate in their organized wholesale electric markets. 
These are described in more detail below but are generally for demand 
response resources, with a few exceptions. As a result, the majority of 
distribution-connected electric storage and other distributed energy 
resources that seek to access the organized wholesale electric markets 
must do so by participating as behind-the-meter demand response. While 
these demand response programs have helped reduce barriers to load 
curtailment resources, they often limit the operations of other types 
of distributed energy resources, such as electric storage or 
distributed generation, as well as the services that they are eligible 
to provide.
---------------------------------------------------------------------------

    \188\ See California Indep. Sys. Operator Corp., 155 FERC ] 
61,229.
---------------------------------------------------------------------------

2. Current Rules
    107. The RTOs/ISOs describe the opportunities for electric storage 
resources connected to the distribution system and electric storage 
resource aggregations to participate in their capacity, energy, and 
ancillary service markets. CAISO supports the aggregation of 
distributed energy resources, including storage, seeking to participate 
in the CAISO markets.\189\ In addition, CAISO states that electric 
storage resources that wish to aggregate into a resource that can 
participate in the wholesale markets can participate by providing load 
curtailment as Proxy Demand Resources or Reliability Demand Response 
Resources.\190\
---------------------------------------------------------------------------

    \189\ CAISO Response at 2-3. See also California Indep. Sys. 
Operator Corp., 155 FERC ] 61,229.
    \190\ CAISO Response at 7.
---------------------------------------------------------------------------

    108. ISO-NE explains that, under each participation model, a single 
resource may be composed of multiple resources if those resources are 
either physically in the same location or require coordinated 
control.\191\ ISO-NE explains that Alternative Technology Regulation 
Resources may include aggregations of multiple end-use customers, each 
with less than 1 MW of regulation capacity.\192\ ISO-NE adds that Asset 
Related Demands may be aggregated if they are served by the same point 
of electrical connection and meet a 1 MW threshold.\193\
---------------------------------------------------------------------------

    \191\ ISO-NE Response at 26 (citing ISO-NE Operating Procedure 
14, section II.A).
    \192\ Id. (citing ISO-NE Tariff, section III.14.2(c)).
    \193\ Id. at 27 (citing ISO-NE Operating Procedure 14, section 
I.2.2).
---------------------------------------------------------------------------

    109. ISO-NE states that electric storage resources that meet its 
definition of Distributed Generation (i.e., behind-the-meter resources 
with an aggregate nameplate capacity of less than 5 MW or the demand of 
the end-use customer, whichever is greater) may qualify as Real-Time 
Demand Response Assets, which allows for participation in the forward 
capacity market, the transitional price-responsive demand program, and 
the regulation market if it is also registered as an Alternative 
Technology Regulation Resource.\194\ ISO-NE explains that, for the 
capacity market, demand resources may consist of an aggregation of 
multiple end-use customers, though they must be at least 100 kW and 
located within a dispatch zone or load zone as required under the 
participation model through which they are participating.\195\ ISO-NE 
further explains that for the energy and reserve markets, demand 
response resources may also be aggregated as long as they are 
individually at least 10 kW, have an expected maximum interruptible 
capacity of 5 MW or less, and are located within a dispatch zone and 
reserve zone.\196\
---------------------------------------------------------------------------

    \194\ Id. at 6-7.
    \195\ Id. at 27 (citing ISO-NE Operating Procedure 14, section 
III.13.1.4.1).
    \196\ Id. (citing ISO-NE Operating Procedure 14, section 
III.E2.1.1).
---------------------------------------------------------------------------

    110. MISO states that Stored Energy Resources and Demand Response 
Resources--Type II are allowed to aggregate under a single elemental 
pricing node. MISO adds that Demand Response Resources--Type I and Load 
Modifying Resources are allowed to aggregate within one local balancing 
authority.\197\
---------------------------------------------------------------------------

    \197\ MISO Response at 15.
---------------------------------------------------------------------------

    111. NYISO states that aggregated resources can participate in the 
Emergency Demand Response Program, Day-Ahead Demand Response Program, 
Demand Side Ancillary Services Program, and Special Case Resource 
Programs. NYISO notes that aggregated electric storage resources may be 
used to generate demand reductions in any of those programs.\198\
---------------------------------------------------------------------------

    \198\ NYISO Response at 13.
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    112. PJM states that aggregated electric storage resources can 
participate in the capacity, energy, and ancillary service markets. In 
the capacity market, PJM states that demand-side resources

[[Page 86540]]

can be aggregated to provide load reductions.\199\ Under PJM's capacity 
performance proposal, electric storage resources are eligible to 
aggregate with other electric storage resources, Intermittent 
Resources, Demand Resources, Energy Efficiency Resources, and 
Environmentally-Limited Resources to provide capacity.\200\ In the PJM 
regulation market, PJM states that all resources, including electric 
storage resources, may elect to be part of a performance group for the 
purpose of improving their overall performance score.\201\ In the PJM 
energy market, PJM adds that multiple batteries located behind a single 
node and owned by the same entity would be eligible to offer into the 
energy market as one resource.\202\
---------------------------------------------------------------------------

    \199\ PJM Response at 20 (citing PJM Tariff, Attachment DD, 
sections 11, 11A).
    \200\ Id. (citing PJM Tariff, Attachment DD, section 5.6.1(h)).
    \201\ Id. at 20-21 (citing PJM Manual 12, section 4.5.7).
    \202\ Id. at 21.
---------------------------------------------------------------------------

    113. SPP states that resources at the same point of injection may 
register at the unit or plant level and electric storage resources may 
be aggregated if the resources are electrically equivalent from the 
transmission system perspective (i.e., use the same point of 
injection).\203\
---------------------------------------------------------------------------

    \203\ SPP Response at 7.
---------------------------------------------------------------------------

3. Comments
    114. Many commenters note that it is important for distributed 
energy resources to be allowed to fully participate in organized 
wholesale electric markets. For example, Advanced Energy Economy 
contends that, absent legitimate technical needs, distributed energy 
resources should be allowed to fully participate in organized wholesale 
electric markets.\204\ Advanced Energy Economy claims that certain 
RTOs/ISOs have excluded these resources through artificial 
classifications (e.g., the inability of multiple behind-the-meter 
generation and electric storage resources to provide frequency 
regulation in PJM). Similarly, SolarCity asks the Commission to require 
RTOs/ISOs to revise or implement rules to ensure that behind-the-meter 
resources, including electric storage resources, have a clear path for 
participation in all wholesale energy markets.\205\
---------------------------------------------------------------------------

    \204\ Advanced Energy Economy Comments at 16-18.
    \205\ SolarCity Comments at 4.
---------------------------------------------------------------------------

    115. Energy Storage Association agrees that distribution-connected 
electric storage resources, including aggregation across multiple 
storage assets and sites, should be able to participate in the 
organized wholesale electric markets to enhance competition needed for 
just and reasonable rates.\206\ Energy Storage Association asks the 
Commission to consider extending the best practices learned in CAISO to 
all organized wholesale electric markets to address common barriers in 
metering, telemetry, and resource eligibility. RES Americas supports 
Energy Storage Association's comments and encourages the Commission to 
investigate the barriers to the participation of distributed energy 
resources in organized wholesale electric markets.\207\ NY Battery and 
Energy Storage Consortium argues that behind-the-meter energy storage 
resources should be able to participate in organized wholesale electric 
markets directly or in aggregate form, and points out that behind-the-
meter storage participating in NYISO as a demand side ancillary 
services program resource is not allowed to bid into the day-ahead 
demand response market, even though it is technically capable of doing 
so.\208\
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    \206\ Energy Storage Association Comments at 30 (citing 
California Indep. Sys. Operator Corp., 155 FERC ] 61,229).
    \207\ RES Americas Comments at 4-5.
    \208\ NY Battery and Energy Storage Consortium Comments at 6.
---------------------------------------------------------------------------

    116. Some commenters cite the inability for distributed energy 
resources to inject energy when participating as demand response as a 
barrier to distributed energy resources. SolarCity states that this 
inability hinders the ability of behind-the-meter resources to provide 
energy services and limits their capacity.\209\ Advanced Energy Economy 
and Solar Grid Storage argue that PJM's restriction on the injection of 
energy past a customer's retail meter during operations for providing 
ancillary services in its markets is a barrier to electric storage 
resources.\210\ Energy Storage Association and NextEra argue that no 
RTO/ISO allows behind-the-meter storage to net inject power to provide 
wholesale generator services.\211\ NextEra agrees that this prohibition 
effectively limits the size of electric storage resources designed for 
customer applications. Energy Storage Association notes that NYISO 
recently received the Commission's conditional acceptance of its 
behind-the-meter net generator enhancement, but Energy Storage 
Association asserts that it still effectively excludes participation of 
electric storage resources because it does not include electric storage 
functionality (e.g., state of charge management).\212\
---------------------------------------------------------------------------

