[Federal Register Volume 85, Number 204 (Wednesday, October 21, 2020)]
[Rules and Regulations]
[Pages 67094-67158]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20973]



[[Page 67093]]

Vol. 85

Wednesday,

No. 204

October 21, 2020

Part II





Department of Energy





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Federal Energy Regulatory Commission





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18 CFR Part 35





Participation of Distributed Energy Resource Aggregations in Markets 
Operated by Regional Transmission Organizations and Independent System 
Operator; Final Rule

  Federal Register / Vol. 85 , No. 204 / Wednesday, October 21, 2020 / 
Rules and Regulations  

[[Page 67094]]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 35

[Docket No. RM18-9-000; Order No. 2222]


Participation of Distributed Energy Resource Aggregations in 
Markets Operated by Regional Transmission Organizations and Independent 
System Operators

AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is 
amending its regulations to remove barriers to the participation of 
distributed energy resource aggregations in the capacity, energy, and 
ancillary service markets operated by Regional Transmission 
Organizations and Independent System Operators (RTO/ISO).

DATES: This rule is effective December 21, 2020. Each RTO/ISO must file 
the tariff changes needed to implement the requirements of this final 
rule by September 17, 2021.

FOR FURTHER INFORMATION CONTACT:
David Kathan (Technical Information), Office of Energy Policy and 
Innovation, Federal Energy Regulatory Commission, 888 First Street NE, 
Washington, DC 20426, (202) 502-6404
Karin Herzfeld (Legal Information), Office of General Counsel--Energy 
Markets, Federal Energy Regulatory Commission, 888 First Street NE, 
Washington, DC 20426, (202) 502-8459

SUPPLEMENTARY INFORMATION:

Table of Contents

 
                                                         Paragraph Nos.
 
I. Introduction......................................                  1
II. Procedural History...............................                 10
III. Need for Reform.................................                 16
    A. Comments......................................                 19
    B. Commission Determination......................                 26
IV. Discussion.......................................                 31
    A. Commission Jurisdiction.......................                 31
        1. Scope of Final Rule.......................                 31
            a. Comments..............................                 32
            b. Commission Determination..............                 38
        2. Opt-Out...................................                 45
            a. Comments..............................                 47
            b. Commission Determination..............                 56
        3. Interconnection...........................                 68
            a. Comments and Data Request Responses...                 70
            b. Commission Determination..............                 90
    B. Definitions of Distributed Energy Resource and                105
     Distributed Energy Resource Aggregator..........
        1. NOPR Proposal.............................                105
        2. Comments..................................                106
        3. Commission Determination..................                114
    C. Eligibility To Participate in RTO/ISO Markets                 119
     Through a Distributed Energy Resource Aggregator
        1. Participation Model.......................                119
            a. NOPR Proposal.........................                119
            b. Comments..............................                120
            c. Commission Determination..............                129
        2. Types of Technologies.....................                133
            a. NOPR Proposal.........................                133
            b. Comments..............................                135
            c. Commission Determination..............                141
        3. Double Counting of Services...............                147
            a. NOPR Proposal.........................                147
            b. Comments..............................                148
            c. Commission Determination..............                159
        4. Minimum and Maximum Size of Aggregation...                165
            a. NOPR Proposal.........................                165
            b. Comments..............................                167
            c. Commission Determination..............                171
        5. Minimum and Maximum Capacity Requirements                 175
         for Distributed Energy Resources
         Participating in an Aggregation.............
            a. NOPR Proposal.........................                175
            b. Comments..............................                176
            c. Commission Determination..............                179
        6. Single Resource Aggregation...............                182
            a. NOPR Proposal.........................                182
            b. Comments..............................                183
            c. Commission Determination..............                185
    D. Locational Requirements.......................                187
            a. NOPR Proposal.........................                187
            b. Comments..............................                191
            c. Commission Determination..............                204
    E. Distribution Factors and Bidding Parameters...                208
            a. NOPR Proposal.........................                208
            b. Comments..............................                210
            c. Commission Determination..............                225
    F. Information and Data Requirements.............                230

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            a. NOPR Proposal.........................                230
            b. Comments..............................                231
            c. Commission Determination..............                236
    G. Metering and Telemetry System Requirements....                241
            a. NOPR Proposal.........................                241
            b. Comments..............................                246
            c. Commission Determination..............                262
    H. Coordination Between the RTO/ISO, Aggregator,                 272
     and Distribution Utility........................
        1. Market Rules on Coordination..............                272
            a. NOPR Proposal.........................                272
            b. Comments..............................                274
            c. Commission Determination..............                278
        2. Role of Distribution Utilities............                281
            a. NOPR Proposal.........................                281
            b. Comments..............................                282
            c. Commission Determination..............                292
        3. Ongoing Operational Coordination..........                300
            a. NOPR Proposal.........................                300
            b. Comments..............................                302
            c. Commission Determination..............                310
        4. Role of Relevant Electric Retail                          314
         Regulatory Authorities......................
            a. NOPR Proposal.........................                314
            b. Comments..............................                315
            c. Commission Determination..............                322
        5. Coordination Frameworks...................                325
            a. NOPR Proposal.........................                325
            b. Comments..............................                326
            c. Commission Determination..............                330
    I. Modifications to List of Resources in                         332
     Aggregation.....................................
            a. NOPR Proposal.........................                332
            b. Comments..............................                333
            c. Commission Determination..............                335
    J. Market Participation Agreements...............                339
        1. NOPR Proposal.............................                339
        2. Comments..................................                342
        3. Commission Determination..................                352
    K. Compliance....................................                357
        1. Comments..................................                358
        2. Commission Determination..................                360
    L. Issues Beyond the Scope of This Rulemaking....                362
        1. Comments..................................                362
        2. Commission Determination..................                363
V. Information Collection Statement..................                364
    A. Summary of this IC............................
    B. Discussion....................................                366
VI. Environmental Analysis...........................                369
VII. Regulatory Flexibility Act Certification........                370
VIII. Document Availability..........................                375
IX. Effective Date and Congressional Notification....                378
Appendix A: Abbreviated Names of Commenters..........
 

I. Introduction

    1. In this final rule, the Federal Energy Regulatory Commission 
(Commission) is adopting reforms to remove barriers to the 
participation of distributed energy resource \1\ aggregations in the 
Regional Transmission Organization (RTO) and Independent System 
Operator (ISO) markets (RTO/ISO markets).\2\ For the reasons discussed 
below, we find that existing RTO/ISO market rules are unjust and 
unreasonable in light of barriers that they present to the 
participation of distributed energy resource aggregations in the RTO/
ISO markets, which reduce competition and fail to ensure just and 
reasonable rates. Therefore, pursuant to the Commission's authority 
under Federal Power Act (FPA) section 206,\3\ the Commission modifies 
Sec.  35.28 \4\ of its regulations to require each RTO/ISO to revise 
its tariff to ensure that its market rules facilitate the participation 
of distributed energy resource aggregations, as discussed further 
below.
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    \1\ We define a distributed energy resource as any resource 
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, demand 
response, energy efficiency, thermal storage, and electric vehicles 
and their supply equipment. See infra P 114.
    \2\ For purposes of this final rule, we define RTO/ISO markets 
as the capacity, energy, and ancillary services markets operated by 
the RTOs and ISOs. We note that, in the Notice of Proposed 
Rulemaking (NOPR) in this proceeding, the Commission used 
``organized wholesale electric markets'' and included that term in 
the proposed regulatory text. See Electric Storage Participation in 
Markets Operated by Regional Transmission Organizations & 
Independent System Operators, Notice of Proposed Rulemaking, 81 FR 
86522, 157 FERC ] 61,121 (2016) (NOPR). We find that using ``RTO/ISO 
markets'' is sufficient to describe the markets at issue in this 
final rule and therefore will no longer use ``organized wholesale 
electric markets'' here or include that term in the regulatory text.
    \3\ 16 U.S.C. 824e.
    \4\ 18 CFR 35.28 (2020).
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    2. As the Commission explained in the NOPR, barriers to the 
participation of new technologies, such as many types of distributed 
energy resources, in the RTO/ISO markets can emerge when the rules 
governing participation in those

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markets are designed for traditional resources and in effect limit the 
services that emerging technologies can provide.\5\ For example, the 
Commission noted in the NOPR that, as a general matter, distributed 
energy resources tend to be too small to meet the minimum size 
requirements to participate in the RTO/ISO markets on a stand-alone 
basis, and may be unable to meet certain qualification and performance 
requirements because of the operational constraints they may have as 
small resources.\6\ The Commission further stated that existing 
participation models \7\ for aggregated resources, including 
distributed energy resources, often require those resources to 
participate in the RTO/ISO markets as demand response, which limits 
their operations and the services that they are eligible to provide.\8\
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    \5\ See NOPR, 157 FERC ] 61,121 at P 2.
    \6\ See id. PP 13, 105.
    \7\ In addition to tariff provisions that apply to all market 
participants, the RTOs/ISOs create tariff provisions for specific 
types of resources when those resources have unique physical and 
operational characteristics or other attributes that warrant 
distinctive treatment from other market participants. The tariff 
provisions that are created for a particular type of resource are 
what we refer to in this final rule as a participation model.
    \8\ NOPR, 157 FERC ] 61,121 at P 106. Demand response means a 
reduction in the consumption of electric energy by customers from 
their expected consumption in response to an increase in the price 
of electric energy or to incentive payments designed to induce lower 
consumption of electric energy. 18 CFR 35.28(b)(4).
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    3. Where such barriers exist, resources that are technically 
capable of providing some services on their own or through aggregation 
are precluded from competing with resources that are already 
participating in the RTO/ISO markets.\9\ These restrictions on 
competition can reduce the efficiency of the RTO/ISO markets, 
potentially leading an RTO/ISO to dispatch more expensive resources to 
meet its system needs. By removing barriers to the participation of 
distributed energy resource aggregations in the RTO/ISO markets, this 
final rule will enhance competition and, in turn, help to ensure that 
the RTO/ISO markets produce just and reasonable rates.
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    \9\ In Order No. 841, the Commission clarified that 
``technically capable'' of providing a service means meeting all of 
the technical, operational, and/or performance requirements that are 
necessary to reliably provide that service. Electric Storage 
Participation in Markets Operated by Regional Transmission 
Organizations & Independent System Operators, Order No. 841, 83 FR 
9580, 162 FERC ] 61,127, at P 78 (2018), order on reh'g, Order No. 
841-A, 84 FR 23902, 167 FERC ] 61,154 (2019), aff'd sub nom. Nat'l 
Ass'n of Regulatory Util. Comm'rs v. FERC, 964 F.3d 1177 (D.C. Cir. 
2020).
    .
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    4. Facilitating distributed energy resource participation in RTO/
ISO markets will provide a variety of benefits to those markets. 
Integrating these resources' capabilities into RTO/ISO planning and 
operations will help the RTOs/ISOs account for the impacts of these 
resources 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.\10\ 
These resources are able to 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 costs related to transmitting energy into persistently high-
priced load pockets.\11\ Indeed, in the NOPR, the Commission noted 
certain valuable characteristics that distributed energy resources can 
offer, including their ability to co-locate with load and provide 
associated benefits. Additionally, their relatively short development 
lead time allows distributed energy resources to respond rapidly to 
near-term generation or transmission reliability-related requirements, 
further improving their ability to enhance reliability and reduce 
system costs.
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    \10\ NOPR, 157 FERC ] 61,121 at P 129.
    \11\ Id. P 130.
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    5. The rules that we adopt in this final rule will help enable the 
participation of distributed energy resources in the RTO/ISO markets by 
providing a means for these resources to, in the aggregate, satisfy 
minimum size and performance requirements that they may not meet on a 
stand-alone basis.\12\ The Commission in the NOPR noted that 
distributed energy resource aggregations can help to address the 
commercial and transactional barriers to distributed energy resource 
participation in the RTO/ISO markets, such as sharing the significant 
costs of participating in those markets, including the costs of the 
necessary metering, telemetry, and communication equipment.\13\
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    \12\ See id. PP 105, 125.
    \13\ Id. P 126.
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    6. To address barriers to the participation of distributed energy 
resource aggregations in the RTO/ISO markets, we require each RTO/ISO 
to revise its tariff to establish distributed energy resource 
aggregators as a type of market participant that can register 
distributed energy resource aggregations under one or more 
participation models in the RTO/ISO tariff that accommodate the 
physical and operational characteristics of each distributed energy 
resource aggregation.
    7. Generally, we are adopting the specific reforms proposed in the 
NOPR, but with certain revisions based on the record in this 
proceeding, including input from the Commission technical conference 
convened April 10-11, 2018, responses to a post-technical conference 
notice, and responses to the Commission's September 5, 2019 Data 
Requests to RTOs/ISOs on policies and procedures that affect the 
interconnection of distributed energy resources. In particular, certain 
proposals in the NOPR have been altered in this final rule to better 
address the needs of different stakeholders, facilitate solutions to 
potential technical challenges, and to reflect the substantial efforts 
that have already been undertaken by some RTOs/ISOs to incorporate 
distributed energy resources into their markets, by providing for 
greater regional flexibility with respect to a number of proposed 
requirements.
    8. For each RTO/ISO, the tariff provisions addressing distributed 
energy resource aggregations must (1) allow distributed energy resource 
aggregations to participate directly in RTO/ISO markets and establish 
distributed energy resource aggregators as a type of market 
participant; (2) allow distributed energy resource aggregators to 
register distributed energy resource aggregations under one or more 
participation models that accommodate the physical and operational 
characteristics of the distributed energy resource aggregations; (3) 
establish a minimum size requirement for distributed energy resource 
aggregations that does not exceed 100 kW; (4) address locational 
requirements for distributed energy resource aggregations; (5) address 
distribution factors and bidding parameters for distributed energy 
resource aggregations; (6) address information and data requirements 
for distributed energy resource aggregations; (7) address metering and 
telemetry requirements for distributed energy resource aggregations; 
(8) address coordination between the RTO/ISO, the distributed energy 
resource aggregator, the distribution utility, and the relevant 
electric retail regulatory authorities; (9) address modifications to 
the list of resources in a distributed energy resource aggregation; and 
(10) address market participation agreements for distributed energy 
resource aggregators. Additionally, each RTO/ISO must accept bids from 
a distributed energy resource aggregator if its aggregation includes 
distributed energy resources that are customers of utilities that 
distributed more than 4 million megawatt-hours in the previous fiscal

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year. An RTO/ISO must not accept bids from a distributed energy 
resource aggregator if its aggregation includes distributed energy 
resources that are customers of utilities that distributed 4 million 
megawatt-hours or less in the previous fiscal year, unless the relevant 
electric retail regulatory authority permits such customers to be bid 
into RTO/ISO markets by a distributed energy resource aggregator.
    9. As discussed further below in Section IV.K (Compliance), each 
RTO/ISO must file the tariff changes needed to implement the 
requirements of this final rule within 270 days of the publication date 
of this final rule in the Federal Register.