    \209\ SolarCity Comments at 4.
    \210\ Advanced Energy Economy Comments at 16-17; Solar Grid 
Storage Comments at 2.
    \211\ Energy Storage Association Comments at 29; NextEra 
Comments at 12.
    \212\ Energy Storage Association Comments at 29-30.
---------------------------------------------------------------------------

    117. Other comments focus on the benefits of allowing distributed 
energy resources to participate in the organized wholesale markets as 
aggregations. RES Americas contends that aggregation of electric 
storage resources, either within the asset class or across other 
resources that can be limited in their ability to offer a breadth of 
market products (i.e., renewables or demand response), could be a means 
to realize market efficiencies and other policy objectives without 
creating entirely new market products or otherwise disrupting grid 
operations.\213\ Electric Vehicle R&D Group states that third-party 
aggregators are the most practical approach to utilizing distributed 
electric storage resources connected to the low- and medium-voltage 
system.\214\ Electric Vehicle R&D Group argues that, given the value 
that distributed electric storage resources provide to both 
transmission and distribution system operators and the lack of 
technical abilities of a distribution system operator to-date to build, 
qualify, and cost-effectively operate a distributed storage system 
aggregator, rules should not prohibit third-party aggregators or 
require distribution operators to manage them. Electric Vehicle R&D 
Group adds that the Commission should allow third-party aggregators to 
provide service to both RTOs and distribution system operators.
---------------------------------------------------------------------------

    \213\ RES Americas Comments at 5.
    \214\ Electric Vehicle R&D Group Comments at 2.
---------------------------------------------------------------------------

    118. National Electrical Manufacturers Association states that 
organized wholesale electric markets should accommodate aggregated 
electric storage resources, including electric storage resources 
installed behind-the-meter, without imposing excessive requirements 
that would preclude the participation of smaller resources (e.g., 
arduous study processes and/or expensive data telemetry 
requirements).\215\ Similarly, NY Battery and Energy Storage Consortium 
argues that NYISO should avoid creating metering and telemetry 
requirements with prohibitively high transaction costs and imposing 
undue burdens on behind-the-meter storage participation.\216\ Energy 
Storage Association agrees that metering and telemetry requirements and

[[Page 86541]]

interconnection processes can pose prohibitively high transaction costs 
for the small project sizes that characterize behind-the-meter electric 
storage resources, creating undue burdens on their participation in 
most RTOs/ISOs.\217\
---------------------------------------------------------------------------

    \215\ National Electrical Manufacturers Association Comments at 
5.
    \216\ NY Battery and Energy Storage Consortium Comments at 6.
    \217\ Energy Storage Association Comments at 29.
---------------------------------------------------------------------------

    119. Similarly, California Energy Storage Alliance claims that the 
overhead costs of registering individual resources within an 
aggregation can be burdensome and costly.\218\ Specifically, California 
Energy Storage Alliance argues that the registration of individual 
customer sites with load-serving entities, the California Public 
Utilities Commission, and CAISO can impose significant costs that 
discourage participation as proxy demand response and other wholesale 
market resources. California Energy Storage Alliance asserts that a 
separate administrative process under a behind-the-meter electric 
storage resource-specific model, or a streamlined version under 
existing constructs, could reduce these administrative costs by 
standardizing forms and processes across all individual resources and 
allowing the submission of a single application.
---------------------------------------------------------------------------

    \218\ California Energy Storage Alliance Comments at 7.
---------------------------------------------------------------------------

    120. Some commenters identify problems with opportunities for 
aggregations in the RTOs/ISOs. Energy Storage Association is concerned 
that aggregated distributed energy resources are not permitted to offer 
into some RTO/ISO markets, while it is not clear how they can offer 
into others.\219\ Energy Storage Association claims that market rules 
present barriers to aggregation (particularly minimum size 
requirements) because they are often designed around individual sites 
as a resource, rather than the capabilities of an aggregated set of 
sites.\220\ NextEra asserts that, to enable aggregators to participate 
effectively in the organized wholesale electric markets, more work is 
needed by the RTOs/ISOs, like the recent CAISO initiative that led to 
new aggregation opportunities for small distributed resources.\221\
---------------------------------------------------------------------------

    \219\ Energy Storage Association Comments at 29 (citing ISO-NE 
Response at 26; NYISO Response at 13).
    \220\ Id. at 27-28.
    \221\ NextEra Comments at 12-13 (citing California Indep. Sys. 
Operator Corp., 155 FERC ] 61,229 at P 60).
---------------------------------------------------------------------------

    121. Public Interest Organizations agree that the opportunity to 
aggregate distributed energy resources could help mitigate minimum size 
or duration requirements, but state that this opportunity is lacking or 
unclear in some RTOs/ISOs.\222\ NY Battery and Energy Storage 
Consortium and NY Transmission Owners point out that NYISO rules do not 
allow smaller resources with a capacity less than 1 MW to aggregate and 
provide generation above their host loads, though they can participate 
as an aggregated demand response resource.\223\ Similarly, Minnesota 
Energy Storage Alliance states that MISO's market rules prevent robust 
participation of distributed electric storage resources in its energy 
and ancillary service markets because they do not permit the 
aggregation of these resources to meet the 5 MW minimum capacity 
requirement for a Demand Response Resource.\224\
---------------------------------------------------------------------------

    \222\ Public Interest Organizations Comments at 5.
    \223\ NY Battery and Energy Storage Consortium Comments at 6; NY 
Transmission Owners Comments at 3 (citing NYISO Installed Capacity 
Manual at 108, 110).
    \224\ Minnesota Energy Storage Alliance Comments at 4.
---------------------------------------------------------------------------

    122. Solar Grid Storage states that, while PJM's 100 kW minimum 
size requirement to participate in its ancillary service markets allows 
electric storage resources to aggregate their dispatch, aggregated 
resources must be part of a ``performance group'' in the same 
location.\225\ Solar Grid Storage asserts that, because some ancillary 
services like frequency regulation are not site specific and can be 
provided with equal value to PJM over vastly different areas within the 
ISO, this locational restriction is unreasonable.
---------------------------------------------------------------------------

    \225\ Solar Grid Storage Comments at 4.
---------------------------------------------------------------------------

    123. Some commenters stress the need to ensure that grid 
reliability concerns are addressed in rules governing behind-the-meter 
resources, including aggregations of such resources. EEI states that, 
because behind-the-meter resources are interconnected to the 
distribution grid and ultimately impact the transmission system, EEI 
members are interested in ensuring that any actions the RTOs/ISOs take 
to allow these resources, including aggregated resources, to 
participate in the organized wholesale electric markets do not 
negatively affect the electric distribution company's ability to 
maintain the reliability of the distribution system.\226\ EEI claims 
that electric distribution utilities need to have visibility and input/
control of the resources that are integrated to the distribution system 
for planning and operating purposes. SoCal Edison states that safety 
and reliability needs must take precedence over wholesale market 
dispatch and asks the Commission to consider the safe and reliable 
operation of the distribution system as a key principle when addressing 
the participation of distribution system-connected electric storage 
resources in the organized wholesale electric markets.\227\
---------------------------------------------------------------------------

    \226\ EEI Comments at 5.
    \227\ SoCal Edison Comments at 2, 5-6.
---------------------------------------------------------------------------

4. Proposed Reforms
    124. We are interested in removing barriers in current RTO/ISO 
market rules that would prevent these new, smaller distributed energy 
resources that are technically capable of participating in the 
organized wholesale electric markets from doing so. It is clear from 
the comments that the ability to meaningfully participate in the 
organized wholesale electric markets for these smaller distributed 
energy resources is through aggregations. Thus, we propose to require 
each RTO/ISO to revise its tariff as necessary to allow distributed 
energy resource aggregators to offer to sell capacity, energy, and 
ancillary services in the organized wholesale electric markets. 
Specifically, we propose to require each RTO/ISO to revise its tariff 
to define distributed energy resource aggregators as a type of market 
participant that can participate in the organized wholesale electric 
markets under the participation model that best accommodates the 
physical and operational characteristics of its distributed energy 
resource aggregation. This proposal is similar to CAISO's market rules 
that establish a distributed energy resource provider as a new type of 
market participant.\228\ Our proposal would expand the types of 
resources that are eligible to participate in the organized wholesale 
electric markets through aggregators and require the RTOs/ISOs to 
remove any unnecessary limitations on how the distributed energy 
resources that participate in such aggregations must be operated.
---------------------------------------------------------------------------

    \228\ See, e.g., California Indep. Sys. Operator Corp., 155 FERC 
] 61,229 at PP 3-7.
---------------------------------------------------------------------------