II. Procedural History

    10. This final rule arises out of the same Commission inquiry that 
led to Order No. 841,\14\ in which the Commission amended its 
regulations under the FPA to remove barriers to the participation of 
electric storage resources in RTO/ISO markets. The Commission commenced 
that inquiry by hosting a panel to discuss electric storage resources 
at its November 19, 2015, open 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 RTO/ISO markets that 
affect the participation of electric storage resources. Concurrently, 
Commission staff issued a request for comments, seeking information 
from interested persons on whether barriers exist to the participation 
of electric storage resources in the RTO/ISO markets that may 
potentially lead to unjust and unreasonable wholesale rates. In 
addition to the responses from the RTOs/ISOs, Commission staff received 
44 comments. Many of the responses and comments discussed types of 
distributed energy resources and general market participation issues 
beyond concerns specific to electric storage resources.\15\
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    \14\ Order No. 841, 162 FERC ] 61,127.
    \15\ See, e.g., CAISO Response (AD16-20) at 2-3; ISO-NE Response 
(AD16-20) at 6-7, 26-27; PJM Response (AD16-20) at 20-21; Advanced 
Energy Economy Comments (AD16-20) on RTO/ISO Responses (AD16-20) at 
16-18; RES Americas Comments (AD16-20) on RTO/ISO Responses (AD16-
20) at 4-5.
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    11. On November 17, 2016, the Commission issued the NOPR in that 
proceeding. In addition to its proposed reforms to facilitate the 
participation of electric storage resources in RTO/ISO markets, the 
Commission proposed to amend its regulations under the FPA to remove 
barriers in current RTO/ISO market rules that may prevent new, smaller 
distributed energy resources that are technically capable of 
participating in the RTO/ISO markets from doing so.\16\
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    \16\ NOPR, 157 FERC ] 61,121 at PP 103, 124.
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    12. The Commission received 109 comments on the NOPR from a diverse 
set of stakeholders.\17\ On February 15, 2018, the Commission issued 
Order No. 841. In that final rule, the Commission noted that more 
information was necessary to inform its consideration of its NOPR 
proposals regarding facilitating the participation of distributed 
energy resource aggregations in RTO/ISO markets and stated that it 
would continue to explore the proposed distributed energy resource 
aggregation reforms under Docket No. RM18-9-000.\18\
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    \17\ See Appendix A for a list of entities that submitted 
comments and the shortened names used throughout this final rule to 
describe those entities.
    \18\ Order No. 841, 162 FERC ] 61,127 at P 5. The Commission 
incorporated by reference all comments filed in response to the NOPR 
in Docket No. RM16-23-000 into Docket No. RM18-9-000 and directed 
any further comments regarding the proposed distributed energy 
resource aggregation reforms should be filed henceforth in Docket 
No. RM18-9-000.
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    13. The Commission also announced that it would hold a technical 
conference to gather additional information regarding some distributed 
energy resource aggregation issues. The technical conference, which was 
held on April 10-11, 2018, addressed five issues related to this 
proceeding: Locational requirements, state and local regulator 
concerns, compensation for multiple services, coordination of 
distributed energy resource aggregations, and ongoing operational 
coordination.\19\ During the technical conference, more than 50 
individuals and entities offered a broad range of perspectives. The 
Commission issued a notice inviting post-technical conference comments 
and requesting comments on a number of follow-up questions related to 
each panel.\20\ The Commission received 52 post-technical conference 
comments from a diverse set of stakeholders.
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    \19\ See Supplemental Notice of Technical Conference, Docket 
Nos. RM18-9-000 and AD18-10-000 (Mar. 29, 2018), https://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=14856384.
    \20\ See Notice Inviting Post-Technical Conference Comments, 
Docket No. RM18-9-000 (Apr. 27, 2018), https://elibrary.ferc.gov/idmws/common/OpenNat.asp?fileID=14 882250.
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    14. On September 5, 2019, Commission staff issued data requests to 
each of the six RTOs/ISOs seeking information regarding their policies 
and procedures that affect the interconnection of distributed energy 
resources. In addition to the responses from the RTOs/ISOs, Commission 
staff received 11 reply comments.
    15. Some RTOs/ISOs in recent years have taken steps to facilitate 
the participation of distributed energy resource aggregations in their 
markets, and the Commission has approved these proposals. In June 2016 
and January 2020, the Commission accepted proposals to allow 
distributed energy resource aggregations to participate in certain RTO/
ISO markets.\21\ In addition, RTOs/ISOs have implemented some 
participation models for distributed energy resource aggregations to 
participate in their markets, often as demand response resources, with 
a few exceptions.\22\
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    \21\ See Cal. Indep. Sys. Operator Corp., 155 FERC ] 61,229 
(2016); N.Y. Indep. Sys. Operator, Inc., 170 FERC ] 61,033 (2020) 
(NYISO Aggregation Order).
    \22\ E.g., CAISO Data Request Response (2019 RM18-9) at 6 
(citing CAISO Tariff, Section 4.17); ISO-NE Data Request Response 
(2019 RM18-9) at 17-18 (stating that distributed energy resources 
may participate in wholesale markets as demand resources or 
Settlement Only Resources).
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III. Need for Reform

    16. In the NOPR, the Commission stated that its proposal is a 
continuation of efforts pursuant to its authority under the FPA to 
ensure that the RTO/ISO tariffs and market rules produce just and 
reasonable rates, terms, and conditions of service.\23\ Specifically, 
the Commission noted that it had observed that market rules designed 
for traditional resources can create barriers to entry for emerging 
technologies. The Commission expressed its concern that existing RTO/
ISO tariffs impede the participation of distributed energy resources in 
the RTO/ISO markets by providing limited opportunities for distributed 
energy resource aggregations.\24\
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    \23\ NOPR, 157 FERC ] 61,121 at P 9 (citing Integration of 
Variable Energy Resources, Order No. 764, 139 FERC ] 61,246, order 
on reh'g and clarification, Order No. 764-A, 141 FERC ] 61,232 
(2012), order on clarification and reh'g, Order No. 764-B, 144 FERC 
] 61,222 (2013); Wholesale Competition in Regions with Organized 
Electric Markets, Order No. 719, 73 FR 64100 (Oct. 28, 2008), 125 
FERC ] 61,071 (2008), order on reh'g, Order No. 719-A, 74 FR 37776 
(Jul. 29, 2009), 128 FERC ] 61,059 (2009), order on reh'g, Order No. 
719-B, 129 FERC ] 61,252 (2009)).
    \24\ Id. P 13.
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    17. The Commission acknowledged in the NOPR that distributed energy 
resources can at times effectively provide the capacity, energy, and 
ancillary services that are purchased and sold in the RTO/ISO 
markets.\25\ However, the Commission explained that sometimes these 
resources can be too small to participate in these markets 
individually. The Commission also noted that current RTO/ISO market

[[Page 67098]]

rules often limit the services that 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 meter or by imposing prohibitively expensive or 
otherwise burdensome requirements.
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    \25\ See id.
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    18. The Commission preliminarily found that the barriers to the 
participation of distributed energy resources through distributed 
energy resource aggregations in the RTO/ISO markets may, in some cases, 
unnecessarily restrict competition, which could lead to unjust and 
unreasonable rates.\26\ The Commission stated that effective wholesale 
competition encourages entry and exit and promotes innovation, incents 
the efficient operation of resources, and allocates risk appropriately 
between consumers and producers. Thus, the Commission stated that 
removing the barriers to participation by distributed energy resource 
aggregations will enhance the competitiveness, and in turn the 
efficiency, of RTO/ISO markets and thereby help to ensure just and 
reasonable and not unduly discriminatory or preferential rates for 
wholesale electric services.
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    \26\ See id. P 14.
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A. Comments

    19. Most commenters, including state entities and RTOs/ISOs, 
support requiring RTOs/ISOs to remove barriers to the participation of 
distributed energy resource aggregations in their markets, subject to 
the Commission's adopting certain modifications to the NOPR proposals 
and/or allowing for regional flexibility in implementing reforms in any 
eventual final rule.\27\ Among other things, these commenters identify 
improved competition and reliability as benefits of the proposed 
reforms and note that they provide a better way to provide price 
signals to distributed energy resources than current retail 
programs,\28\ which may reduce the cost of meeting power system 
needs.\29\ AWEA notes that participation in wholesale markets allows 
distributed energy resources to receive real-time information about 
system needs.\30\ Commenters also state that the removal of barriers 
to, and integration of, distributed energy resource aggregations could 
spur innovation, and allow these aggregations to serve important roles 
on the grid.\31\ Several commenters emphasize that a distributed energy 
resource aggregation framework must ensure that aggregated distributed 
energy resources can provide all the services that they are capable of 
providing,\32\ while competing on a level and technology-neutral 
playing field with other resources.\33\ Some commenters note that 
distributed energy resources do not currently fit within existing 
paradigms, which were designed for, and favor, other resources.\34\ 
Others state that for distributed energy resources and distributed 
energy resource aggregations to fairly participate, they must meet the 
same technical and commercial requirements as other resources, and pay 
equally for ancillary services and use of the transmission system.\35\
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    \27\ See, e.g., Advanced Energy Economy Comments (RM16-23) at 
31-32; Connecticut Department of Energy Comments (RM16-23) at 4; 
IPKeys/Motorola Comments (RM16-23) at 4; Leadership Group Comments 
(RM16-23) at 2; MISO Comments (RM16-23) at 2; Ohio Commission 
Comments (RM16-23) at 2-3.
    \28\ AWEA Comments (RM16-23) at 1-2; City of New York Comments 
(RM16-23) at 3, 5, 7; Maryland and New Jersey Commissions Comments 
(RM16-23) at 2; Ohio Commission Comments (RM16-23) at 2; Public 
Interest Organizations Comments (RM16-23) at 5-6.
    \29\ AWEA Comments (RM16-23) at 2.
    \30\ Id.
    \31\ California Energy Storage Alliance Comments (RM16-23) at 4; 
Microgrid Resources Coalition Comments (RM16-23) at 10; Union of 
Concerned Scientists Comments (RM16-23) at 9, 15, 17 (noting the 
lack of participation models for potential market service providers 
like domestic electric water heaters and distributed solar 
resources).
    \32\ See, e.g., Advanced Energy Management Comments (2018 RM18-
9) at 3; Direct Energy Comments (2018 RM18-9) at 5, 11-13; Energy 
Storage Association Comments (2018 RM18-9) at 2; Microsoft Comments 
(2018 RM18-9) at 16-17; NRG Comments (2018 RM18-9) at 5-6.
    \33\ Advanced Energy Economy Comments (2018 RM18-9) at 5; 
Advanced Energy Management Comments (2018 RM18-9) at 3; Microsoft 
Comments (2018 RM18-9) at 15-16; NRG Comments (2018 RM18-9) at 3.
    \34\ Fresh Energy/Sierra Club/Union of Concerned Scientists 
Comments (RM16-23) at 1; Public Interest Organizations Comments 
(RM16-23) at 5-6.
    \35\ PJM Market Monitor Comments (RM16-23) at 10-11; New York 
Utility Intervention Unit Comments (RM16-23) at 3.
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    20. Several commenters assert that existing participation models 
discriminate against distributed energy resources. For instance, Public 
Interest Organizations argue that distributed energy resources in PJM 
are often forced into participating as demand response, or 
interconnecting as generation, which are cost prohibitive.\36\ Stem 
asserts that CAISO's Non-Generator Resource and Distributed Energy 
Resource Provider models effectively prevent participation of behind-
the-meter resources in CAISO.\37\ Advanced Energy Economy contends 
that, despite the benefits that aggregated distributed energy resources 
provide,\38\ performance penalties for deviation from the 
characteristics of traditional generation effectively preclude 
participation in the capacity market.\39\
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    \36\ Public Interest Organizations Comments (RM16-23) at 19.
    \37\ Stem Comments (RM16-23) at 12, 16.
    \38\ Advanced Energy Economy states that the benefits include 
the ability to provide a quick response to system emergencies, which 
gives other resources time to ramp up or procure fuel, the ability 
of demand response to prevent blackouts during times of peak demand, 
and the ability to be dispatched granularly to provide support to 
specific parts of the grid. Advanced Energy Economy Comments (RM16-
23) at 42-43.
    \39\ Id. (arguing that PJM's capacity performance construct and 
ISO-NE's pay-for-performance construct both effectively require 
indefinite run times to avoid performance penalties that can amount 
to more than a year's worth of capacity revenue).
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    21. Some commenters state that distributed energy resource 
aggregation integration can be accomplished in a reliable and cost-
effective manner.\40\ Other commenters argue that allowing distributed 
energy resource aggregations to participate in wholesale markets will 
create new opportunities and enhance the reliability and resilience of 
the grid, leading to benefits such as savings and efficiency.\41\ 
Advanced Energy Buyers suggest that allowing distributed energy 
resources to participate in RTO/ISO markets will also provide such 
resources with additional revenue streams, making them more economic 
and candidates for greater investment, and provide additional benefit 
to the grid as a result of increased market activity.\42\ Commenters 
also note that the pairing of dispatchable resources with non-
dispatchable resources in an aggregation could create a portfolio that 
overall could be dispatchable to the bulk power system.\43\ Other 
commenters assert that, if distributed energy resources are not able to 
participate in wholesale markets, it could result in system overbuild, 
inaccurate wholesale price formation, and lack of visibility into 
system conditions.\44\
---------------------------------------------------------------------------

    \40\ Advanced Energy Economy Comments (2018 RM18-9) at 5.
    \41\ See, e.g., Advanced Energy Buyers Comments (2018 RM18-9) at 
3; CAISO Comments (2018 RM18-9) at 1; Direct Energy Comments (2018 
RM18-9) at 11-13; NRG Comments (2018 RM18-9) at 5-6; Tesla Comments 
(2018 RM18-9) at 3.
    \42\ Advanced Energy Buyers Comments (2018 RM18-9) at 5.
    \43\ NYISO Indicated Transmission Owners Comments (2018 RM18-9) 
at 4.
    \44\ Id.; Microsoft Comments (2018 RM18-9) at 13.
---------------------------------------------------------------------------

    22. Certain United States senators express support for the proposed 
rule which, they state, would help develop frameworks for how 
renewables can aggregate together to more effectively participate in 
energy markets, and provide useful guidance on how to better integrate 
these resources with existing energy providers. In addition,

[[Page 67099]]

these United States senators maintain that the rulemaking comes at a 
critical time for renewable energy because renewables led the way in 
2016 for new additions onto the energy grid.\45\ These United States 
senators, as well as members of the United States House of 
Representatives, urge the Commission to adopt a final rule that 
provides all distributed energy resources with the opportunity to 
participate in RTO/ISO markets, noting that the changes proposed in the 
NOPR will help improve the reliability and resilience of the bulk power 
system by providing operators with new local tools to manage 
unanticipated events and potentially lower costs for customers. They 
state that renewable energy provided 10% of electricity generation in 
2018 due to state and federal policies as well as consumer interest in 
choosing cost-competitive technologies.\46\
---------------------------------------------------------------------------

    \45\ September 22, 2017 Letter to Chairman Neil Chatterjee from 
United States Senators Sheldon Whitehouse, Cory A. Booker, Edward J. 
Markey, Ron Wyden, Elizabeth Warren and Bernard Sanders (filed Sept. 
25, 2017) (September 22 Letter); see also May 23, 2018 Letter to 
Chairman Kevin McIntyre from United States Senators Sheldon 
Whitehouse, Edward J. Markey, Martin Heinrich, Jeanne Shaheen, 
Richard Blumenthal, Margaret Wood Hassan, Angus S. King, Jr., Dianne 
Feinstein, Bernard Sanders, Catherine Cortez Masto, Jack Reed, Ron 
Wyden, Jeff Merkley, Kamala D. Harris, Cory A. Booker, and Brian 
Schatz (filed May 23, 2018) (discussing 2016 estimates from the 
Energy Information Administration that distributed energy resources 
accounted for about two percent of the installed generation capacity 
in the United States). In response to the September 22 Letter, 
Chairman Chatterjee stated that the Commission has a role in 
fostering resource neutral, non-discriminatory policies with respect 
to the wholesale markets, including removing barriers to the 
participation of distributed energy resources in the wholesale 
markets. Chairman's Response to September 22 Letter (filed Oct. 5, 
2017).
    \46\ February 11, 2019 Letter to Chairman Neil Chatterjee from 
United States Congress members Peter Welch, Mike Levin, Mike 
Quigley, Paul D. Tonko, Daniel W. Lipinski, Jerry McNerney, James R. 
Langevin, Kathy Castor, Raul M. Grijalva, Mark Pocan, Donald S. 
Beyer Jr., Matt Cartwright, Nanette Diaz Barrag[aacute]n, Sean 
Casten, Jamie Raskin, James P. McGovern, and Mike Doyle (filed Feb. 
11, 2019); February 11, 2019 Letter to Chairman Neil Chatterjee from 
United States Senators Sheldon Whitehouse, Edward J. Markey, Cory A. 
Booker, Catherine Cortez Masto, Martin Heinrich, Brian Schatz, Ron 
Wyden, Jeffrey A. Merkley, Kamala D. Harris, Richard Blumenthal, 
Jack Reed, Angus S. King, Jr., Tina Smith, Jacky Rosen, Margaret 
Wood Hassan, Jeanne Shaheen, Dianne Feinstein, and Bernard Sanders 
(filed Feb. 21, 2019).
---------------------------------------------------------------------------

    23. Mensah asserts that one of the biggest limitations that needs 
to be addressed is the ability of behind-the-meter distributed energy 
resources to inject onto the grid.\47\ Tesla requests the Commission 
extend to distributed energy resource aggregations the finding in Order 
No. 841 that existing tariffs do not recognize the operational 
characteristics of electric storage resources and limit their 
participation in the markets.\48\ Tesla urges the Commission to require 
that RTO/ISO tariffs allow distributed energy resources, including 
those resources physically located behind an end-use customer meter, to 
employ their full operational range by injecting energy onto the grid 
in order to provide any wholesale service through participation in 
distributed energy resource aggregations.\49\
---------------------------------------------------------------------------

    \47\ Mensah Comments (RM16-23) at 3.
    \48\ Tesla Comments (2018 RM18-9) at 7.
    \49\ Id. at 1, 7.
---------------------------------------------------------------------------

    24. Some commenters argue that the Commission needs to provide 
general guidance on distributed energy resource aggregation, with 
straightforward rules, clearly defined responsibilities, and data-
driven market signals.\50\ They explain that distributed energy 
resource aggregations must have transparent and predictable parameters 
for participation that are not overly restrictive and do not contain 
undue administrative delay.\51\ Microsoft suggests that the Commission 
provide ``directional guidance'' to RTOs/ISOs to remove barriers.\52\
---------------------------------------------------------------------------

    \50\ Advanced Energy Buyers Comments (2018 RM18-9) at 2; 
Advanced Energy Economy Comments (2018 RM18-9) at 5.
    \51\ Advanced Energy Buyers Comments (2018 RM18-9) at 5.
    \52\ Microsoft Comments (2018 RM18-9) at 13.
---------------------------------------------------------------------------

    25. In contrast, EEI states that the Commission should defer to 
regional stakeholder processes and coordination with state-
jurisdictional entities to formulate the detailed provisions required 
to implement distributed energy resource aggregation participation in 
the wholesale market.\53\ APPA states that the evidence is thin to show 
that there is a great demand for distributed energy resource 
aggregation programs or that such programs will bring meaningful 
benefits to consumers in the RTO/ISO regions.\54\
---------------------------------------------------------------------------

    \53\ EEI Comments (2018 RM18-9) at 3.
    \54\ APPA Comments (2018 RM18-9) at 10.
---------------------------------------------------------------------------

B. Commission Determination

    26. For the reasons discussed below, in this final rule, we affirm 
the preliminary finding in the NOPR that existing RTO/ISO market rules 
are unjust and unreasonable because they present barriers to the 
participation of distributed energy resource aggregations in the RTO/
ISO markets, and such barriers reduce competition and fail to ensure 
just and reasonable rates. Specifically, current RTO/ISO market rules 
present barriers that prevent certain distributed energy resources that 
are technically capable of participating in the RTO/ISO markets on 
their own or through aggregation from doing so.\55\ Permitting 
distributed energy resource aggregations to participate in the RTO/ISO 
markets may allow these resources, in the aggregate, to meet certain 
qualification and performance requirements, particularly if the 
operational characteristics of different distributed energy resources 
in a distributed energy resource aggregation complement each other.\56\ 
The reforms adopted in this final rule will remove the barriers that 
qualification and performance requirements currently pose to the 
participation of distributed energy resources in the RTO/ISO 
markets.\57\
---------------------------------------------------------------------------

    \55\ See NOPR, 157 FERC ] 61,121 at P 124.
    \56\ See id. P 125.
    \57\ See infra section IV.C.4 (Minimum and Maximum Size of 
Aggregation) (agreeing with commenters that a minimum size 
requirement not to exceed 100 kW will help improve competition in 
the RTO/ISO markets and avoid confusion about appropriate minimum 
size requirements for distributed energy resource aggregations under 
existing or new participation models); Section IV.C.6 (Single 
Resource Aggregation) (explaining that a consistent minimum size 
requirement will minimize barriers in the event that an individual 
distributed energy resource ceases to participant in RTO/ISO markets 
as a single qualifying distributed energy resource aggregation).
---------------------------------------------------------------------------

    27. The reforms adopted in this final rule are timely, as there has 
been significant development of distributed energy technologies and 
deployment of distributed energy resources in recent years. Moreover, 
this development has generated discussions on the potential for such 
resources--including new distributed energy resources that are smaller, 
interconnected at lower voltages, and geographically dispersed--to 
provide grid services through participation in RTO/ISO markets. Wider 
scale use of distributed energy resources is enabled by increased 
deployment of, and improvements in, metering, telemetry, and 
communication technologies. Aggregations of new and existing 
distributed energy resources can provide new cost-effective sources of 
energy and grid services and enhance competition in wholesale markets 
as new market participants.
    28. Individual distributed energy resources often do not meet the 
minimum size requirements to participate in the RTO/ISO markets under 
existing participation models and often cannot satisfy all the 
performance requirements of the various participation models due to 
their small size. In order to participate in RTO/ISO markets, 
distributed energy resources tend to participate in RTO/ISO demand 
response programs. While these demand response programs have helped 
reduce barriers to load curtailment resources, they often limit the 
operations of some

[[Page 67100]]

types of distributed energy resources, such as electric storage or 
distributed generation, as well as the services that they are eligible 
to provide.\58\
---------------------------------------------------------------------------

    \58\ For example, when participating through demand response 
programs, distributed energy resources generally can only operate to 
reduce customer demand at the meter, and any injection/generation 
cannot exceed customer demand. Consequently, these resources are 
prevented from injecting additional electricity into the grid to 
make sales of electricity in RTO/ISO markets.
---------------------------------------------------------------------------

    29. We find that adopting the reforms described below will enhance 
the competitiveness, and in turn the efficiency, of RTO/ISO markets and 
thereby help to ensure just and reasonable and not unduly 
discriminatory or preferential rates for wholesale electric 
services.\59\ Further, the reforms required by this final rule will 
help the RTOs/ISOs account for the impacts of distributed energy 
resources on installed capacity requirements and day-ahead energy 
demand, thereby reducing uncertainty in load forecasts and the risk of 
over procurement of resources and the associated costs, and provide 
numerous other benefits.\60\ Accordingly, as discussed further below, 
we adopt the NOPR proposal to add Sec.  35.28(g)(12)(i) to the 
Commission's regulations and require each RTO/ISO to have tariff 
provisions that allow distributed energy resource aggregations to 
participate directly in RTO/ISO markets.\61\ While we agree with 
commenters that there are operational, technological, and cost 
implications that must be evaluated and addressed, as explained below, 
we find that the record in this proceeding provides sufficient basis 
for taking action to require the implementation of the generic 
requirements discussed herein.
---------------------------------------------------------------------------

    \59\ See infra Section IV.C.1 (Participation Model); Section 
IV.C.2 (Types of Technologies); Section IV.C.3 (Double Counting of 
Services); Section IV.H.2 (Role of Distribution Utilities); Section 
IV.J (Market Participation Agreements).
    \60\ See infra Section IV.C.4 (Minimum and Maximum Size of 
Aggregation); Section IV.D (Locational Requirements).
    \61\ In addition, we adopt the proposal to add sections 
35.28(b)(10) and (11) to the Commission's regulations incorporating 
the definitions for distributed energy resource and distributed 
energy resource aggregator.
---------------------------------------------------------------------------

    30. To the extent that an RTO/ISO proposes to comply with any or 
all of the requirements in this final rule using its currently 
effective requirements for distributed energy resources, it must 
demonstrate on compliance that its existing approach meets the 
requirements in this final rule.

IV. Discussion

A. Commission Jurisdiction

1. Scope of Final Rule
    31. In the NOPR, the Commission stated that it was proposing 
reforms pursuant to its 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.\62\
---------------------------------------------------------------------------

    \62\ NOPR, 157 FERC ] 61,121 at P 1.
---------------------------------------------------------------------------

a. Comments
    32. Several commenters assert that the basis for the Commission's 
jurisdiction is straightforward because sales from distributed energy 
resource aggregators into wholesale markets are sales at wholesale in 
interstate commerce.\63\ Other commenters question the Commission's 
authority to implement the proposed reforms, seek clarification of the 
NOPR's scope, or ask the Commission to respect existing federal, state, 
and local jurisdictional boundaries.\64\
---------------------------------------------------------------------------

    \63\ See, e.g., Sunrun Comments (2018 RM18-9) at 3-4 (citing 16 
U.S.C. 824(b)(1)); Connecticut State Entities Comments (RM16-23) at 
7; Stem Comments (2018 RM18-9) at 3.
    \64\ See, e.g., APPA/NRECA Comments (RM16-23) at 18-20; MISO 
Transmission Owners Comments (RM16-23) at 17-18; NESCOE Comments 
(RM16-23) at 16; TAPS Comments (RM16-23) at 4-5; Xcel Energy 
Services Comments (RM16-23) at 6-9, 23-24.
---------------------------------------------------------------------------

    33. Stem asserts that the Commission should clarify that it has 
jurisdiction over participation in the wholesale markets and the 
associated transactions, while relevant electric retail regulatory 
authorities \65\ have jurisdiction over the physical dispatch and the 
resulting electrical activity on the distribution system.\66\ 
Connecticut State Entities argue that, while the management of the 
impacts of new generation on the distribution system remains with the 
states, the comprehensive and effective integration of these emerging 
technologies into the wholesale markets rests with the Commission.\67\
---------------------------------------------------------------------------

    \65\ The term ``relevant electric retail regulatory authority'' 
means the entity that establishes the retail electric prices and any 
retail competition policies for customers, such as the city council 
for a municipal utility, the governing board of a cooperative 
utility, or the state public utility commission. See Order No. 719, 
125 FERC ] 61,071 at P 158.
    \66\ Stem Comments (2018 RM18-9) at 3.
    \67\ Connecticut State Entities Comments (RM16-23) at 7.
---------------------------------------------------------------------------

    34. Harvard Environmental Policy Initiative argues that the 
Commission's proposal to assert jurisdiction over a distributed energy 
resource aggregator's sale of sink-related services to RTOs/ISOs would 
fall under the Commission's jurisdiction under the test applied by the 
U.S. Supreme Court in FERC v. Electric Power Supply Ass'n,\68\ and that 
the Commission has authority under FPA section 206 to require RTOs/ISOs 
to enable the participation of distributed energy resource 
aggregators.\69\ Harvard Environmental Policy Initiative further 
contends that a company's distribution system investments, even if 
motivated by a Commission rule, are not evidence that the Commission 
has overstepped its legal authority, and that, even if a change in 
state law were necessary to allow consumers to participate, the NOPR 
does not force states to do anything and does not require states to 
facilitate the development of distributed energy resources.\70\
---------------------------------------------------------------------------

    \68\ Harvard Environmental Policy Initiative Comments (RM16-23) 
at 3 (citing FERC v. Electric Power Supply Ass'n, 136 S. Ct. 760, 
776 (2016) (EPSA)).
    \69\ Id. at 4-5.
    \70\ Id. at 9, 12.
---------------------------------------------------------------------------

    35. In contrast, some commenters question the Commission's 
authority to impose the proposed reforms or seek clarification of 
federal and state jurisdictional boundaries.\71\ APPA/NRECA interpret 
the NOPR to be limited to reforms to the RTO/ISO tariff rules governing 
RTO/ISO markets and they urge the Commission not to expand the scope of 
the NOPR beyond RTO/ISO markets and to preserve state and local 
authority over retail sales, generation facilities, and local 
distribution facilities.\72\ TAPS similarly asserts that any final rule 
should be limited to (1) the treatment by RTOs/ISOs of energy and 
ancillary services from distributed energy resources after those 
resources have already been delivered to the RTO's/ISO's markets; and 
(2) assuring that any such participation of distributed energy resource 
aggregations in RTO/ISO markets is compatible with the safe and 
reliable operation of the distribution system, as well as relevant 
electric retail regulatory authority and distribution utility tariffs, 
rules, and requirements.\73\ FirstEnergy argues that any rules adopted 
by the Commission must preserve state jurisdictional authority over 
distribution-level resources.\74\ Similarly, the Maryland and New 
Jersey Commissions ask the Commission to confirm that state decisions 
on distribution system design, resource interconnection access, 
operations, and costs will not be viewed