    125. Distributed energy resources may be unable or unwilling to 
participate in the organized wholesale electric markets absent the 
opportunity to participate as part of a distributed energy resource 
aggregation. Distributed energy resources are generally smaller than 
other resources connected to the grid and therefore may be unable to 
meet all of the qualification or performance requirements for 
participation in the organized wholesale electric markets. 
Specifically, they may be too small to satisfy minimum size 
requirements on a stand-alone basis and, as small resources, may face 
operational constraints that prevent them from satisfying minimum 
performance

[[Page 86542]]

requirements.\229\ However, if these distributed energy resources were 
permitted to aggregate with other distributed energy resources to 
participate in the organized wholesale electric markets, they may be 
able to, in the aggregate, meet any minimum size and performance 
requirements, particularly if the operational characteristics of 
different distributed energy resources in a given distributed energy 
resource aggregation complement each other.
---------------------------------------------------------------------------

    \229\ For example, combining the discharge times of multiple 
electric storage resources and/or combining them with distributed 
generation resources could allow aggregated resources to meet 
minimum run-time requirements that individual electric storage 
resources may not be able to meet.
---------------------------------------------------------------------------

    126. Distributed energy resource aggregations will also help to 
address the commercial and transactional barriers to distributed energy 
resource participation in the organized wholesale electric markets. 
Owners and operators of individual distributed energy resources may be 
reluctant to incur the significant costs of participating in the 
organized wholesale electric markets, such as the costs of the 
necessary metering, telemetry and communication equipment. The smaller 
a resource is, the more likely the transaction costs to sell services 
into the organized wholesale electric markets outweigh the benefits 
that the prospective market participant may realize from selling 
wholesale services. However, some of these costs can be reduced by 
participating in the organized wholesale electric markets through a 
distributed energy resource aggregation, for example the time and 
resources necessary to learn the market rules and actively submit bids 
and/or offers into the organized wholesale electric markets.
    127. We also believe that some of the restrictions placed on 
aggregators in the RTOs/ISOs, such as the types of resources that can 
participate in those aggregations and the inability to inject energy 
onto the grid, may limit the operation and effectiveness of existing 
RTO/ISO programs for aggregations. Therefore, as discussed further 
below, we propose to expand the types of distributed energy resources 
that are eligible to participate in the organized wholesale electric 
markets through aggregators and require RTOs/ISOs to remove any 
unnecessary limitations on how the distributed energy resources that 
participate in such aggregations must be operated.
    128. Our proposal requires the RTOs/ISOs to define distributed 
energy resource aggregators as a type of market participant that can 
participate in the organized wholesale electric markets under the 
participation model that best accommodates the physical and operational 
characteristics of its distributed energy resource aggregation. This 
proposed requirement means that the distributed energy resource 
aggregator would register as, for example, a generation asset if that 
is the participation model that best reflects its physical 
characteristics. While we expect efficiencies to be gained by allowing 
distributed energy resources aggregations to participate under existing 
participation models, we also acknowledge that the use of existing 
participation models may not be possible in every RTO/ISO based on how 
market participation is structured. However, where this is possible, we 
emphasize that the distributed energy resource aggregation must still 
satisfy any eligibility requirements of the applicable participation 
model before it can participate in the organized wholesale electric 
markets under that participation model. Therefore, to accommodate the 
participation of distributed energy resource aggregations under the 
various participation models, we propose that each RTO/ISO modify the 
eligibility requirements for existing participation models as necessary 
to allow for the participation of distributed energy resource 
aggregators.
    129. The costs of distributed energy resources have decreased 
significantly,\230\ which when paired with alternative revenue streams 
and innovative financing solutions, is increasing these resources' 
potential to compete in and deliver value to the organized wholesale 
electric markets. Moreover, integrating these resources' capabilities 
into the organized wholesale electric markets will help the RTOs/ISOs 
to account for their impacts on installed capacity requirements and 
day-ahead energy demand, thereby reducing uncertainty in load forecasts 
and reducing the risk of over procurement of resources and the 
associated costs.
---------------------------------------------------------------------------

    \230\ See, e.g., Revolution . . . No, The Future Arrives for 
Five Clean Energy Technologies, 2016 Update, at 1; and Tracking the 
Sun VIII, Lawrence Berkeley National Lab, at 15 (Aug. 2015).
---------------------------------------------------------------------------

    130. We believe that our proposal will provide numerous 
supplementary benefits to the RTO/ISO systems. For example, by removing 
barriers to the participation of distributed energy resources in 
organized wholesale electric markets through aggregators, these 
resources may locate where price signals indicate that new capacity is 
most needed, potentially helping to alleviate congestion and congestion 
costs during peak load conditions and to reduce transmission investment 
costs for transmitting energy into persistently high-priced load 
pockets. Moreover, unlike larger fossil fuel generators that often are 
not able to locate in load pockets due to environmental or other citing 
concerns, distributed energy resources are more able to co-locate with 
load and provide associated benefits. We also believe that the shorter 
lead time to develop many forms of distributed energy resources 
compared to traditional generators or transmission lines allows them to 
rapidly respond to near-term generation or transmission reliability-
related requirements, further improving their ability to enhance 
reliability and reduce system costs.
    131. Additionally, we agree with the comments of Advanced Energy 
Economy and Public Interest Organizations that electric storage 
resources and other resources connected to the distribution system 
should be able to participate in all of the organized wholesale 
electric markets in which they are technically capable of participating 
and that barriers that unnecessarily prevent distributed energy 
resources from providing certain services may be caused by market rules 
that are unduly discriminatory. The most commonly cited example of 
these barriers to participation in the comments we received are market 
rules that relegate electric storage resources, particularly behind-
the-meter electric storage resources, to market participation using 
demand response programs. We agree with commenters that existing RTO/
ISO demand response programs may restrict the ability of electric 
storage and other distributed energy resources from providing the full 
suite of services that they are capable of providing, and therefore 
propose this alternative path for distributed energy resources to 
access the organized wholesale electric markets.
    132. As such, we propose to require each RTO/ISO to revise its 
tariff to allow distributed energy resource aggregators to participate 
directly in the organized wholesale electric markets and to establish 
market rules to accommodate the participation of distributed energy 
resource aggregations, consistent with the following:
    a. Eligibility to participate in the organized wholesale electric 
markets through a distributed energy resource aggregator;
    b. Locational requirements for distributed energy resource 
aggregations;
    c. Distribution factors and bidding parameters for distributed 
energy resource aggregations;

[[Page 86543]]

    d. Information and data requirements for distributed energy 
resource aggregations;
    e. Modifications to the list of resources in a distributed energy 
resource aggregation;
    f. Metering and telemetry system requirements for distributed 
energy resource aggregations;
    g. Coordination between the RTO/ISO, the distributed energy 
resource aggregator, and the distribution utility; and
    h. Market participation agreements for distributed energy resource 
aggregators.
a. Eligibility To Participate in the Organized Wholesale Electric 
Markets Through a Distributed Energy Resource Aggregator
    133. We preliminarily find that limiting the types of technologies 
that are allowed to participate in the organized wholesale electric 
markets through distributed energy resource aggregator would create a 
barrier to entry for emerging or future technologies, potentially 
precluding them from being eligible to provide all of the capacity, 
energy and ancillary services that they are technically capable of 
providing. While some individual resources or certain technologies may 
not be able to meet the qualification or performance requirements to 
provide services to the organized wholesale electric markets on their 
own, they may satisfy such requirements as part of a distributed energy 
resource aggregation where resources complement one another's 
capabilities.\231\ To help ensure that the market rules that the RTOs/
ISOs develop to comply with any Final Rule issued in this proceeding 
are sufficiently flexible to accommodate the participation of new 
distributed energy resources as technology continues to evolve and to 
acknowledge the potential for distributed energy resources to satisfy 
qualification or performance requirements through a distributed energy 
resource aggregator, we propose that each RTO/ISO revise its tariff so 
that it does not prohibit the participation of any particular type of 
technology in the organized wholesale electric markets through a 
distributed energy resource aggregator. However, to the extent existing 
rules or regulations explicitly prohibit certain technologies from 
participating in the organized wholesale electric markets, we do not 
intend to overturn those rules or regulations.
---------------------------------------------------------------------------

    \231\ Combining electric storage resources with distributed 
generation could allow the aggregate resource to achieve performance 
requirements (such as minimum run times) that an electric storage 
resource could not meet on its own and provide services (such as 
regulation) that distributed generation may not be able to provide 
on its own.
---------------------------------------------------------------------------