[[Page 67101]]

as a barrier to wholesale competition or subject to Commission 
review.\75\ MISO Transmission Owners assert that any final rule must 
not disturb a state's jurisdiction over retail electricity sales and 
retail distribution service, including state regulation of retail 
rates, net metering programs, and participation in wholesale markets by 
resources located behind a retail distribution service meter.\76\
---------------------------------------------------------------------------

    \71\ See EEI Comments (RM16-23) at 25; Icetec Comments (2018 
RM18-9) at 1-2; Maryland and New Jersey Commissions Comments (RM16-
23) at 2-3; Massachusetts Commission Comments (RM16-23) at 10; Stem 
Comments (2018 RM18-9) at 3.
    \72\ APPA/NRECA Comments (RM16-23) at 18-20.
    \73\ TAPS Comments (RM16-23) at 9.
    \74\ FirstEnergy Comments (2019 RM18-9) at 5 n.13.
    \75\ Maryland and New Jersey Commissions Comments (RM16-23) at 
3.
    \76\ MISO Transmission Owners Comments (RM16-23) at 5-6.
---------------------------------------------------------------------------

    36. The Maryland and New Jersey Commissions ask the Commission to 
enunciate clear federal and state jurisdictional lines pertaining to 
both the distribution system and distributed energy resources, whether 
in front of or behind the meter.\77\ The Massachusetts Commission and 
EEI ask the Commission to clarify whether distribution system-connected 
and behind-the-meter distributed energy resources that participate in 
wholesale markets are Commission-jurisdictional facilities.\78\ EEI 
notes that the Commission has exclusive jurisdiction over sales for 
resale under the FPA.\79\ The Harvard Environmental Policy Initiative 
states that EEI confuses Commission jurisdiction over energy sales with 
state jurisdiction over generation facilities and argues that states 
will retain authority over the resources themselves.\80\
---------------------------------------------------------------------------

    \77\ Maryland and New Jersey Commissions Comments (RM16-23) at 
2.
    \78\ Massachusetts Commission Comments (RM16-23) at 11.
    \79\ EEI Comments (RM16-23) at 23-24 (citing 16 U.S.C. 
824o(a)(1)).
    \80\ Harvard Environmental Policy Initiative Comments (RM16-23) 
at 12.
---------------------------------------------------------------------------

    37. Icetec asks the Commission either to (1) clarify that retail 
customers transmitting power from distributed energy resources behind 
their retail service point to their retail point of interconnection are 
not considered public utilities subject to Open Access Transmission 
Tariff (OATT) and Open Access Same-Time Information System (OASIS) 
requirements, or (2) require RTOs/ISOs to include a pro forma request 
for waiver of those requirements in distributed energy resource 
participation agreements.\81\ The Harvard Environmental Policy 
Initiative states that the Commission should establish a jurisdictional 
line that distinguishes between sales by distributed energy resource 
aggregators and sales by individual distributed energy resources by 
determining that an energy sale from an individual distributed energy 
resource is not a ``wholesale sale in interstate commerce'' but is 
instead ``any other sale'' under FPA section 201 and therefore not 
subject to Commission regulation.\82\
---------------------------------------------------------------------------

    \81\ Icetec Comments (2018 RM18-9) at 9.
    \82\ Harvard Environmental Policy Initiative Comments (RM16-23) 
at 13 (quoting 16 U.S.C. 824(b)(1)).
---------------------------------------------------------------------------

b. Commission Determination
    38. FPA section 201 authorizes the Commission to regulate the 
transmission of electric energy in interstate commerce and the 
wholesale sale of electric energy in interstate commerce, as well as 
all facilities used for such transmission or sale of electric 
energy.\83\ FPA section 201 also defines a public utility as a person 
who owns or operates facilities subject to the jurisdiction of the 
Commission.\84\ FPA sections 205 \85\ and 206 \86\ provide the 
Commission with jurisdiction over all rates and charges made, demanded, 
or received by any public utility for or in connection with the 
transmission or sale of electric energy subject to the Commission's 
jurisdiction. Those sections also provide the Commission with 
jurisdiction over all rules, regulations, practices, or contracts 
affecting jurisdictional rates, charges, or classifications.
---------------------------------------------------------------------------

    \83\ 16 U.S.C. 824.
    \84\ Id. 824(e).
    \85\ Id. 824d.
    \86\ Id. 824e.
---------------------------------------------------------------------------

    39. The Commission's authority to issue regulations pertaining to 
distributed energy resource aggregations stems from both the 
Commission's jurisdiction over the wholesale sales by distributed 
energy resource aggregators into RTO/ISO markets and from its 
jurisdiction over practices affecting wholesale rates.\87\
---------------------------------------------------------------------------

    \87\ See Nat'l Ass'n of Regulatory Util. Comm'rs v. FERC, 964 
F.3d at 1186 (``FERC bears the responsibility of regulating the 
wholesale market, which encompasses `both wholesale rates and the 
panoply of rules and practices affecting them.' '') (quoting EPSA, 
136 S. Ct. at 773).
---------------------------------------------------------------------------

    40. First, we find that the sales of electric energy by distributed 
energy resource aggregators for purposes of participating in an RTO/ISO 
market are wholesale sales subject to the Commission's jurisdiction. In 
Order No. 841, the Commission observed that an electric storage 
resource that injects electric energy back to the grid for purposes of 
participating in an RTO/ISO market engages in a sale of electric energy 
at wholesale in interstate commerce.\88\ Similarly, to the extent that 
a distributed energy resource aggregator's transaction in RTO/ISO 
markets entails the injection of electric energy onto the grid and a 
sale of that energy for resale in wholesale electric markets, we find 
that the Commission has jurisdiction over such wholesale sales.\89\
---------------------------------------------------------------------------

    \88\ Order No. 841, 162 FERC ] 61,127 at P 30.
    \89\ See EnergyConnect, Inc., 130 FERC ] 61,031, at P 29 (2010). 
We note that injections of electric energy to the grid do not 
necessarily trigger the Commission's jurisdiction. See Sun Edison 
LLC, 129 FERC ] 61,146 (2009), reh'g granted on other grounds, 131 
FERC ] 61,213 (2010) (the Commission's jurisdiction would arise only 
when a facility operating under a state net metering program 
produces more power than it consumes over the relevant netting 
period); MidAmerican Energy Co., 94 FERC ] 61,340 (2001).
---------------------------------------------------------------------------

    41. Second, we find that RTO/ISO market rules governing sales in 
RTO/ISO markets by distributed energy resource aggregators from demand 
resources (e.g., demand response and energy efficiency) are practices 
affecting wholesale rates. This finding aligns with the decision of the 
U.S. Supreme Court in EPSA, which interpreted the FPA as providing the 
Commission with jurisdiction over the participation in RTO/ISO markets 
of demand response resources: A type of non-traditional resource that, 
by definition, is located behind a customer meter and generally is 
located on the distribution system.\90\ First, the Court found that the 
Commission's regulation of demand response participation in wholesale 
markets met the ``affecting'' standard in FPA sections 205 and 206 
``with room to spare.'' \91\ Second, the Court found that the 
Commission's regulation of demand response resources did not regulate 
retail sales in violation of FPA section 201(b).\92\ These holdings 
apply equally to RTO/ISO market rules governing sales in RTO/ISO 
markets by distributed energy resource aggregators from demand 
resources.
---------------------------------------------------------------------------

    \90\ See Order No. 841-A, 167 FERC ] 61,154 at P 33 (citing 
EPSA, 136 S. Ct. 760; 18 CFR 35.28(b)(4)).
    \91\ EPSA, 136 S. Ct. at 774 (referring to the Commission's 
jurisdiction under FPA sections 205 and 206 to regulate practices 
affecting jurisdictional rates).
    \92\ Id. at 784.
---------------------------------------------------------------------------

    42. We clarify that, to the extent a distributed energy resource 
aggregator makes sales of electric energy into RTO/ISO markets, it will 
be considered a public utility subject to the Commission's 
jurisdiction.\93\ Such distributed energy resource aggregators must 
fulfill certain responsibilities set forth in the FPA and the 
Commission's rules and regulations.\94\ If a distributed

[[Page 67102]]

energy resource aggregator (1) aggregates only demand resources; or (2) 
aggregates only customers in a net metering program that are not net 
sellers, that distributed energy resource aggregator would not become a 
public utility.\95\
---------------------------------------------------------------------------

    \93\ See EnergyConnect, Inc., 130 FERC ] 61,031 at P 29 (finding 
an aggregator of retail customers to be a public utility under FPA 
section 201(e) because its agreements to make sales of balancing 
energy for resale in RTO/ISO markets would constitute jurisdictional 
facilities under FPA section 201(b)).
    \94\ Examples of such responsibilities include filing rates 
under FPA section 205 (potentially including obtaining market-based 
rate authority); filing Electric Quarterly Reports; submitting FPA 
sections 203 and 204 filings related to corporate mergers and other 
activities; and fulfilling FPA section 301 accounting obligations 
and FPA section 305(b) interlocking directorate obligations. See 16 
U.S.C. 824b, 824c, 824d, 825, 825d(b).
    \95\ See EnergyConnect, Inc., 130 FERC ] 61,031 at P 30 (finding 
that ``where an entity is only engaged in the provision of demand 
response services, and makes no sales of electric energy for resale, 
that entity would not own or operate facilities that are subject to 
the Commission's jurisdiction and would not be a public utility that 
is required to have a rate on file with the Commission''); Sun 
Edison LLC, 129 FERC ] 61,146 (the Commission's jurisdiction would 
arise only when a facility operating under a state net metering 
program produces more power than it consumes over the relevant 
netting period); MidAmerican Energy Co., 94 FERC ] 61,340.
---------------------------------------------------------------------------

    43. We further clarify that we are only exercising jurisdiction in 
this final rule over the sales by distributed energy resource 
aggregators into the RTO/ISO markets. Hence, an individual distributed 
energy resource's participation in a distributed energy resource 
aggregation would not cause that individual resource to become subject 
to requirements applicable to Commission-jurisdictional public 
utilities.
    44. As the Commission stated in Order Nos. 841 and 841-A, the 
Commission recognizes a vital role for state and local regulators with 
respect to retail services and matters related to the distribution 
system, including design, operations, power quality, reliability, and 
system costs.\96\ As in Order No. 841, we reiterate that nothing in 
this final rule preempts the right of states and local authorities to 
regulate the safety and reliability of the distribution system and that 
all distributed energy resources must comply with any applicable 
interconnection and operating requirements.\97\
---------------------------------------------------------------------------

    \96\ Order No. 841, 162 FERC ] 61,127 at P 36; Order No. 841-A, 
167 FERC ] 61,154 at P 42.
    \97\ See Order No. 841-A, 167 FERC ] 61,154 at P 46.
---------------------------------------------------------------------------

2. Opt-Out
    45. In the NOPR, the Commission proposed to require each RTO/ISO to 
revise its tariff as necessary to accommodate the participation of 
distributed energy resource aggregations in RTO/ISO markets.\98\ In the 
NOPR, the Commission stated that, to the extent existing rules or 
regulations explicitly prohibit certain technologies from participating 
in RTO/ISO markets, it did not intend to overturn those rules or 
regulations.\99\ However, the Commission did not propose a mechanism by 
which relevant electric retail regulatory authorities could authorize 
or prohibit the participation of distributed energy resources or 
distributed energy resource aggregators in RTO/ISO markets. The 
Commission also explained that, because the individual resources in 
distributed energy resource aggregations likely will fall under the 
purview of multiple organizations (e.g., the RTO/ISO, state regulatory 
commissions, relevant distribution utilities, and local regulatory 
authorities), the proposed market participation agreements \100\ for 
distributed energy resource aggregators must require that the 
aggregator attest 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.\101\ The Commission stated that this may include 
any laws or regulations of the relevant electric retail regulatory 
authority that do not permit demand response resources to participate 
in RTO/ISO markets as the Commission considered in Order No. 719.\102\
---------------------------------------------------------------------------

    \98\ NOPR, 157 FERC ] 61,121 at P 124.
    \99\ Id. P 133.
    \100\ See Section IV.J (Market Participation Agreements) below 
for more discussion of market participation agreements.
    \101\ NOPR, 157 FERC ] 61,121 at P 157.
    \102\ Id. P 157 n.238 (citing Order No. 719, 125 FERC ] 61,071 
at P 154).
---------------------------------------------------------------------------

    46. After the technical conference, the Commission sought comments 
on whether states could require distributed energy resources to choose 
to participate in either an RTO/ISO market or retail compensation 
program, but not allow participation in both.\103\ The Commission also 
sought comments on the benefits and drawbacks of such an approach.
---------------------------------------------------------------------------

    \103\ Notice Inviting Post-Technical Conference Comments at 6.
---------------------------------------------------------------------------

a. Comments
    47. As described above,\104\ numerous commenters question the 
Commission's authority to require RTOs/ISOs to accommodate the 
participation of distributed energy resource aggregations in RTO/ISO 
markets. They believe that, to mitigate their jurisdictional concerns, 
relevant electric retail regulatory authorities and/or distribution 
utilities must be allowed to either authorize or prohibit the 
participation of distributed energy resources and/or distributed energy 
resource aggregators in the RTO/ISO markets (i.e., to opt in or opt 
out, respectively).\105\ Thus, they specifically request that the 
Commission adopt an opt-out/opt-in provision similar to that 
established in Order No. 719 to allow relevant electric retail 
regulatory authorities to decide whether distributed energy resources 
may participate in aggregations in RTO/ISO markets.\106\
---------------------------------------------------------------------------

    \104\ See supra Section IV.A.1 (Scope of Final Rule).
    \105\ See, e.g., APPA/NRECA Comments (RM16-23) at 21-22; DTE 
Electric/Consumers Energy Comments (RM16-23) at 7; MISO Transmission 
Owners Comments (RM16-23) at 6; NARUC Comments (RM16-23) at 4-5; 
TAPS Comments (RM16-23) at 10, 16-17.
    \106\ See, e.g., AES Companies Comments (RM16-23) at 31; Kansas 
Commission Comments (2018 RM18-9) at 4; NRECA Comments (2018 RM18-9) 
at 6-7, 27-28; Organization of MISO States Comments (RM16-23) at 4-
5; Southern Companies Comments (2018 RM18-9) at 3-4 (citing Order 
No. 719, 125 FERC ] 61,071; Order No. 719-A, 128 FERC ] 61,059); see 
discussion of opt-out/opt-in infra PP 59, 64.
---------------------------------------------------------------------------