    134. We also propose that it is appropriate for each RTO/ISO to 
limit the participation of resources in the organized wholesale 
electric markets through a distributed energy resource aggregator that 
are receiving compensation for the same services as part of another 
program. Since resources able to register as part of a distributed 
energy resources aggregation will be located on the distribution 
system, they may also be eligible to participate in retail compensation 
programs, such as net metering, or other wholesale programs, such as 
demand response programs. Therefore, to ensure that there is no 
duplication of compensation, we propose that distributed energy 
resources that are participating in one or more retail compensation 
programs such as net metering or another wholesale market participation 
program will not be eligible to participate in the organized wholesale 
electric markets as part of a distributed energy resource aggregation.
    135. With respect to the capacity of the individual distributed 
energy resources that can participate in the wholesale electric markets 
through a distributed energy resource aggregator, we propose not to 
establish a minimum or maximum capacity requirement. We believe 
participation in the organized wholesale electric markets through a 
distributed energy resource aggregator should not be conditioned on the 
size of the resource, but we recognize that existing organized 
wholesale electric market rules may require resources to meet certain 
minimum or maximum capacity requirements under certain participation 
models. Therefore, we seek comment on whether we should establish a 
minimum or maximum capacity limit for individual resources seeking to 
participate in the organized wholesale electric markets through a 
distributed energy resource aggregator, or whether we should allow each 
RTO/ISO to propose such a minimum or maximum capacity requirement on 
compliance with any Final Rule issued in this rulemaking proceeding. To 
the extent that commenters think that we should adopt a minimum or 
maximum capacity requirement for individual distributed energy 
resources participating in the organized wholesale markets through a 
distributed energy resource aggregator, we seek comment on what that 
requirement should be.
    136. With respect to the size of the distributed energy resource 
aggregations themselves, we propose that these aggregations meet any 
minimum size requirements of the participation model under which they 
elect to participate in the organized wholesale electric markets. For 
example, if a distributed energy resource aggregator decides to 
register using the participation model for electric storage resources 
proposed above given the cumulative physical and operational 
characteristics of the distributed energy resources in its aggregation, 
then its distributed energy resource aggregation would be required to 
meet the 100 kW minimum size requirement we propose for that 
participation model. Alternatively, if the distributed energy resource 
aggregator decides to register as a generator, then its aggregation 
would be required to meet the minimum size requirement for the 
generator participation model in the relevant RTO/ISO market. We seek 
comment on this proposal to require distributed energy resource 
aggregations to meet the minimum size requirements of the participation 
model that they use to participate in the organized wholesale electric 
markets.
    137. Consistent with Order No. 719, we also propose that each RTO/
ISO revise its tariff to allow a single qualifying distributed energy 
resource to avail itself of the proposed distributed energy resource 
aggregation rules by serving as its own distributed energy resource 
aggregator.\232\
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    \232\ See Order No. 719, FERC Stats. & Regs. ] 31,281 at P 
158(d) (``An [aggregator of retail customers] can bid demand 
response either on behalf of only one retail customer or multiple 
retail customers.'').
---------------------------------------------------------------------------

b. Locational Requirements for Distributed Energy Resource Aggregations
    138. Some RTO/ISO market rules permit only those resources that are 
located behind the same point of interconnection or at a single pricing 
node to aggregate. These limitations could be the result of several 
concerns. For instance, an RTO/ISO may be concerned that geographically 
dispersed resources participating in the organized wholesale electric 
markets through a distributed energy resource aggregation may 
exacerbate a transmission constraint or otherwise cause a reliability 
concern if dispatched as a single resource by the RTO/ISO. Similarly, 
an RTO/ISO may be concerned about price formation for services with 
geographically specific prices if geographically dispersed resources 
participating in the organized wholesale electric markets through a 
distributed energy resource aggregation were dispatched as a single 
resource by the RTO/ISO. That said, we are concerned that some existing

[[Page 86544]]

requirements for aggregations to be located behind a single point of 
interconnection or pricing node may be overly stringent and may 
unnecessarily restrict the opportunities for distributed energy 
resources to participate in the organized wholesale electric markets 
through a distributed energy resource aggregator. We also note that 
recent improvements in metering, telemetry, and communication 
technology should facilitate better situational awareness and enable 
management of geographically disperse distributed energy resource 
aggregations, potentially rendering such restrictive locational 
requirements unnecessary.
    139. Therefore, we propose to require each RTO/ISO to revise its 
tariff to establish locational requirements for distributed energy 
resources to participate in a distributed energy resource aggregation 
that are as geographically broad as technically feasible. Our proposal 
would give each RTO/ISO flexibility to adopt locational requirements 
that both allow for the participation of geographically disperse 
distributed energy resources in the organized wholesale electric 
markets through a distributed energy resource aggregation, where 
technically feasible, and account for the modeling and dispatch of the 
RTO's/ISO's transmission system. We further acknowledge that the 
appropriate locational requirements may differ based on the services 
that a distributed energy resource aggregator seeks to provide (e.g., 
the locational requirements for participation in the day-ahead energy 
market may differ from those for participation in the ancillary service 
markets).
    140. To the extent that commenters would prefer that we require the 
RTOs/ISOs to adopt consistent locational requirements, we seek further 
comment on what locational requirements we could require each RTO/ISO 
to adopt that would allow distributed energy resources to be aggregated 
as widely as possible without threatening the reliability of the 
transmission grid or the efficiency of the organized wholesale electric 
markets. We note that, in some RTOs/ISOs and for some services, the 
only geographic limitations imposed on distributed energy resource 
aggregations are by zone or due to modeled transmission 
constraints.\233\
---------------------------------------------------------------------------

    \233\ See, e.g., CAISO Tariff, Att. A, section 4.17.3 (e) 
(``Each Distributed Energy Resource Aggregation must be located in a 
single Sub-LAP.''). CAISO defines a sub-LAP as a subset of pricing 
nodes within a default load aggregation point. See CAISO Tariff, 
Appendix A, Master Definitions and Supplement. See also NYISO Market 
Administration and Control Area Service Tariff, section 2.4 
(Definitions-D) (``Demand Side Ancillary Service Program Resource 
(DSASP Resource): A Demand Side Resource or an aggregation of Demand 
Side Resources located in the [New York Control Area (NYCA)] with at 
least 1 MW of load reduction that is represented by a point 
identifier (PTID) and is assigned to a Load Zone or Subzone by the 
ISO . . . .''); NYISO Day-Ahead Demand Response Program Manual at 
2.16.4 (``A process and procedures will be drawn to . . . set limits 
to aggregation projects by zone, provider, program, or any other 
category.'').
---------------------------------------------------------------------------

    141. We seek comment on potential concerns about dispatch, pricing, 
or settlement that the RTOs/ISOs must address if the distributed energy 
resources in a particular distributed energy resource aggregation are 
not limited to the same pricing node or behind the same point of 
interconnection. We also note that, as discussed in Section III.B.4.g, 
we propose to allow the relevant distribution utility or utilities to 
review the list of distributed energy resources in a distributed energy 
resource aggregation, which will also help ensure that dispatch of the 
aggregated distributed energy resources as a single resource will not 
cause any reliability concerns.
c. Distribution Factors and Bidding Parameters for Distributed Energy 
Resource Aggregations
    142. RTOs/ISOs need to know which resources in a distributed energy 
resource aggregation will be responding to their dispatch signals and 
where those resources are located. This information is particularly 
important if the resources in a distributed energy resource aggregation 
are located across multiple points of interconnection, multiple 
transmission or distribution lines, or multiples nodes on the grid.
    143. We, therefore, propose that the market rules governing 
distributed energy resource aggregations allow the RTOs/ISOs to require 
sufficient information from the resources in a distributed energy 
resource aggregation to reliably operate their systems. Specifically, 
we propose to require each RTO/ISO to revise its tariff to include the 
requirement that distributed energy resource aggregators (1) provide 
default distribution factors \234\ when they register their distributed 
energy resource aggregation and (2) update those distribution factors 
if necessary when they submit offers to sell or bids to buy into the 
organized wholesale electric markets. In turn, we propose to require 
each RTO/ISO to revise the bidding parameters for each participation 
model in its tariff to allow distributed energy resource aggregators to 
update their distribution factors when participating in the organized 
wholesale electric markets. In addition to comments on this proposal, 
we seek comment on alternative approaches that may provide the RTOs/
ISOs with the information from geographically or electrically disperse 
resources in a distributed energy resource aggregation necessary to 
reliably operate their systems.
---------------------------------------------------------------------------

    \234\ For purposes of this NOPR, distribution factors indicate 
how much of the total response from a distributed energy resource 
aggregation would be coming from each pricing node at which one or 
more resources participating in the aggregation are located.
---------------------------------------------------------------------------

    144. Moreover, we preliminarily find that the bidding parameters 
for each participation model in the RTO/ISO tariffs may have to account 
for the physical and operational characteristics of distributed energy 
resource aggregations. Therefore, we seek comment on whether bidding 
parameters in addition to those already incorporated into existing 
participation models may be necessary to adequately characterize the 
physical or operational characteristics of distributed energy resource 
aggregations.
d. Information and Data Requirements for Distributed Energy Resource 
Aggregations
    145. The RTOs/ISOs need sufficient information about the 
distributed energy resource aggregation and the individual resources in 
a distributed energy resource aggregation to effectively model, 
dispatch, and settle the aggregation. We preliminarily find that the 
information and data requirements that apply to distributed energy 
resource aggregations must not pose barriers to the participation of 
small distributed energy resources or distributed energy resources 
relying on any specific technology in the organized wholesale electric 
markets through a distributed energy resource aggregator. We refer to 
information and data requirements as the information that the 
distributed energy resource aggregator is required to provide to the 
RTO/ISO when the distributed energy resource aggregator and its list of 
resources register as a market participant as well as the information 
and data necessary for settlement and auditing purposes. In this NOPR, 
we seek to balance the information needs of RTOs/ISOs with information 
requirements so burdensome that they could limit the benefit of these 
proposed changes. The RTO/ISO will require certain information for the 
distributed energy resource aggregation as a whole, as well as the 
individual resources in the aggregation. While some of this information 
may be replicated in bidding parameters, we propose that the 
distributed energy resource aggregator

[[Page 86545]]

initially provide to the RTO/ISO a description of the physical 
parameters of the distributed energy resource aggregation, including 
(1) the total capacity; (2) the minimum and maximum operating limits; 
(3) the ramp rate; (4) the minimum run time; and (5) the default 
distribution factors, if applicable. We propose to require each RTO/ISO 
to revise its tariff to require distributed energy resource aggregators 
to provide the RTO/ISO with a list of the distributed energy resources 
in the distributed energy resource aggregation that includes 
information about each of those distributed energy resources, including 
each resource's capacity, location on the distribution system, and its 
operating limits.
    146. Electric Vehicle R&D Group identifies PJM's requirement for 
resources in a distributed energy resource aggregation to provide a 
one-line diagram of the resource as too cumbersome, especially for 
small resources at residential locations.\235\ Additionally, in CAISO's 
distributed energy resource provider filing, CAISO declined to require 
renewable generation resources in an aggregation to provide the same 
meteorological data that standalone intermittent generators are 
required to provide because they believed the requirement would create 
an undue burden on individual distributed energy resources.\236\ We 
agree that certain information requirements may be so burdensome for 
individual distributed energy resources that they pose a barrier to the 
participation of these distributed energy resources in the organized 
wholesale electric markets through aggregations. We therefore seek 
comment on whether there are information and data requirements imposed 
by RTOs/ISOs that apply to other market participants that should not 
apply to individual distributed energy resources participating in the 
organized wholesale electric markets through a distributed energy 
resource aggregation.
---------------------------------------------------------------------------

    \235\ Electric Vehicle R&D Group Comments at 8-9.
    \236\ See CAISO Transmittal Letter, Docket No ER16-1085-000, at 
22. (Mar. 4, 2016).
---------------------------------------------------------------------------

    147. We also propose to require each RTO/ISO to revise its tariff 
to require distributed energy resource aggregators to maintain 
aggregate settlement data for the distributed energy resource 
aggregation so that the RTO/ISO can regularly settle with the 
distributed energy resource aggregator for its market participation. 
Finally, we propose to require distributed energy resource aggregators 
to maintain data for a length of time consistent with the RTO's/ISO's 
auditing requirements, for each individual resource in its distributed 
energy resource aggregation so that each resource can verify its 
performance if audited. We seek comment on these proposed data 
requirements and on whether distributed energy resource aggregators 
should be required to provide additional data to the RTO/ISO.
e. Modifications to the List of Resources in a Distributed Energy 
Resource Aggregation
    148. The requirements for a distributed energy resource aggregator 
associated with modifications to the list of resources in a distributed 
energy resource aggregation can present a barrier to the participation 
of distributed energy resource aggregations in the organized wholesale 
electric markets. Electric Vehicle R&D Group notes that, to modify its 
distributed energy resource aggregation in PJM, it has to un-register 
all resources in its aggregation and then re-run the testing protocol 
for the revised aggregation to re-qualify to participate in the PJM 
markets.\237\ Electric Vehicle R&D Group argues that testing every 
incremental addition to an aggregation is unnecessary because they are 
required to continuously report their available capacity and meter 
their aggregate power response. Because the incremental impacts on the 
organized wholesale electric markets of the addition or removal of 
individual distributed energy resources from a distributed energy 
resource aggregation will likely be minimal, and they are short lead 
time resources that can be developed and built quickly, we 
preliminarily conclude that they should be able to enter and exit 
distributed energy resource aggregations participating in the organized 
wholesale electric markets without undue burden.
---------------------------------------------------------------------------

    \237\ Electric Vehicle R&D Group Comments at 9.
---------------------------------------------------------------------------

    149. We therefore propose that each RTO/ISO revise its tariff to 
allow a distributed energy resource aggregator to modify the list of 
resources in its distributed energy resource aggregation without 
reregistering all of the resources if the modification will not result 
in any safety or reliability concerns. We emphasize, however, pursuant 
to the proposed requirements in Section III.B.4.g below, that the 
relevant distribution utility or utilities must have the opportunity to 
review the list of individual resources that are located on their 
distribution system in a distributed energy resource aggregation before 
those resources may participate in the organized wholesale electric 
markets through the aggregation, so that they can assess whether the 
resources would be able to respond to RTO/ISO dispatch instructions 
without posing any significant risk to the distribution system.
f. Metering and Telemetry System Requirements for Distributed Energy 
Resource Aggregations
    150. While the distributed energy resources in an aggregation will 
need to be directly metered, the metering and telemetry system, i.e., 
hardware and software, requirements RTOs/ISOs impose on distributed 
energy resource aggregators and individual resources in distributed 
energy resource aggregations can pose a barrier to the participation of 
these aggregations in organized wholesale electric markets. We 
recognize that RTOs/ISOs need metering data for settlement purposes, 
and telemetry data to determine a resource's real-time operational 
capabilities so that they can efficiently dispatch resources. However, 
metering and telemetry systems are often expensive potentially creating 
a burden for small distributed energy resources. While telemetry data 
about a distributed energy resource aggregation as a whole is necessary 
for the RTO/ISO to efficiently dispatch the aggregation, telemetry data 
for each individual resource in the aggregation may not be.
    151. While we are not proposing to prescribe specific metering and 
telemetry systems for distributed energy resource aggregators, we 
propose to require each RTO/ISO to revise its tariff to identify any 
necessary metering and telemetry hardware and software requirements for 
distributed energy resource aggregators and the individual resources in 
a distributed energy resource aggregation. These requirements must 
ensure that the distributed energy resource aggregator will be able to 
provide the necessary information and data to the RTO/ISO discussed in 
Section III.B.4.d but also not impose unnecessarily burdensome costs on 
the distributed energy resource aggregators and individual resources in 
a distributed energy resource aggregation that may create a barrier to 
their participation in the organized wholesale electric markets. We 
also note that there may be different types of resources in these 
aggregations, some in front of the meter, some behind the meter with 
the ability to inject energy back to the grid, and some behind the 
meter without the ability to inject energy to the grid. We therefore 
seek comment on whether the RTOs/ISOs need to establish metering and 
telemetry hardware and software requirements for each of the different 
types of distributed energy resources that participate in the