    48. Some of these commenters contend that the Commission would be 
exceeding its statutory authority if the final rule does not include an 
opt-out.\107\ They argue that the Commission may determine how 
distributed energy resources participate in RTO/ISO markets, but 
whether they participate is the exclusive province of the states.\108\ 
APPA points to the existing opt-out for demand response resources 
established in Order No. 719 to argue that the applicability of 
relevant electric retail regulatory authority should not turn on the 
wholesale participation model selected by the aggregator.\109\ APPA 
asserts that the authority of relevant electric retail regulators over 
the terms and conditions of interconnection to the distribution system 
includes the authority to limit the manner in which a distributed 
energy resource uses the distribution system.\110\ APPA argues that an 
opt-out is consistent with the NOPR's proposal that market 
participation agreements include an attestation that an aggregation is 
compliant with distribution utility tariffs and the rules and 
regulations of any other relevant regulatory authority. APPA further 
argues that an opt-out conforms with the requirement in Order No. 841 
that an electric storage resource must be ``contractually permitted'' 
to inject electric energy back onto the grid (e.g., per the 
interconnection agreement between an electric storage resource that is 
interconnected on a distribution system or behind the meter and the 
distribution utility to which it is

[[Page 67103]]

interconnected).\111\ Xcel Energy Services argues that, to the extent 
distributed energy resource participation in RTO/ISO markets does 
occur, the applicable state has the authority to establish the 
parameters of the participation model, not the RTO/ISO.\112\ Xcel 
Energy Services asserts that the Commission should not usurp the 
states' authority to address inappropriate arbitrage between retail and 
wholesale consumption.\113\
---------------------------------------------------------------------------

    \107\ Kansas Commission Comments (2018 RM18-9) at 3; NARUC 
Comments (2018 RM18-9) at 2-3; see APPA Comments (2018 RM18-9) at 
15.
    \108\ Kansas Commission Comments (2018 RM18-9) at 2-3; NARUC 
Comments (2018 RM18-9) at 2-3.
    \109\ APPA Comments (2018 RM18-9) at 17-18.
    \110\ Id. at 15-16 (noting that CAISO's Distributed Energy 
Resource Provider program requires compliance with applicable 
distribution utility tariffs and operating procedures, as well as 
applicable requirements of the relevant electric retail regulatory 
authority).
    \111\ Id. at 16 (citing NOPR, 157 FERC ] 61,121 at P 157; Order 
No. 841, 162 FERC ] 61,127 at P 33).
    \112\ Xcel Energy Services Comments (RM16-23) at 23-24.
    \113\ Id. at 24.
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    49. Multiple United States senators urge the Commission to preserve 
the authority of state and local authorities over distribution 
utilities with respect to distributed energy resource aggregators. They 
express concern that the final rule could have a negative effect on 
state and local authorities' ability to regulate retail and 
distribution service. They argue that, if the Commission authorizes the 
aggregation of distributed energy resources by entities other than the 
local distribution utility without authorization by the appropriate 
state or local regulator, the Commission would break precedent and 
expand Commission regulation into areas that are jurisdictional to 
state and localities under the FPA. They maintain that the relevant 
electric retail regulatory authority is best positioned to decide 
whether to authorize third-party distributed energy resource 
aggregators to transact with retail customers.\114\
---------------------------------------------------------------------------

    \114\ May 7, 2019 Letter to Chairman Neil Chatterjee from United 
States Senators John Hoeven, Kevin Cramer, John Barrasso, John 
Boozman, Lisa Murkowski, Michael B. Enzi, Joni K. Ernst, Roger F. 
Wicker, Shelley Moore Capito, Chuck Grassley, M. Michael Rounds, 
Steve Daines, John Thune, Thom Tillis, Mike Crapo, Cindy Hyde-Smith, 
Roy Blunt, James E. Risch, James Lankford, Deb Fischer, James M. 
Inhofe, and Bill Cassidy. In response to this letter, the Chairman 
noted that he asked state regulators participating at the April 2018 
technical conference to discuss whether and why they view as 
important in the context of this rulemaking the type of flexibility 
that the Commission has provided to relevant electric retail 
regulatory authorities with respect to participation of demand 
response resources in wholesale electric markets. The Chairman also 
stated that he recognizes the important role of state and local 
regulators with respect to reliability and resilience, particularly 
with respect to the distribution system. Chairman's Response to May 
7, 2019 Letter (filed June 4, 2019).
---------------------------------------------------------------------------

    50. Those commenters advocating for an opt-out also generally 
express concerns about the cost, and operational and reliability 
impacts, of distributed energy resource aggregations on distribution 
utilities and the distribution system.\115\ With regard to cost 
impacts, some commenters suggest that costs borne by small utilities 
and their customer bases may outweigh the benefits of distributed 
energy resource aggregation participation in RTO/ISO markets, and that 
small to medium-sized distribution utilities may not have the resources 
needed to coordinate with distributed energy resource aggregators and 
RTOs/ISOs.\116\ In addition, NRECA argues that opt-out/opt-in 
provisions would lessen the compliance burden on smaller entities and 
would be consistent with the deference to relevant electric retail 
regulatory authorities included in IEEE 1547.\117\ NRECA also raises 
concerns that distributed energy resource aggregators may ``cherry-
pick'' the more lucrative resources in a system, undermining 
reliability and the ability of utilities to develop and invest in their 
own integrated distributed energy resources portfolio.\118\ 
Organization of MISO States suggests that even a temporary opt-out 
would allow for safe and reliable implementation with minimal 
disruption to the distribution system.\119\
---------------------------------------------------------------------------

    \115\ See, e.g., Vice Chairman Place Comments (2018 RM18-9) at 
2-3; EEI Comments (2018 RM18-9) at 19-20; Eversource Comments (2018 
RM18-9) at 12-13; NRECA Comments (2018 RM18-9) at 7-10, 12; see also 
AMP Comments (2019 RM18-9) at 1.
    \116\ APPA Comments (2018 RM18-9) at 7 (asserting that rate 
design challenges can be particularly acute for small to medium-
sized distribution utilities), 9-10 (asserting that monitoring and 
responding to system impacts associated with distributed energy 
resource aggregation activity could be particularly difficult for 
small and medium-sized utilities); APPA/NRECA Comments (RM16-23) at 
39 (asserting that the costs of installing new meters or new 
communication technology to capture wholesale market transactions 
would burden smaller distribution utilities in particular); NRECA 
Comments (2018 RM18-9) at 14 (asserting that smaller distribution 
cooperatives may not have staff or resources needed to conduct 
ongoing operational coordination with RTOs/ISOs and distributed 
energy resource aggregators), 26 (asserting that the considerable 
amount of funding required to potentially benefit a small number of 
customers imposes too large of a burden on small utilities); TAPS 
Comments (RM16-23) at 15-16 (asserting that, particularly for a 
small utility, the costs of ongoing coordination, metering, 
settlements, and rate-unbundling needed to support sales to RTO/ISO 
markets by distributed energy resources may far exceed the potential 
efficiency benefits from their participation in RTO/ISO markets).
    \117\ NRECA Comments (2018 RM18-9) at 27-28. IEEE-1547 is a 
standard of the Institute of Electrical and Electronics Engineers 
(IEEE) that provides a set of criteria and requirements for the 
interconnection of distributed energy resources.
    \118\ Id. at 22-23.
    \119\ Organization of MISO States Comments (2018 RM18-9) at 5-6.
---------------------------------------------------------------------------

    51. Some commenters argue that, to relieve smaller entities of cost 
and coordination burdens, the Commission should at a minimum establish 
an express opt-in requirement for small distribution utilities similar 
to the one the Commission adopted in Order No. 719.\120\ NRECA asserts 
that the distributed energy resource aggregation proposals would be 
costly for small cooperatives in rural, remote communities.\121\ NRECA 
and TAPS recommend that the Commission require express permission from 
the relevant electric retail regulatory authority before the RTO/ISO 
may accept bids from distributed energy resource aggregations located 
on the system of a utility that distributes 4 million MWh or less, 
employing the same size threshold as the small utility opt-in allowed 
in Order No. 719-A.\122\
---------------------------------------------------------------------------

    \120\ APPA Comments (2018 RM18-9) at 19-20; TAPS Comments (RM16-
23) at 16; TAPS Comments (2018 RM18-9) at 19-21.
    \121\ NRECA Comments (2019 RM18-9) at 4-5.
    \122\ Id.; TAPS Comments (RM16-23) at 16-17; TAPS Comments (2018 
RM18-9) at 19 & n.27.
---------------------------------------------------------------------------

    52. In contrast, other commenters caution against adopting the 
Order No. 719 construct.\123\ Many of those commenters argue that an 
opt-out is not necessary because the Commission has exclusive 
jurisdiction over sales from distributed energy resource aggregators 
into RTO/ISO markets.\124\ Moreover, several commenters argue that the 
responsibility for integrating emerging technologies into RTO/ISO 
markets rests with the Commission (while the states are responsible for 
managing the impacts on the distribution system) and that the Order No. 
719 opt-out provision has effectively prevented the development of 
demand response in the Midwest and led to higher wholesale rates.\125\ 
In addition, some commenters argue that providing states with an opt-
out would be inconsistent with the Commission's denial of such an opt-
out

[[Page 67104]]

from electric storage participation in Order No. 841.\126\
---------------------------------------------------------------------------

    \123\ See, e.g., Advanced Energy Buyers Comments (2018 RM18-9) 
at 6; Advanced Energy Management Comments (2018 RM18-9) at 7-8, 10-
11; Icetec Comments (2018 RM18-9) at 10-11; SEIA Comments (2018 
RM18-9) at 8; Stem Comments (2018 RM18-9) at 4-6.
    \124\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9) 
at 18; Energy Storage Association Comments (2018 RM18-9) at 5; 
Icetec Comments (2018 RM18-9) at 11; Stem Comments (2018 RM18-9) at 
4-5 (arguing that the FPA does not permit a state to use its 
jurisdiction over generation or local distribution facilities to 
prevent distributed energy resources or distributed energy resource 
aggregators from accessing Commission-jurisdictional markets); 
Sunrun Comments (2018 RM18-9) at 3-4 (arguing that whether wholesale 
sales originate from facilities on the transmission system, the 
distribution system, or behind the meter is immaterial to the 
Commission's jurisdiction and that FPA section 201(b) distinguishes 
between authority to regulate transactions and authority to regulate 
facilities).
    \125\ Advanced Energy Economy Comments (RM16-23) at 44-45; 
Connecticut State Entities Comments (RM16-23) at 7; Organization of 
MISO States Comments (RM16-23) at 5 n.3 (noting concerns of Illinois 
Commission).
    \126\ E.g., Advanced Energy Management Comments (2018 RM18-9) at 
7-8 (citing Order No. 841, 162 FERC ] 61,127 at P 35).
---------------------------------------------------------------------------

    53. With respect to the Commission's authority, some commenters 
assert that only the Commission has jurisdiction to determine 
eligibility for wholesale market participation \127\ and that limiting 
or conditioning wholesale market participation through retail tariffs 
\128\ or distribution interconnection agreements \129\ would interfere 
with that jurisdiction. Advanced Energy Management asserts that because 
selling injections of electric energy in wholesale markets is governed 
under the FPA and distributed energy resources are not always behind 
the meter, there should not be a blanket opt-out available to relevant 
electric retail regulatory authorities.\130\
---------------------------------------------------------------------------

    \127\ Advanced Energy Economy Comments (2018 RM18-9) at 18 
(citing Advanced Energy Econ., 161 FERC ] 61,245 (2017) (AEE 
Declaratory Order), reh'g denied, 163 FERC ] 61,030 (2018) (AEE 
Rehearing Order); Order No. 841, 162 FERC ] 61,127 at P 35); 
Advanced Energy Management Comments (2018 RM18-9) at 18; Icetec 
Comments (2018 RM18-9) at 11, 16.
    \128\ Advanced Energy Economy Comments (2018 RM18-9) at 18.
    \129\ Icetec Comments (2018 RM18-9) at 11; see Stem Comments 
(2018 RM18-9) at 15.
    \130\ Advanced Energy Management Comments (RM16-23) at 7. 
Advanced Energy Management states that there should be no 
restriction on where distributed energy resource aggregators can 
recruit customers to participate in the wholesale market. Advanced 
Energy Management Comments (2018 RM18-9) at 11.
---------------------------------------------------------------------------

    54. However, some commenters recognize that states do have the 
right to implement retail tariffs that disqualify a resource from 
participating in the state program if the resource elects to 
participate in RTO/ISO markets.\131\ Several commenters caution that, 
if the Commission does consider an opt-out, it must be narrowly 
tailored.\132\ Harvard Environmental Policy Initiative points to the 
Commission's proposed coordination provisions to demonstrate that the 
Commission will not preempt state authority over distribution system 
planning or create new authority for the Commission to allow 
distributed energy resources to connect to a distribution system 
without a utility's approval or knowledge.\133\
---------------------------------------------------------------------------

    \131\ See Advanced Energy Management Comments (2018 RM18-9) at 
11; Stem Comments (2018 RM18-9) at 11; Sunrun Comments (2018 RM18-9) 
at 8.
    \132\ See Advanced Energy Economy Comments (2018 RM18-9) at 21; 
Public Interest Organizations Comments (2018 RM18-9) at 8-10 
(suggesting a Commission waiver process with a notice and comment 
period); Stem Comments (2018 RM18-9) at 6 (suggesting, as one basis 
to restrict distributed energy resource participation, the 
demonstration of a reliability violation that cannot be resolved 
through effective distribution system management).
    \133\ Harvard Environmental Policy Initiative Comments (RM16-23) 
at 12.
---------------------------------------------------------------------------

    55. In response to concerns about the impact of distributed energy 
resource aggregations on the distribution system, several commenters 
argue that distributed energy resource aggregation participation in 
RTO/ISO markets does not introduce additional reliability or cost 
concerns beyond those that are addressed through the interconnection 
process.\134\ In contrast with commenters that suggest that distributed 
energy resource aggregations introduce reliability or cost concerns, 
Advanced Energy Economy argues that an opt-out would limit RTO/ISO 
visibility into distributed energy resource operations, thereby 
preventing RTO/ISO operators from using them to maintain reliability 
and improve resilience, and would limit an RTO's/ISO's ability to 
efficiently optimize all of the resources available in its region, 
risking increased costs to consumers.\135\
---------------------------------------------------------------------------

    \134\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9) 
at 17-18; Advanced Energy Management Comments (2018 RM18-9) at 9-10; 
Stem Comments (2018 RM18-9) at 9, 15; Sunrun Comments (2018 RM18-9) 
at 6; see also New Jersey Board Comments (2018 RM18-9) at 4.
    \135\ Advanced Energy Economy Comments (2018 RM18-9) at 15-16.
---------------------------------------------------------------------------

b. Commission Determination
    56. We decline to include a mechanism for all relevant electric 
retail regulatory authorities to prohibit all distributed energy 
resources from participating in the RTO/ISO markets through distributed 
energy resource aggregations (i.e., to opt out). However, we modify the 
NOPR proposal in recognition of the potential indirect costs borne by 
smaller utilities due to this final rule. More specifically, and as 
discussed further below, we add Sec.  35.28(g)(12)(iv) to the 
Commission's regulations to provide that RTOs/ISOs may not accept bids 
from distributed energy resource aggregators aggregating customers of 
small utilities \136\ unless the relevant electric retail regulatory 
authority allows such customers of small utilities to participate in 
distributed energy resource aggregations (i.e., to opt in).
---------------------------------------------------------------------------