[[Page 86546]]

organized wholesale electric markets through distributed energy 
resource aggregations, as well as whether we should establish specific 
metering and telemetry system requirements and, if so, what 
requirements would be appropriate.
    152. With respect to telemetry, we believe that the distributed 
energy resource aggregator should be able to provide to the RTO/ISO the 
real-time capability of its resource in a manner similar to the 
requirements for generators, so the RTO/ISO knows the operating level 
of the resource and how much that resource can ramp up or ramp down 
over its full range of capability, including its charging capability 
for distributed energy resource aggregations that include electric 
storage resources. These telemetry system requirements may also need to 
be in place at different locations for geographically dispersed 
distributed energy resource aggregations that have to provide 
distribution factors or other similar factors, as discussed above. With 
respect to metering, we recognize that distributed energy resources may 
be subject to metering system requirements established by the 
distribution utility or local regulatory authority. Therefore, we 
propose that each RTO/ISO should rely on meter data obtained through 
compliance with these distribution utility or local regulatory 
authority metering system requirements whenever possible for settlement 
and auditing purposes, only applying additional metering system 
requirements for distributed energy resource aggregations when this 
data is insufficient.
g. Coordination Between the RTO/ISO, the Distributed Energy Resource 
Aggregator, and the Distribution Utility
    153. The market rules that each RTO/ISO adopts to facilitate the 
participation of distributed energy resource aggregations must address 
coordination between the RTO/ISO, the distributed energy resource 
aggregator, and the distribution utility to ensure that the 
participation of these resources in the organized wholesale electric 
markets does not present reliability or safety concerns for the 
distribution or transmission system. Thus, we propose to require each 
RTO/ISO to revise its tariff to provide for coordination among the RTO/
ISO, a distributed energy resource aggregator, and the relevant 
distribution utilities with respect to (1) the registration of new 
distributed energy resource aggregations and (2) ongoing coordination, 
including operational coordination, between the RTO/ISO, a distributed 
energy resource aggregator, and the relevant distribution utility or 
utilities. We seek comment on the detailed proposals described below.
    154. First, we propose that each RTO/ISO revise its tariff to 
provide for coordination among itself, a distributed energy resource 
aggregator, and the relevant distribution utility or utilities when a 
distributed energy resource aggregator registers a new distributed 
energy resource aggregation or modifies an existing distributed energy 
resource aggregation to include new resources. The purpose of this 
coordination would be to ensure that all of the individual resources in 
the distributed energy resource aggregation are technically capable of 
providing services to the RTO/ISO through the aggregator and are 
eligible to be part of the aggregation (i.e., are not participating in 
another retail or wholesale compensation program, as discussed in 
Section III.B.4.a above). In addition, we propose that this 
coordination provide the relevant distribution utility or utilities 
with the opportunity to review the list of individual resources that 
are located on their distribution system that enroll in a distributed 
energy resource aggregation before those resources may participate in 
the organized wholesale electric markets through the aggregation. The 
opportunity for the relevant distribution utility or utilities to 
review the list of these resources would allow them to assess whether 
the resources would be able to respond to RTO/ISO dispatch instructions 
without posing any significant risk to the distribution system and to 
ensure these resources are not participating in any other retail 
compensation programs. Finally, we propose that this coordination 
provide the relevant distribution utility or utilities the opportunity 
to report such information to the RTO/ISO for its consideration prior 
to the RTO/ISO allowing the new or modified distributed energy resource 
aggregation to participate in the organized wholesale electric market. 
We seek comment on whether the RTO/ISO tariffs should provide for any 
additional review by or coordination with other parties prior to a new 
or existing distributed energy resource aggregation participating in 
the organized wholesale electric markets.
    155. Second, we acknowledge that ongoing coordination between the 
RTO/ISO, a distributed energy resource aggregator, and the relevant 
distribution utility or utilities may be necessary to ensure that the 
distributed energy resource aggregator is disaggregating dispatch 
signals from the RTO/ISO and dispatching individual resources in a 
distributed energy resource aggregation consistent with the limitations 
of the distribution system. Thus, we propose that each RTO/ISO revise 
its tariff to establish a process for ongoing coordination, including 
operational coordination, among itself, the distributed energy resource 
aggregator, and the distribution utility to maximize the availability 
of the distributed energy resource aggregation consistent with the safe 
and reliable operation of the distribution system. To account for the 
possibility that distribution facilities may be out of service and 
impair the operation of certain individual resources in a distributed 
energy resource aggregation, we also propose to require each RTO/ISO to 
revise its tariff to require the distributed energy resource aggregator 
to report to the RTO/ISO any changes to its offered quantity and 
related distribution factors that result from distribution line faults 
or outages. We seek comment on the level of detail necessary in the 
RTO/ISO tariffs to establish a framework for ongoing coordination 
between the RTO/ISO, a distributed energy resource aggregator, and the 
relevant distribution utility or utilities. We also seek comment on any 
related reliability, safety, and operational concerns and how they may 
be effectively addressed.
    156. Further, we seek comment on the appropriate lines of 
communication to require. While it may be commercially efficient for 
the distributed energy resource aggregator to have the burden of 
communicating with both the RTO/ISO and the distribution utility, and 
acknowledging the assumption that the distributed energy resource 
aggregator will be the single point of contact with the RTO/ISO, are 
there reasons (e.g., distribution operations or a distributed energy 
resource aggregator's commercial interest) why this would be 
insufficient communication? Does a distribution utility that serves 
distributed energy resources need real-time direct communication with 
the RTO/ISO, such as in the form of operating procedures or software-
enabled communications, in order to operate its distribution system, or 
can that communication be organized through the distributed energy 
resource aggregator? Finally, we welcome comments on how the 
distributed energy resource aggregator model proposed herein would 
interact with or complement the distribution system operator (DSO) 
model being discussed in some states, and whether a DSO model might add 
value to the distributed energy resource aggregator model in terms of 
facilitating communication among affected entities?

[[Page 86547]]

h. Market Participation Agreements for Distributed Energy Resource 
Aggregators
    157. To ensure that a distributed energy resource aggregator 
complies with all relevant provisions of the RTO/ISO tariffs, it must 
execute an agreement with the RTO/ISO that defines its roles and 
responsibilities and its relationship with the RTO/ISO before it can 
participate in the organized wholesale electric markets. Since the 
individual resources in these distributed energy resource aggregations 
will likely fall under the purview of multiple organizations (e.g., the 
RTO/ISO, state regulatory commissions, relevant distribution utilities, 
and local regulatory authorities), these agreements must also require 
that the distributed energy resource aggregator attests that its 
distributed energy resource aggregation is compliant with the tariffs 
and operating procedures of the distribution utilities and the rules 
and regulations of any other relevant regulatory authority.\238\ We 
therefore propose that each RTO/ISO revise its tariff to include a 
market participation agreement for distributed energy resource 
aggregators. We do not propose specific requirements for such 
agreements at this time, but instead seek comment on the information 
these agreements should contain.
---------------------------------------------------------------------------

    \238\ This may include any laws or regulations of the relevant 
retail regulatory authority that do not permit demand response 
resources to participate in the RTO/ISO markets as the Commission 
considered in Order No. 719. See Order No. 719, FERC Stats. & Regs. 
] 31,281 at P 154.
---------------------------------------------------------------------------

    158. While these agreements will define the roles and 
responsibilities of the distributed energy resource aggregator, they 
should not limit the business models under which distributed energy 
resource aggregators can operate. Therefore, we propose that the market 
participation agreement for distributed energy resource aggregators 
that each RTO/ISO must include in its tariff does not restrict the 
business models that distributed energy resource aggregators may adopt. 
For example, while the third-party aggregator is a common business 
model, the market participation agreement for distributed energy 
resource aggregators should not preclude distribution utilities, 
cooperatives, or municipalities from aggregating distributed energy 
resources on their systems or even microgrids from participating in the 
organized wholesale electric markets as a distributed energy resource 
aggregation.

IV. Compliance

    159. We propose to require each RTO/ISO to submit a compliance 
filing to demonstrate that it satisfies the proposed requirements set 
forth in the Final Rule within six months of the date the Final Rule in 
this proceeding is published in the Federal Register. While we believe 
that six months is sufficient for each RTO/ISO to develop and submit 
its compliance filing, we recognize that implementation of the reforms 
proposed herein could take more time due to the changes that may be 
necessary to each RTO's/ISO's modeling and dispatch software. 
Therefore, we propose to allow twelve months from the date of the 
compliance filing for implementation of the proposed reforms to become 
effective.
    160. We seek comment on the proposed deadline for each RTO/ISO to 
submit its compliance filing, as well as the proposed deadline for each 
RTO's/ISO's implementation of the proposed reforms to become effective. 
Specifically, we seek comment on whether the proposed compliance and 
implementation timeline would allow sufficient time for each RTO/ISO to 
implement changes to its technological systems and business processes 
in response to a Final Rule. We also seek comment on whether the RTOs/
ISOs will require more or less time to implement certain reforms versus 
others.
    161. To the extent that any RTO/ISO believes that it already 
complies with any of the requirements adopted in a Final Rule in this 
proceeding, the RTO/ISO would be required to demonstrate how it 
complies in the filing due within six months of the date any Final Rule 
in this proceeding is published in the Federal Register. The proposed 
implementation deadline would apply only to the extent that an RTO/ISO 
does not already comply with the reforms proposed in this NOPR.