    \136\ As discussed below, we will consider small utilities to be 
those with a total electric output for the preceding fiscal year not 
exceeding 4 million MWh.
---------------------------------------------------------------------------

    57. We disagree with the suggestion that the Commission is legally 
required to grant an opt-out that enables all relevant electric retail 
regulatory authorities to prohibit all distributed energy resources 
from participating in the RTO/ISO markets through distributed energy 
resource aggregations. The Commission has exclusive jurisdiction over 
the wholesale markets and the criteria for participation in those 
markets, including the wholesale market rules for participation of 
resources connected at or below distribution-level voltages.\137\ As 
the Commission previously has found, establishing the criteria for 
participation in RTO/ISO markets, including with respect to resources 
located on the distribution system or behind the meter, is essential to 
the Commission's ability to fulfill its statutory responsibility to 
ensure that wholesale rates are just and reasonable.\138\
---------------------------------------------------------------------------

    \137\ Order No. 841-A, 167 FERC ] 61,154 at P 38; Order No. 841, 
162 FERC ] 61,127 at P 35 (citing EPSA, 136 S. Ct. 760; AEE 
Declaratory Order, 161 FERC ] 61,245 at PP 59-60; see also Nat'l 
Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1187 (``FERC has the 
exclusive authority to determine who may participate in the 
wholesale markets.''); Nat'l Ass'n of Regulatory Util. Comm'rs v. 
FERC, 475 F.3d 1277, 1280-82 (D.C. Cir. 2007); Transmission Access 
Policy Study Grp. v. FERC, 225 F.3d 667, 696 (D.C. Cir. 2000).
    \138\ Order No. 841-A, 167 FERC ] 61,154 at P 31; see also id. P 
38 (citing AEE Rehearing Order, 163 FERC ] 61,030 at P 36). The 
Supreme Court also has recognized that the Commission extensively 
regulates the structure and rules of wholesale auctions, in order to 
ensure that they produce just and reasonable results. See Hughes v. 
Talen Energy Mktg., LLC, 136 S. Ct. 1288, 1293-94 (2016) (Hughes); 
EPSA, 136 S. Ct. at 769.
---------------------------------------------------------------------------

    58. This final rule addresses rules for participation in RTO/ISO 
markets by distributed energy resource aggregators. Like the 
Commission's rules governing demand response and electric storage 
resource participation in RTO/ISO markets, this final rule 
``addresses--and addresses only--transactions occurring on the 
wholesale market.'' \139\ Thus, we continue to find that the FPA and 
relevant precedent does not legally compel the Commission to adopt a 
relevant electric retail regulatory authority opt-out with respect to 
participation in RTO/ISO markets by all resources interconnected on a 
distribution system or located behind a retail meter.\140\ As the 
United States Court of Appeals for the District of Columbia Circuit 
(D.C. Circuit) recently explained, the Commission has jurisdiction to 
decide which entities may participate in wholesale markets, which means 
that a relevant electric

[[Page 67105]]

retail regulatory authority cannot broadly prohibit the participation 
in RTO/ISO markets of all distributed energy resources or of all 
distributed energy resource aggregators as doing so would interfere 
with the Commission's statutory obligation to ensure that wholesale 
electricity markets produce just and reasonable rates.\141\
---------------------------------------------------------------------------

    \139\ EPSA, 136 S. Ct. at 776; see also Nat'l Ass'n of 
Regulatory Util. Comm'rs, 964 F.3d at 1186, 1189 (finding that 
``Order No. 841 solely targets the manner in which an [electric 
storage resource] may participate in wholesale markets'' and that 
Order Nos. 841 and 841-A ``do nothing more than regulate matters 
concerning federal transactions''); Order No. 841-A, 167 FERC ] 
61,154 at P 44.
    \140\ Order No. 841-A, 167 FERC ] 61,154 at P 32; see also AEE 
Declaratory Order, 161 FERC ] 61,245 at P 62 (citing EPSA, 136 S. 
Ct. at 776).
    \141\ See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 
1187 (``[B]ecause FERC has the exclusive authority to determine who 
may participate in the wholesale markets, the Supremacy Clause . . . 
requires that [s]tates not interfere. . . . FERC's statement in 
Order No. 841-A that [s]tates may not block RTO/ISO market 
participation `through conditions on the receipt of retail service,' 
or impose any `condition[ ] aimed directly at the RTO/ISO markets, 
even if contained in the terms of retail service,' is simply a 
restatement of the well-established principles of federal 
preemption.'') (quoting Order No. 841-A, 167 FERC ] 61,154 at P 41) 
(finding that states cannot intrude on the Commission's jurisdiction 
by prohibiting all consumers from selling into the wholesale market) 
(citing AEE Rehearing Order, 163 FERC ] 61,030 at P 37; AEE 
Declaratory Order, 161 FERC ] 61,245 at P 61); see also Hughes, 136 
S. Ct. at 1298 (``States may not seek to achieve ends, however 
legitimate, through regulatory means that intrude on FERC's 
authority over interstate wholesale rates . . . .''); Oneok, Inc. v. 
Learjet, Inc., 575 U.S. 373, 386 (2015) (finding that the proper 
test for determining whether a state action is preempted is 
``whether the challenged measures are 'aimed directly at interstate 
purchasers and wholesalers for resale' or not'') (quoting N. Natural 
Gas Co. v. State Corp. Comm'n of Kan., 372 U.S. 84, 94 (1963)); 
Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1187 (similar).
---------------------------------------------------------------------------

    59. As commenters point out, the Commission in Order No. 719 
granted relevant electric retail regulatory authorities an opt-out from 
allowing retail customers to participate directly in wholesale markets 
through aggregations of demand response resources.\142\ As noted above, 
the Commission was not obligated to provide such an opt-out, but rather 
did so as an exercise of its discretion.\143\ Consistent with that 
previous exercise of the Commission's discretion, we clarify that this 
final rule does not affect the ability of relevant electric retail 
regulatory authorities to prohibit retail customers' demand response 
from being bid into RTO/ISO markets by aggregators.\144\
---------------------------------------------------------------------------

    \142\ Order No. 719, 125 FERC ] 61,071 at PP 154-55.
    \143\ See EPSA, 136 S. Ct. at 779 (describing the opt-out as a 
``notable solicitude toward the States,'' in recognition of ``the 
linkage between wholesale and retail markets and the States' role in 
overseeing retail sales''); Nat'l Ass'n of Regulatory Util. Comm'rs, 
964 F.3d at 1190 (``Local Utility Petitioners correctly acknowledge 
that EPSA did not condition its holdings on the existence of an opt-
out.'').
    \144\ See 18 CFR 35.28(g)(1)(iii). Similarly, we recognize 
Kentucky's existing right to exclude energy efficiency resources 
from wholesale market participation. AEE Declaratory Order, 161 FERC 
] 61,245 at P 66.
---------------------------------------------------------------------------

    60. However, unlike aggregators of demand response, distributed 
energy resource aggregators are capable of engaging in sales for resale 
of electricity and those distributed energy resource aggregators making 
such sales in the RTO/ISO markets are public utilities subject to the 
Commission's jurisdiction.\145\ We recognize that the participation of 
distributed energy resource aggregators in RTO/ISO markets necessarily 
has effects on the distribution system,\146\ and, as in Order No. 841, 
we have considered those effects in evaluating whether to exercise our 
discretion to grant an opt-out. Upon such consideration, we find that 
the benefits of allowing distributed energy resource aggregators 
broader access to the wholesale market outweigh the policy 
considerations in favor of an opt-out. Specifically, we find that the 
reliability, transparency, and market-related benefits of removing 
barriers to the participation of distributed energy resource 
aggregators in RTO/ISO markets are significant. Considering those 
benefits,\147\ we are not persuaded that concerns about potential 
effects on the distribution system justify adopting an opt-out that 
could substantially limit that participation.\148\ As discussed below, 
there are several ways that relevant electric retail regulatory 
authorities may address any such concerns without broadly prohibiting 
the participation of distributed energy resources or distributed energy 
resource aggregators in RTO/ISO markets. Therefore, we do not find it 
appropriate and thus decline to exercise discretion to adopt a broad 
opt-out with respect to distributed energy resource aggregations in 
this final rule.
---------------------------------------------------------------------------

    \145\ See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 
1190 (citing Order No. 841-A, 167 FERC ] 61,154 at PP 51-52 
(distinguishing [electric storage resource] participation in 
wholesale sales from demand response resources participating in 
wholesale bids)).
    \146\ See Order No. 841-A, 167 FERC ] 61,154 at P 56 (citing 
EPSA, 136 S. Ct. at 776).
    \147\ See, e.g., supra PP 4 (explaining that integrating 
distributed energy resources' capabilities into RTO/ISO planning and 
operations will help the RTOs/ISOs account for the impacts of these 
resources on installed capacity requirements and day-ahead energy 
demand, thereby reducing uncertainty in load forecasts and reducing 
the risk of over procurement of resources), 27 (stating that 
distributed energy resource aggregations can provide new grid 
services and enhance competition in wholesale markets as new market 
participants), 29 (finding that the reforms in this final rule will 
enhance the competitiveness, and in turn the efficiency, of RTO/ISO 
markets); see, e.g., infra PP 114 (explaining that the revised 
definition of distributed energy resource adopted in this final rule 
is technology-neutral, thereby ensuring that any resource that is 
technically capable of providing wholesale services through 
aggregation is eligible to do so, which enhances competition in the 
RTO/ISO markets), 142 (stating that requiring RTOs/ISOs to allow 
heterogeneous aggregations will further enhance competition in RTO/
ISO markets by ensuring that complementary resources, including 
those with different physical and operational characteristics, can 
meet qualification and performance requirements), 160, 163 
(discussing how the final rule enhances competition and improves 
reliability by requiring RTOs/ISOs to allow participation of 
distributed energy resources in both wholesale and retail or 
multiple wholesale programs), 173 (finding that requiring RTOs/ISOs 
to establish a minimum size requirement not to exceed 100 kW will 
remove a barrier to distributed energy resource aggregations, 
improve competition in RTO/ISO markets, avoid confusion about 
appropriate requirements, and help ensure just and reasonable 
rates), 205 (discussing the benefits of single-node and multi-node 
aggregations).
    \148\ The list of benefits catalogued in the preceding footnote 
includes many of the same benefits that the D.C. Circuit pointed to 
when explaining why the Commission's decision not to provide an opt-
out in Order No. 841 was not an unreasoned departure from Order No. 
719. See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1190 
(explaining that the Commission's decision to forgo an opt-out was 
``neither unexplained nor unsupported'' and pointing to the 
Commission's consideration of the benefits of enabling broad 
participation of electric storage resources, including on 
``competition,'' ``prices,'' and the ``diversity'' of resource types 
that can participate in RTO/ISO markets).
---------------------------------------------------------------------------

    61. We continue to recognize the important role that state and 
local authorities play with respect to distributed energy resources and 
their potential aggregation. This final rule does not curtail that 
authority. As in Order No. 841, the reforms adopted in this final rule 
do not preclude or limit state or local regulation of: Retail rates; 
distribution system planning, distribution system operations, or 
distribution system reliability; distributed energy resource facility 
siting; and interconnection of resources to the distribution system 
that are not subject to Commission jurisdiction, as discussed further 
below.\149\ In addition, and again as recognized in Order No. 841, 
under a relevant electric retail regulatory authority's jurisdiction 
over its retail programs, such a regulatory authority is able to 
condition a distributed energy resource's participation in a retail 
distributed energy resource program on that resource not also 
participating in the RTO/ISO markets.\150\ This should allow

[[Page 67106]]

a retail regulatory authority to address any specific concerns.
---------------------------------------------------------------------------

    \149\ See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 
1188 (noting that the similar decision in ``Order No. 841 does not 
`usurp[ ] state power' '' and pointing to the fact that ``States 
retain their authority to impose safety and reliability requirements 
without interference from FERC, and [electric storage resources] 
must still obtain all requisite permits, agreements, and other 
documentation necessary to participate in federal wholesale 
markets'') (quoting EPSA, 136 S. Ct. at 777).
    \150\ See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 
1188 (``States retain their authority to prohibit local [electric 
storage resources] from participating in the interstate and 
intrastate markets simultaneously, meaning [s]tates can force local 
[electric storage resources] to choose which market they wish to 
participate in.''); Order No. 841-A, 167 FERC ] 61,154 at P 41 
(acknowledging that states have the authority to include conditions 
in their own retail distributed energy resource or retail electric 
storage resource programs that prohibit any participating resources 
from also selling into RTO/ISO markets because, in that scenario, 
the owner of a resource has a choice between participating in the 
retail market or wholesale market); see also Arkansas Commission 
Comments (2019 RM18-9) at 2-4.
---------------------------------------------------------------------------

    62. As to commenters' concerns regarding cost impacts on the 
distribution system, we note that, in Order No. 841, with respect to 
concerns about electric storage resources' use of the distribution 
system, the Commission observed that, in PJM Interconnection L.L.C., 
the Commission permitted a distribution utility to assess a wholesale 
distribution charge to an electric storage resource participating in 
the PJM markets. Consistent with this precedent, the Commission found 
that it may be appropriate, on a case-by-case basis, for distribution 
utilities to assess a charge on electric storage resources similar to 
those assessed to the market participant in that proceeding.\151\ 
Consistent with that conclusion, we find that it may also be 
appropriate, on a case-by-case basis, for distribution utilities to 
assess a wholesale distribution charge on distributed energy resource 
aggregators participating in RTO/ISO markets.
---------------------------------------------------------------------------

    \151\ Order No. 841, 162 FERC ] 61,127 at P 296 (citing PJM 
Interconnection L.L.C., 149 FERC ] 61,185, at P 12 (2014) (wholesale 
distribution charge that ComEd will assess to Energy Vault is a 
weighted average carrying charge that is applied on a case-by-case 
basis, depending on the distribution facilities expected to be used 
in providing wholesale distribution service), order on reh'g, 151 
FERC ] 61,231, at PP 16-18 (2015)).
---------------------------------------------------------------------------

    63. Moreover, we recognize that, where appropriate, the Commission 
previously has taken steps to address a potential burden imposed by a 
Commission final rule on smaller entities. For instance, the Commission 
has distinguished small utilities whose total electric output for the 
preceding fiscal year did not exceed 4 million MWh \152\ for purposes 
of granting waivers from Order No. 889's \153\ standards of conduct for 
transmission providers \154\ and determining whether a specific 
cooperative should be considered a non-public utility outside the scope 
of a refund obligation involving the California energy crisis.\155\ In 
Order No. 719-A, the Commission provided an opt-in for small utilities, 
which requires the relevant electric retail regulatory authority to 
give affirmative permission for the demand response of customers of 
utilities that distributed 4 million MWh or less in the previous fiscal 
year to be bid into RTO/ISO markets by an aggregator of those retail 
customers.\156\
---------------------------------------------------------------------------

    \152\ The 4 million MWh cutoff stems from the Small Business 
Size Standards component of the North American Industry 
Classification System, which previously defined a small utility as 
one that, including its affiliates, is primarily engaged in the 
generation, transmission, or distribution of electric energy for 
sale, and whose total electric output for the preceding fiscal year 
did not exceed 4 million MWh. 13 CFR 121.201 (2013) (Sector 22, 
Utilities, North American Industry Classification System (NAICS)). 
Currently, the number of employees is the basis used to measure 
whether electric power generation, transmission, and distribution 
industries are small businesses. 13 CFR 121.201 (2020) (Sector 22, 
Utilities, NAICS).
    \153\ Open Access Same-Time Information System & Standards of 
Conduct, Order No. 889, FERC Stats. & Regs. ] 31,035 (1996) (cross-
referenced at 75 FERC ] 61,078), clarified, 76 FERC ] 61,009 (1996), 
order on reh'g, Order No. 889-A, FERC Stats. & Regs. ] 31,049 
(cross-referenced at 78 FERC ] 61,221), reh'g denied, Order No. 889-
B, 81 FERC ] 61,253 (1997), aff'd in relevant part sub nom. 
Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667 (D.C. 
Cir. 2000).
    \154\ See Wolverine Power Supply Coop., 127 FERC ] 61,159, at P 
15 (2009).
    \155\ See San Diego Gas & Elec. Co. v. Sellers of Energy & 
Ancillary Servs. in Mkts. Operated by the CAISO, 125 FERC ] 61,297, 
at P 24 (2008).
    \156\ Order No. 719-A, 128 FERC ] 61,059 at PP 51, 59-60.
---------------------------------------------------------------------------

    64. Notwithstanding our finding that the benefits of this final 
rule outweigh the policy considerations in favor of a broad opt-out, we 
acknowledge that this final rule may place a potentially greater burden 
on smaller utility systems.\157\ Recognizing this potentially greater 
burden on small utility systems, we will exercise our discretion to 
include in this final rule an opt-in mechanism for small utilities 
similar to that provided in Order No. 719-A. Specifically, we determine 
that customers of utilities that distributed 4 million MWh or less in 
the previous fiscal year may not participate in distributed energy 
resource aggregations unless the relevant electric retail regulatory 
authority affirmatively allows such customers to participate in 
distributed energy resource aggregations.
---------------------------------------------------------------------------

    \157\ See supra P 50 (citing APPA Comments (2018 RM18-9) at 7, 
9-10; APPA/NRECA Comments (RM16-23) at 39; NRECA Comments (2018 
RM18-9) at 14, 26-28; TAPS Comments (RM16-23) at 15-16).
---------------------------------------------------------------------------

    65. We therefore direct each RTO/ISO to amend its market rules as 
necessary to (1) accept bids from a distributed energy resource 
aggregator if its aggregation includes distributed energy resources 
that are customers of utilities that distributed more than 4 million 
MWh in the previous fiscal year, and (2) not accept bids from 
distributed energy resource aggregators if its aggregation includes 
distributed energy resources that are customers of utilities that 
distributed 4 million MWh or less in the previous fiscal year, unless 
the relevant electric retail regulatory authority permits such 
customers to be bid into RTO/ISO markets by a distributed energy 
resource aggregator. We conclude that this opt-in mechanism 
appropriately balances the benefits that distributed energy resource 
aggregation can provide to RTO/ISO markets with a recognition of the 
burdens that such aggregation may create for small utilities in 
particular. Accordingly, we find that adopting this mechanism helps to 
ensure that any ``negative effects'' of this final rule are 
``outweighed by the benefits,'' \158\ listed above,\159\ that it 
provides to RTO/ISO markets.
---------------------------------------------------------------------------

    \158\ Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1190.
    \159\ See supra n.147.
---------------------------------------------------------------------------

    66. On compliance, we require each RTO/ISO to explain how it will 
implement this small utility opt-in. We note that an RTO/ISO may choose 
to implement this requirement in a similar manner as it currently 
implements the small utility opt-in provision under Order No. 719-A.
    67. Although the Small Business Administration (SBA) no longer 
defines small utilities based on total electric output for the 
preceding fiscal year of 4 million MWh or less,\160\ we use this 
standard for purposes of this final rule, as it is consistent with the 
Commission's use of this standard for the opt-in adopted in Order No. 
719-A,\161\ and is supported by commenters asking the Commission to 
include an opt-in as part of this rule.\162\
---------------------------------------------------------------------------

    \160\ The SBA now defines small utilities based on the number of 
employees. 13 CFR 121.201 (establishing a threshold of 1,000 
employees for electric power distribution utilities).
    \161\ Order No. 719-A, 128 FERC ] 61,059 at PP 51, 59-60.
    \162\ NRECA Comments (2019 RM18-9) at 4-5; TAPS Comments (RM16-
23) at 16-17; TAPS Comments (2018 RM18-9) at 19 & n.27.
---------------------------------------------------------------------------

3. Interconnection
    68. The NOPR did not propose any changes to RTO/ISO policies and 
procedures for the interconnection of distributed energy resources. 
However, the Commission stated that comments demonstrated that current 
RTO/ISO market rules often limit the services that distributed energy 
resources are eligible to provide, including by imposing prohibitively 
expensive or otherwise burdensome interconnection requirements.\163\ 
The Commission also recognized that RTO/ISO demand response models 
often prohibit distributed energy resources from injecting power back 
onto the grid in

[[Page 67107]]

part because they are not studied in the interconnection process.\164\
---------------------------------------------------------------------------

    \163\ See NOPR, 157 FERC ] 61,121 at P 13 & n.30 (citing Energy 
Storage Association's comment that 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).
    \164\ See id. P 15 & n.32 (citing PJM's response that demand-
side 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).
---------------------------------------------------------------------------

    69. On September 5, 2019, Commission staff issued data requests to 
each of the six RTOs/ISOs seeking information regarding their policies 
and procedures that affect the interconnection of distributed energy 
resources. The RTOs/ISOs filed their responses in October 2019, and 
several commenters subsequently submitted reply comments.
a. Comments and Data Request Responses
    70. Several commenters state that any final rule should make clear 
that the interconnection of resources on a state-jurisdictional 
distribution system remains the responsibility of the distribution 
utilities and the states.\165\ The Maryland and New Jersey Commissions 
seek confirmation that state jurisdiction would remain unchanged as to 
the siting and costs associated with interconnecting resources to the 
distribution system, and would apply to all resources, including 
distributed energy resources, having or seeking interconnection or 
access to the wholesale market.\166\ The Maryland and New Jersey 
Commissions request that the Commission confirm that, in the context of 
interconnection requests for wholesale market access, states will 
continue to have discretion to review distribution utility company 
tariffs to justify how costs are allocated or how the resources and 
their proposed interconnection locations benefit ultimate 
ratepayers.\167\ The Massachusetts Commission makes similar 
arguments.\168\
---------------------------------------------------------------------------

    \165\ See, e.g., IRC Comments (RM16-23) at 9-10; Massachusetts 
Municipal Electric Comments (RM16-23) at 4; Massachusetts State 
Entities Comments (2019 RM18-9) at 11; NESCOE Comments (RM16-23) at 
16; TAPS Comments (RM16-23) at 15.
    \166\ Maryland and New Jersey Commissions Comments (RM16-23) at 
2-3.
    \167\ Id. at 3.
    \168\ Massachusetts Commission Comments (RM16-23) at 11.
---------------------------------------------------------------------------

    71. In order to avoid uncertainty and litigation, Duke Energy and 
EEI ask for additional clarity with respect to state-versus-Commission 
jurisdiction affecting interconnection, distribution planning, and 
investments to enable distributed energy resource aggregation.\169\ 
TAPS asks that any final rule make clear that, absent proper 
application of a Commission-jurisdictional Generator Interconnection 
Agreement, the Commission does not seek to alter or preempt local and 
state rules governing interconnection to the distribution system.\170\ 
Furthermore, TAPS asserts that, given the limited circumstances in 
which the Commission has the authority to require interconnection to, 
or deliveries over, distribution facilities, the NOPR appropriately 
does not attempt to establish new rules or requirements governing the 
details of interconnection of distributed energy resources.\171\
---------------------------------------------------------------------------

    \169\ Duke Energy Comments (RM16-23) at 4; EEI Comments (RM16-
23) at 25.
    \170\ TAPS Comments (RM16-23) at 15.
    \171\ Id. at 5-9.
---------------------------------------------------------------------------

    72. As to their own interconnection procedures and experience with 
distributed energy resources, ISO-NE, NYISO, and PJM's data request 
responses reference Order Nos. 2003 and 2006 and indicate that they 
apply the jurisdictional test for dual-use facilities established in 
those orders.\172\ As explained in more detail below, Order Nos. 2003 
and 2006 established what some RTOs/ISOs have labeled the ``first use'' 
test, under which the first interconnection to a distribution facility 
for the purpose of making wholesale sales is not subject to Commission 
jurisdiction, but triggers jurisdiction for any subsequent wholesale 
interconnection requests to the same distribution facility.\173\ MISO 
explains that no distributed energy resources have requested to 
interconnect to distribution facilities subject to the MISO tariff but 
indicates that it would apply the jurisdictional test in Order Nos. 
2003 and 2006 in processing subsequent interconnection requests to such 
facilities.\174\ SPP states that it would consider an interconnection 
to be Commission jurisdictional only if the relevant distribution 
facilities were under SPP's functional control, and SPP's data request 
response appears to indicate that, even after the first wholesale use, 
such distribution facilities would not be subject to its tariff.\175\ 
CAISO states that, if a distributed energy resource plans to 
participate in CAISO's markets, the interconnection is Commission 
jurisdictional pursuant to the utility distribution company's Wholesale 
Distribution Access Tariff.\176\
---------------------------------------------------------------------------

    \172\ ISO-NE Data Request Response (2019 RM18-9) at 3-4, 9-10; 
NYISO Data Request Response (2019 RM18-9) at 1-2; PJM Data Request 
Response (2019 RM18-9) at 2, 5.
    \173\ Standardization of Generator Interconnection Agreements & 
Procedures, Order No. 2003, 104 FERC ] 61,103, at P 804 (2003), 
order on reh'g, Order No. 2003-A, 106 FERC ] 61,220, order on reh'g, 
Order No. 2003-B, 109 FERC ] 61,287 (2004), order on reh'g, Order 
No. 2003-C, 111 FERC ] 61,401 (2005), aff'd sub nom. Nat'l Ass'n of 
Regulatory Util. Comm'rs v. FERC, 475 F.3d 1277 (D.C. Cir. 2007), 
cert. denied, 552 U.S. 1230 (2008); Standardization of Small 
Generator Interconnection Agreements and Procedures, Order No. 2006, 
111 FERC ] 61,220, order on reh'g, Order No. 2006-A, 113 FERC ] 
61,195 (2005), order granting clarification, Order No. 2006-B, 116 
FERC ] 61,046 (2006), corrected, 71 FR 53,965 (Sept. 13, 2006); see 
also Reform of Generator Interconnection Procedures and Agreements, 
Order No. 845, 163 FERC ] 61,043 (2018), errata notice, 167 FERC ] 
61,123, order on reh'g, Order No. 845-A, 166 FERC ] 61,137 (2019), 
errata notice, 167 FERC ] 61,124, order on reh'g, Order No. 845-B, 
168 FERC ] 61,092 (2019). We note that Order No. 845 did not make 
any changes to the ``first use'' test for distribution 
interconnection at issue here.
    \174\ See MISO Data Request Response (2019 RM18-9) at 6-7 (``If 
the [distributed energy resource] interconnection customer intends 
to connect the [distributed energy resource] unit to facilities 
listed on [MISO's list of transmission facilities transferred to its 
functional control] or a distribution facility that provides 
Wholesale Distribution Service, then the Interconnection Customer is 
required to follow the Generator Interconnection Procedures 
(Attachment X) of MISO Tariff. If [the distributed energy resource] 
is not interconnecting to such facilities, then the interconnection 
customer is required to follow the interconnection rules of the Host 
Distribution Provider.'').
    \175\ See SPP Data Request Response (2019 RM18-9) at 2-3, 6 
(``Such distribution facilities are not subject to the Tariff in 
this situation. The Tariff would not apply to non-jurisdictional 
facilities; however, there might be an obligation for the utility to 
coordinate with SPP regarding potential impacts to the SPP 
Transmission System.'').
    \176\ CAISO Data Request Response (2019 RM18-9) at 2-4 
(explaining that ``each CAISO transmission owner that is 
[Commission] jurisdictional and operates distribution facilities has 
a Wholesale Distribution Access Tariff with the express purpose of 
enabling [distributed energy resources] to interconnect to the 
distribution grid and still participate in the CAISO wholesale 
markets'').
---------------------------------------------------------------------------

    73. In response to CAISO's data request response, SoCal Edison 
clarifies that every SoCal Edison distribution facility with which a 
new resource seeks interconnection pursuant to the Wholesale 
Distribution Access Tariff is already subject to an OATT for purposes 
of making wholesale sales.\177\ Pacific Gas & Electric states that the 
Commission-jurisdictional Wholesale Distribution Access Tariff is not 
only the primary, but also should be the exclusive, means of 
interconnecting certain distributed energy resources that wish to 
export energy for purposes of participating in the wholesale 
markets.\178\ It states that this is important because California's 
Rule 21, a state-jurisdictional tariff, does not currently provide a 
methodology to separate wholesale from retail use and

[[Page 67108]]

thus could allow bypass of retail rates for behind-the-meter 
distributed energy resources that both consume and export electricity 
for both retail and wholesale purposes.\179\
---------------------------------------------------------------------------

    \177\ SoCal Edison Comments (2019 RM18-9) at 2.
    \178\ Pacific Gas & Electric Comments (2019 RM18-9) at 4. It 
states, however, that some wholesale market-participating 
distributed energy resources interconnect today under California's 
Rule 21, a state-jurisdictional tariff. For instance, it asserts 
that Rule 21 applies to Qualifying Facilities (QF) that make net 
surplus sales under California's net metering program, which are 
considered qualifying sales under the Public Utilities Regulatory 
Policy Act (PURPA).
    \179\ Id. at 5.
---------------------------------------------------------------------------