V. Information Collection Statement

    162. The Paperwork Reduction Act (PRA) \239\ requires each federal 
agency to seek and obtain Office of Management and Budget (OMB) 
approval before undertaking a collection of information directed to ten 
or more persons or contained in a rule of general applicability. OMB's 
regulations,\240\ in turn, require approval of certain information 
collection requirements imposed by agency rules. Upon approval of a 
collection(s) of information, OMB will assign an OMB control number and 
an expiration date. Respondents subject to the filing requirements of a 
rule will not be penalized for failing to respond to these 
collection(s) of information unless the collection(s) of information 
display a valid OMB control number.
---------------------------------------------------------------------------

    \239\ 44 U.S.C. 3501-3520.
    \240\ 5 CFR 1320 (2016).
---------------------------------------------------------------------------

    163. In this NOPR, we are proposing to amend the Commission's 
regulations under Part 35 to require each RTO/ISO to propose revisions 
to its tariff to (1) establish a participation model consisting of 
market rules that, recognizing the physical and operational 
characteristics of electric storage resources, accommodates their 
participation in the organized wholesale electric markets and (2) 
define distributed energy resource aggregators as a type of market 
participant that can participate in the organized wholesale electric 
markets under the participation model that best accommodates the 
physical and operational characteristics of its distributed energy 
resource aggregation. Accordingly, we encourage comments regarding the 
time burden expected to be required to comply with the proposed rule 
regarding the requirement for the RTOs/ISOs to change their tariffs to 
conform to the proposed rule. Specifically, this NOPR seeks comment on 
the additional burden and cost (human, hardware, and software) 
associated with implementation, operation, and maintenance of these new 
provisions in RTO/ISO tariffs. The Commission will provide estimates 
for these costs in any future Final Rule, as appropriate.
    Burden Estimate and Information Collection Costs: We believe that 
the burden estimates below are representative of the average burden on 
respondents. The estimated burden and cost for the requirements 
contained in this NOPR follow.

[[Page 86548]]



                                                 FERC-516, as Modified by the NOPR in Docket RM16-23-000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Annual number                          Average burden     Total annual  burden
                                        Number of       of responses     Total number  of    (hours) &  cost per     hours &  total         Cost per
                                       respondents     per respondent        responses            response             annual cost       respondent ($)
                                                 (1)               (2)     (1) x (2) = (3)  (4).................  (3) x (4) = (5).....         (5) / (1)
--------------------------------------------------------------------------------------------------------------------------------------------------------
One-Time Tariff Filings (Year 1)..           \241\ 6                 1                   6  1,040 hrs; $76,960    6,240 hrs; $461,760.           $76,960
                                                                                             \242\.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Title: FERC-516, Electric Rate Schedules and Tariff Filings.
---------------------------------------------------------------------------

    \241\ Respondent entities are either RTOs or ISOs.
    \242\ The estimated hourly cost (salary plus benefits) provided 
in this section is based on the salary figures for May 2015 posted 
by the Bureau of Labor Statistics for the Utilities sector (http://www.bls.gov/oes/current/naics2_22.htm#13-0000) and scaled to reflect 
benefits using the relative importance of employer costs in employee 
compensation from June 2016 (http://www.bls.gov/news.release/ecec.nr0.htm). The hourly estimates for salary plus benefits are:
    Legal (code 23-0000), $128.94
    Computer and mathematical (code 15-0000), $60.54
    Information systems manager (code 11-3021), $91.63
    IT security analyst (code 15-1122), $63.55
    Auditing and accounting (code 13-2011), $53.78
    Information and record clerk (code 43-4199), $37.69
    Electrical Engineer (code 17-2071), $64.20
    Economist (code 19-3011), $74.43
    Management (code 11-0000), $88.94
    The average hourly cost (salary plus benefits), weighting all of 
these skill sets evenly, is $73.74. The Commission rounds it to $74 
per hour.
---------------------------------------------------------------------------

    Action: Proposed revisions to an information collection.
    OMB Control No.: 1902-0096.
    Respondents for this Rulemaking: RTOs and ISOs.
    Frequency of Information: One-time during Year One.
    Necessity of Information: The Commission implements this rule to 
eliminate barriers to electric storage resource participation in the 
organized wholesale electric markets and allow for participation of 
aggregated distributed energy resources in the organized wholesale 
electric markets.
    Internal Review: The Commission has reviewed the changes and has 
determined that such changes are necessary. These requirements conform 
to the Commission's need for efficient information collection, 
communication, and management within the energy industry. The 
Commission has specific, objective support for the burden estimates 
associated with the information collection requirements.
    Interested persons may obtain information on the reporting 
requirements by contacting the following: Federal Energy Regulatory 
Commission, 888 First Street NE., Washington, DC 20426 [Attention: 
Ellen Brown, Office of the Executive Director] Email: 
[email protected] Phone: (202) 502-8663; fax: (202) 273-0873. 
Comments concerning the collection of information and the associated 
burden estimate(s) may also be sent to: Office of Information and 
Regulatory Affairs, Office of Management and Budget, 725 17th Street 
NW., Washington, DC 20503 [Attention: Desk Officer for the Federal 
Energy Regulatory Commission]. Due to security concerns, comments 
should be sent electronically to the following email address: 
[email protected]. Comments submitted to OMB should refer to 
FERC-516 and OMB Control No. 1902-0096.

VI. Regulatory Flexibility Act Certification

    164. The Regulatory Flexibility Act of 1980 (RFA) \243\ generally 
requires a description and analysis of proposed rules that will have 
significant economic impact on a substantial number of small entities. 
The RFA mandates consideration of regulatory alternatives that 
accomplish the stated objectives of a rule and that minimize any 
significant economic impact on a substantial number of small entities. 
The Small Business Administration's (SBA) Office of Size Standards 
develops the numerical definition of a small business.\244\ These 
standards are provided on the SBA Web site.\245\
---------------------------------------------------------------------------

    \243\ 5 U.S.C. 601-12.
    \244\ 13 CFR 121.101.
    \245\ U.S. Small Business Administration, Table of Small 
Business Size Standards Matched to North American Industry 
Classification System Codes (effective Feb. 26, 2016), https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.
---------------------------------------------------------------------------

    165. The SBA classifies an entity as an electric utility if it is 
primarily engaged in the transmission, generation and/or distribution 
of electric energy for sale. Under this definition, the six RTOs/ISOs 
are considered electric utilities, specifically focused on electric 
bulk power and control. The size criterion for a small electric utility 
is 500 or fewer employees.\246\ Since every RTO/ISO has more than 500 
employees, none are considered small entities.
---------------------------------------------------------------------------

    \246\ 13 CFR 121.201 (Sector 22, Utilities).
---------------------------------------------------------------------------

    166. Furthermore, because of their pivotal roles in wholesale 
electric power markets in their regions, none of the RTOs/ISOs meet the 
last criterion of the two-part RFA definition of a small entity: ``Not 
dominant in its field of operation.'' \247\ As a result, we certify 
that the reforms required by this NOPR would not have a significant 
economic impact on a substantial number of small entities.
---------------------------------------------------------------------------

    \247\ The RFA definition of ``small entity'' refers to the 
definition provided in the Small Business Act, which defines a 
``small business concern'' as a business that is independently owned 
and operated and that is not dominant in its field of operation. The 
Small Business Administration's regulations at 13 CFR 121.201 define 
the threshold for a small Electric Bulk Power Transmission and 
Control entity (NAICS code 221121) to be 500 employees. See 5 U.S.C. 
601(3) (citing to section 3 of the Small Business Act, 15 U.S.C. 
632).
---------------------------------------------------------------------------

VII. Environmental Analysis

    167. The Commission is required to prepare an Environmental 
Assessment or an Environmental Impact Statement for any action that may 
have a significant adverse effect on the human environment.\248\ We 
conclude that neither an Environmental Assessment nor an Environmental 
Impact Statement is required for this NOPR under section 380.4(a)(15) 
of the Commission's regulations, which provides a categorical exemption 
for approval of actions under sections 205 and 206 of the FPA relating 
to the filing of schedules containing all rates and charges for the 
transmission or sale of electric energy subject to the Commission's 
jurisdiction, plus the classification, practices, contracts and 
regulations that affect rates, charges, classifications, and 
services.\249\
---------------------------------------------------------------------------

    \248\ Regulations Implementing the National Environmental Policy 
Act of 1969, Order No. 486, 52 FR 47,897 (Dec. 17, 1987), FERC 
Stats. & Regs., ] 30,783 (1987).
    \249\ 18 CFR 380.4(a)(15).
---------------------------------------------------------------------------

VIII. Comment Procedures

    168. The Commission invites interested persons to submit comments 
on all matters and issues proposed in this Proposal to be adopted, 
including any related matters or alternative proposals that commenters 
may wish to discuss. Comments are due January 30, 2017. Comments must 
refer to Docket No. RM16-23-000 and must include the commenter's name, 
the organization they represent, if applicable, and their address.
    169. The Commission encourages comments to be filed electronically 
via

[[Page 86549]]

the eFiling link on the Commission's Web site at http://www.ferc.gov. 
The Commission accepts most standard word processing formats. Documents 
created electronically using word processing software should be filed 
in native applications or print-to-PDF format and not in a scanned 
format. Commenters filing electronically do not need to make a paper 
filing.
    Commenters that are not able to file comments electronically must 
send an original of their comments to: Federal Energy Regulatory 
Commission, Secretary of the Commission, 888 First Street NE., 
Washington, DC 20426.
    170. All comments will be placed in the Commission's public files 
and may be viewed, printed, or downloaded remotely as described in the 
Document Availability section below. Commenters on this Proposal are 
not required to serve copies of their comments on other commenters.

IX. Document Availability

    171. 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 (http://www.ferc.gov) and 
in the Commission's Public Reference Room during normal business hours 
(8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street NE., Room 2A, 
Washington, DC 20426.
    172. 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 of this document, excluding the last three digits, in 
the docket number field.
    173. User assistance is available for eLibrary and the Commission's 
Web site during normal business hours from the Commission's Online 
Support at (202) 502-6652 (toll free at 1-866-208-3676) or email at 
[email protected], or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at 
[email protected].

List of Subjects in 18 CFR Part 35

    Electric power rates; Electric utilities.

    By direction of the Commission.

    Issued: November 17, 2016.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
    In consideration of the foregoing, the Commission proposes to amend 
Part 35 Chapter 1, Title 18 of the Code of Federal Regulations as 
follows:

PART 35--FILING OF RATE SCHEDULES AND TARIFFS

0
1. The authority citation continues to read as follows:

    Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 
U.S.C. 7101-7352.

0
2. Amend Sec.  35.28 by adding new paragraphs (b)(9) through (12), (g) 
(9), and (g)(10).


Sec.  35.28  Non-discriminatory open access transmission tariff.

* * * * *
    (b) * * *

    (9) Electric storage resource as used in this section means a 
resource capable of receiving electric energy from the grid and 
storing it for later injection of electricity back to the grid 
regardless of where the resource is located on the electrical 
system.
    (10) Distributed energy resource as used in this section means a 
source or sink of power that is located on the distribution system, 
any subsystem thereof, or behind a customer meter.
    (11) Distributed energy resource aggregator as used in this 
section means the entity that aggregates one or more distributed 
energy resources for purposes of participation in the capacity, 
energy and ancillary service markets of the regional transmission 
organizations and independent system operators.
    (12) Organized wholesale electric markets as used in this 
section means the capacity, energy, and ancillary service markets 
operated by regional transmission organizations and independent 
system operators.
* * * * *
    (g) * * *
    (9) Electric Storage Resources. (i) Each Commission-approved 
independent system operator and regional transmission organization 
must have tariff provisions providing a participation model for 
electric storage resources that
    (A) Ensures that electric storage resources are eligible to 
provide all capacity, energy and ancillary services that they are 
technically capable of providing in the organized wholesale electric 
markets;
    (B) Incorporates bidding parameters that reflect and account for 
the physical and operational characteristics of electric storage 
resources;
    (C) Ensures that electric storage resources can be dispatched 
and can set the wholesale market clearing price as both a wholesale 
seller and wholesale buyer consistent with existing rules that 
govern when a resource can set the wholesale price;
    (D) Establishes a minimum size requirement for participation in 
the organized wholesale electric markets that does not exceed 100 
kW; and
    (E) Specifies that the sale of energy from the organized 
wholesale electric markets to an electric storage resource that the 
resource then resells back to those markets must be at the wholesale 
locational marginal price.
    (ii) [Reserved]
    (10) Distributed Energy Resource Aggregators. (i) Each 
independent system operator and regional transmission organization 
must have tariff provisions that allow distributed energy resource 
aggregations to participate directly in the organized wholesale 
electric markets. Each regional transmission organization and 
independent system operator must establish distributed energy 
resource aggregators as a type of market participant and must allow 
the distributed energy resource aggregators to register distributed 
energy resource aggregations under the participation model in the 
regional transmission operator or the independent system operator's 
tariff that best accommodates the physical and operational 
characteristics of the distributed energy resource aggregation.
    (ii) Each regional transmission operator and independent system 
operator, to accommodate the participation of distributed energy 
resource aggregations, must establish market rules on:
    (A) Eligibility to participate in the organized wholesale 
electric markets through a distributed energy resource aggregation;
    (B) Locational requirements for distributed energy resource 
aggregations;
    (C) Distribution factors and bidding parameters for distributed 
energy resource aggregations;
    (D) Information and data requirements for distributed energy 
resource aggregations;
    (E) Modification to the list of resources in a distributed 
energy resource aggregation;
    (F) Metering and telemetry system requirements for distributed 
energy resource aggregations;
    (G) Coordination between the regional transmission organization 
or independent system operator, the distributed energy resource 
aggregator, and the distribution utility;
    (H) Market participation agreements for distributed energy 
resource aggregators.

    Note: The following appendix will not appear in the Code of Federal 
Regulations

Appendix A: Abbreviated Names of Commenters

    The following table contains the abbreviated names of the 
commenters that are used in this Notice of Proposed Rulemaking.

------------------------------------------------------------------------
           Abbreviation                          Commenters
------------------------------------------------------------------------
Advanced Energy Economy...........  Advanced Energy Economy
AEP...............................  American Electric Power Service
                                     Corporation

[[Page 86550]]

 
AES Companies.....................  Indianapolis Power & Light Company,
                                     The Dayton Power and Light Company,
                                     AES Energy Storage LLC, AES ES Tait
                                     LLC and all other AES U.S.
                                     operating companies that own
                                     generation and storage
Alevo.............................  Alevo Analytics
Advanced Microgrid Solutions......  Advanced Microgrid Solutions, Inc.
APPA..............................  American Public Power Association
Advanced Rail Energy Storage......  Advanced Rail Energy Storage, LLC
Brookfield Renewable..............  Brookfield Renewable
California Department of Water      California Department of Water
 Resources.                          Resources
California Energy Storage Alliance  California Energy Storage Alliance
Delaware Commission...............  Delaware Public Service Commission
Duke Energy.......................  Duke Energy Corporation
EEI...............................  Edison Electric Institute
Enel Green Power..................  Enel Green Power North America, Inc.
Electric Power Supply Association.  Electric Power Supply Association
Electric Vehicle R&D Group........  University of Delaware Electric
                                     Vehicle R&D Group
Energy Storage Association........  Energy Storage Association
FirstLight........................  FirstLight Power Resources
                                     Management LLC
Golden Spread.....................  Golden Spread Electric Cooperative,
                                     Inc.
Ice Energy........................  Ice Energy
Independent Energy Producers        Independent Energy Producers
 Association.                        Association
Manitoba Hydro....................  Manitoba Hydro
Minnesota Energy Storage Alliance.  Minnesota Energy Storage Alliance
National Electrical Manufacturers   National Electrical Manufacturers
 Association.                        Association
National Hydropower Association...  National Hydropower Association
New York Battery and Energy         New York Battery and Energy Storage
 Storage Consortium.                 Technology Consortium
NextEra...........................  NextEra Energy Resources, LLC
NRECA.............................  National Rural Electric Cooperative
                                     Association
NY Transmission Owners............  Central Hudson Gas & Electric
                                     Corporation, Consolidated Edison
                                     Company of New York, Inc., New York
                                     Power Authority, New York State
                                     Electric & Gas Corporation, Niagara
                                     Mohawk Power Corporation, Orange
                                     and Rockland Utilities, Inc., Power
                                     Supply Long Island, and Rochester
                                     Gas and Electric Corporation
Ormat.............................  Ormat Nevada Inc.
Pacific Gas & Electric............  Pacific Gas and Electric Company
Public Interest Organizations.....  Sustainable FERC Project on behalf
                                     of Natural Resources Defense
                                     Council and Union of Concerned
                                     Scientists
PJM Market Monitor................  Independent Market Monitor For PJM
Quanta............................  Ralph Masiello, Quanta Technologies,
                                     LLC
RES Americas......................  Renewable Energy Systems Americas
                                     Inc.
SoCal Edison......................  Southern California Edison Company
Schulte Associates................  Schulte Associates LLC
Solar Grid Storage................  Solar Grid Storage, LLC
SolarCity.........................  SolarCity Corporation
Steffes...........................  Steffes
Tesla.............................  Tesla Motors, Inc.
Viridity..........................  Viridity Energy, Inc.
Wellhead..........................  Wellhead Electric Company
Xcel Energy Services..............  Xcel Energy Services, Inc., on
                                     behalf of its operating company
                                     affiliates, Northern States Power
                                     and Southwestern Public Service
                                     Company
------------------------------------------------------------------------

[FR Doc. 2016-28194 Filed 11-29-16; 8:45 am]
BILLING CODE 6717-01-P