    74. Pacific Gas & Electric notes that CAISO's existing Demand 
Response Provider participation model allows existing retail loads 
interconnected under state-approved tariffs to participate in wholesale 
markets as non-exporting Proxy Demand Response resources without the 
risk of bypassing retail rates.\180\ Pacific Gas & Electric explains 
that it and CAISO can avoid the risk of retail bypass by requiring any 
individual distributed energy resources in a distributed energy 
resource aggregation that had previously interconnected as non-
exporting resources under California's Rule 21 and that now wish to 
export electricity to participate in wholesale markets to seek a new 
interconnection pursuant to, or to convert their existing 
interconnection to an agreement under, the Wholesale Distribution 
Access Tariff. Pacific Gas & Electric states that this framework 
complies with the Commission's implementation of the jurisdictional 
boundaries set forth in federal law.\181\
---------------------------------------------------------------------------

    \180\ Id. at 6.
    \181\ Id. at app. A.
---------------------------------------------------------------------------

    75. AMP asserts that some of the RTO/ISO responses erroneously 
state that a distribution facility becomes Commission jurisdictional 
when a wholesale sale occurs over that distribution facility. AMP 
asserts that it is the wholesale transaction, not the distribution line 
itself, that is subject to the Commission's jurisdiction.\182\ AMP also 
notes that RTO/ISO processes should refer to local jurisdiction and 
interconnection processes in addition to state processes because 
decision making is often done at the local level pursuant to local 
jurisdictional authority separate and distinct from state regulatory 
authority.
---------------------------------------------------------------------------

    \182\ AMP Comments (2019 RM18-9) at 2.
---------------------------------------------------------------------------

    76. Several commenters request that the Commission revise its 
interconnection policy as it applies to distributed energy 
resources.\183\ Advanced Energy Economy states that the Commission 
could work with relevant electric retail regulatory authorities and 
distribution utilities to address interconnection requirements through 
standard interconnection tariffs in those states where distributed 
energy resources are not classified as QFs under PURPA \184\ and for 
which no retail tariff exists.\185\
---------------------------------------------------------------------------

    \183\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9) 
at 19-21; Eversource Comments (2018 RM18-9) at 9-10; Icetec Comments 
(2018 RM18-9) at 2-3, 11.
    \184\ 16 U.S.C. 796(17)-(18), 824a-3.
    \185\ Advanced Energy Economy Comments (2018 RM18-9) at 20-21 
(asserting that resources in such states have no clear path to 
interconnection to the distribution system and a limited ability to 
participate in any wholesale distributed energy resource aggregation 
program).
---------------------------------------------------------------------------

    77. Eversource argues that, because the participation of 
distributed energy resources in RTO/ISO markets could convert a 
previously state-jurisdictional distribution facility into a 
Commission-jurisdictional distribution facility and potentially 
necessitate hundreds or thousands of interconnection agreement filings, 
the Commission should revisit the interconnection agreement filing 
criteria for distributed energy resources and develop a process that 
fairly balances the administrative burden on parties with respect for 
Commission and state jurisdictional lines.\186\ Icetec requests that 
the Commission reinforce the traditional bright line between Commission 
and state jurisdiction at the transmission-distribution boundary by 
confirming that relevant electric retail regulatory authorities have 
sole jurisdiction over the interconnection of resources to the 
distribution system, while ensuring that that jurisdiction may not be 
used to discriminatorily restrict or condition distributed energy 
resource participation in RTO/ISO markets.\187\
---------------------------------------------------------------------------

    \186\ Eversource Comments (2018 RM18-9) at 9-10.
    \187\ Icetec Comments (2018 RM18-9) at 2-3, 11.
---------------------------------------------------------------------------

    78. Advanced Energy Management requests that the Commission 
recognize the clear distinction between the distribution 
interconnection process and the wholesale market registration 
process.\188\ Advanced Energy Management states that the Commission has 
authority over the criteria for wholesale market registration and 
participation, and that state and local regulators have authority over 
the criteria for a non-discriminatory distribution interconnection 
process that ensures that interconnecting distributed energy resources 
that wish to participate in the wholesale market do not create 
distribution reliability issues.\189\ According to Advanced Energy 
Management, if a distributed energy resource imposes costs on the grid 
when it interconnects, regardless of reason, those costs can be 
recovered as interconnection costs under the authority of state 
regulators.\190\
---------------------------------------------------------------------------

    \188\ Advanced Energy Management Comments (2018 RM18-9) at 18; 
Advanced Energy Management Comments (2019 RM18-9) at 3.
    \189\ Advanced Energy Management Comments (2018 RM18-9) at 18-
19; Advanced Energy Management Comments (2019 RM18-9) at 3.
    \190\ Advanced Energy Management Comments (2018 RM18-9) at 10.
---------------------------------------------------------------------------

    79. Stem recommends that the Commission initiate a process to 
revise distribution utilities' interconnection tariffs (e.g., the 
Wholesale Distribution Access Tariffs in California) so that (1) 
individual distributed energy resources, participating through an 
aggregator, are not required to do more than satisfy the local 
interconnection requirements in order to offer residual capability 
through the RTO/ISO markets, and (2) the tariffs accommodate the 
potential for coordinated dispatch of a distributed energy resource 
aggregation such as including limitations on aggregated behavior due to 
distribution system constraints, which would be communicated to the 
RTO/ISO as a reduced size resource during registration as a market 
participant.\191\ Microgrid Resource Coalition similarly asserts that a 
responsive distributed energy resource needs to specify its expected 
modes of operation during the interconnection process by establishing 
its physical capabilities subject to any residual distribution system 
constraints, which will establish the limits of its ability to provide 
services to the grid.\192\
---------------------------------------------------------------------------

    \191\ Stem Comments (2018 RM18-9) at 9-10, 15-16.
    \192\ Microgrid Resources Coalition Comments (2018 RM18-9) at 
12.
---------------------------------------------------------------------------

    80. Public Interest Organizations argue that some RTO/ISO tariffs 
present significant barriers to distributed energy resource 
interconnection, particularly those that require individual distributed 
energy resources to complete a wholesale interconnection process.\193\ 
Therefore, Public Interest Organizations propose that distributed 
energy resource interconnection be solely under retail jurisdiction, 
and that RTO/ISO purview over distributed energy resource aggregations 
be limited to market rules, and where cause is shown, for transmission 
system impacts.\194\
---------------------------------------------------------------------------

    \193\ Public Interest Organizations Comments (2019 RM18-9) at 3.
    \194\ Id. at 3-4.
---------------------------------------------------------------------------

    81. Some commenters contend that PJM's interconnection processes 
impose significant transaction costs on distributed energy 
resources.\195\ Icetec asserts that every distributed energy resource 
that wishes to participate in PJM markets, no matter how small, must go 
through PJM's interconnection queue; that an individual residential 
owner must file an OATT with the Commission registering the 120 volt 
wiring in its house as a transmission

[[Page 67109]]

provider before a third party can apply to interconnect distributed 
energy resources located behind a residential meter; and that PJM 
refers most distribution-connected projects to distribution utilities 
for further study, even if the resource is already interconnected and 
injecting power under a distribution interconnection tariff.\196\ 
Icetec claims that, in contrast, distribution utilities may operate 
distributed energy resources attached to their systems without going 
through RTO/ISO interconnection, which creates partially discriminatory 
market access by placing merchant distributed energy resource 
developers at a significant disadvantage relative to incumbent 
utilities.\197\ Icetec requests that the Commission require RTOs/ISOs 
to accept a distributed energy resource as deliverable to the wholesale 
transmission system, with further studies limited to the transmission 
system, when it is properly connected to the distribution system under 
an arrangement approved by the relevant electric retail regulatory 
authority.\198\ Icetec also asks the Commission to both allow 
distributed energy resources that deliver to the transmission system at 
a bus that is primarily load-serving to participate in wholesale 
markets without further transmission studies and to direct RTOs/ISOs to 
file tariff revisions setting procedures and timelines for 
interconnection studies carried out by distribution utilities for 
interconnection of distributed energy resources intending to 
participate in RTO/ISO markets.\199\
---------------------------------------------------------------------------

    \195\ Icetec Comments (2018 RM18-9) at 7-9; UofD/Mensah Comments 
(2019 RM18-9) at 2-5.
    \196\ Icetec Comments (2018 RM18-9) at 7-8.
    \197\ Id. at 8.
    \198\ Id. at 8-9.
    \199\ Id. at 9.
---------------------------------------------------------------------------

    82. UofD/Mensah similarly contend that PJM's existing processes are 
unjust and unreasonable in light of barriers that they present to small 
resources that interconnect under state or local jurisdiction.\200\ 
According to UofD/Mensah, PJM imposes a more burdensome market 
participation process on resources that interconnect under state or 
local jurisdiction than on resources that interconnect under Commission 
jurisdiction.\201\ Specifically, they contend that PJM's Small 
Generator Interconnection Procedures use screens based only on the 
local distribution system rather than studies to assess safety and 
reliability, require PJM to provide interconnection customers that pass 
the screens an Interconnection Service Agreement within 15-20 days of 
the request, and only cost $500--$5,000 depending on the circumstances. 
They assert, however, that for non-jurisdictional interconnections, 
each resource must wait up to six months for the queue study process to 
begin and undergo a Feasibility Study and sometimes a System Impact 
Study, expected to take three months each, before approval. They assert 
that UofD was required to provide deposits totaling $27,000 for its 933 
kW electric vehicle project, which is nine times the deposit that they 
would have been charged if the interconnection was Commission 
jurisdictional.
---------------------------------------------------------------------------

    \200\ UofD/Mensah Comments (2019 RM18-9) at 2, 4.
    \201\ Id. at 2.
---------------------------------------------------------------------------

    83. UofD/Mensah therefore request that the Commission align the 
RTO/ISO market participation process requirements for non-Commission-
jurisdictional interconnections with the Commission's Small Generator 
Interconnection Procedures.\202\ UofD/Mensah also recommend that the 
current distributed energy resource interconnection process be improved 
by permitting a subset of small, behind-the-meter resources that 
already have state or local interconnection approval to be 
automatically approved to provide wholesale services.\203\ For those 
resources not automatically approved, UofD/Mensah recommend that the 
Commission limit the allowable cost and time of existing RTO/ISO 
processes and allow aggregations to be studied as a group. Finally, 
after correcting the non-Commission-jurisdictional interconnection 
process, UofD/Mensah recommend that the Commission consider declining 
to exercise its authority over the interconnection of distributed 
energy resources that seek to provide wholesale services or at least 
clarify the ``dual-use doctrine'' in specific cases so that developers 
need not rely on RTOs/ISOs to interpret it.\204\ In response to UofD/
Mensah, PJM notes that its stakeholder process is currently considering 
reforms designed to provide a ``fast-track'' avenue for processing 
energy-only resources under 2 MW.\205\
---------------------------------------------------------------------------

    \202\ Id. at 4-5.
    \203\ Id. at 5.
    \204\ Id. at 5-6.
    \205\ PJM Reply Comments (2019 RM18-9) at 4.
---------------------------------------------------------------------------

    84. Advanced Energy Economy asserts that the Commission does not 
need to address interconnection practices in order to issue a final 
rule, and suggests that, if the Commission is interested in exploring a 
different approach for interconnection of distributed energy resources, 
it should do so in a separate proceeding.\206\ Advanced Energy Economy 
also asserts that each of the RTOs/ISOs described processes that are 
generally consistent with the Commission's long-standing ``dual use'' 
policy.\207\
---------------------------------------------------------------------------

    \206\ Advanced Energy Economy Comments (2019 RM18-9) at 1-2, 7-
8.
    \207\ Id. at 2-3.
---------------------------------------------------------------------------

    85. Several commenters argue that distribution interconnection 
requirements should address distribution-level reliability concerns 
that are raised by the interconnection of distributed energy resources 
to distribution systems.\208\ Vice Chairman Place of the Pennsylvania 
Public Utilities Commission argues for primacy of a distribution 
utility's interconnection requirements in determining the eligibility 
of distributed energy resources to participate in distributed energy 
resource aggregations, and asserts that distributed energy resource 
aggregations may necessitate new interconnection requirements or 
study.\209\ Vice Chairman Place asserts that distribution utilities are 
authorized by state regulators to protect distribution operations, and 
that distributed energy resources participating in aggregations will 
need to comply with state-level interconnection agreements.\210\ 
FirstEnergy argues that states must address the development of 
distributed energy resource interconnection standards and technical 
requirements, and that distribution utilities are best situated to 
identify system issues that may affect ongoing reliable operations on 
local systems.\211\
---------------------------------------------------------------------------

    \208\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9) 
at 17; PJM Comments (2018 RM18-9) at 18-19; Stem Comments (2018 
RM18-9) at 15.
    \209\ Vice Chairman Place Comments (2018 RM18-9) at 2.
    \210\ Id. at 2-3.
    \211\ FirstEnergy Comments (2019 RM18-9) at 4-5.
---------------------------------------------------------------------------

    86. Several commenters argue that the RTOs/ISOs should perform some 
sort of study of a distributed energy resource aggregation because 
distribution-level interconnection reviews are only a reliability and 
safety check for individual resources, and do not evaluate the combined 
impact that an aggregation would have on the system or the impact that 
the distributed energy resource will have on the system if it chooses 
to participate in an aggregation.\212\ EEI, PJM Utilities Coalition, 
and San Diego Gas & Electric recommend that an aggregation study be 
done if a distributed energy resource joins an aggregation and if the 
composition of an aggregation changes

[[Page 67110]]

after registration.\213\ TAPS agrees, and notes that, even for 
distribution utilities with robust generation interconnection processes 
that include rigorous modeling and studies, it may be impossible to 
anticipate and fully evaluate every possible combination of loads, 
resources, and distribution system configurations to determine in 
advance whether potential RTO/ISO and distributed energy resource 
aggregator dispatch decisions might have adverse impacts.\214\ 
Similarly, NRECA asserts that an interconnection agreement with the 
distributed energy resource is necessary but not sufficient; NRECA 
argues that distribution utilities need to be able to conduct an 
integration study within a reasonable timeline that considers grid 
topology, as well as to modify their interconnection procedures to 
ensure third-party distributed energy resource participation in RTO/ISO 
markets will not create any safety, reliability or power quality 
concerns, and that implementation will conform with IEEE standards 
(such as IEEE 1547).\215\ Pacific Gas & Electric concurs with the need 
to modify existing processes and protocols for distribution review 
requirements for assessing aggregation impacts and points to an ongoing 
collaborative process underway in California that requires additional 
time to complete.\216\
---------------------------------------------------------------------------

    \212\ EEI Comments (2018 RM18-9) at 14-16; Organization of MISO 
States Comments (2018 RM18-9) at 8-9; San Diego Gas & Electric 
Comments (2018 RM18-9) at 5; SoCal Edison Comments (2018 RM18-9) at 
11.
    \213\ EEI Comments (2018 RM18-9) at 15-16; PJM Utilities 
Coalition Comments (2018 RM18-9) at 14; San Diego Gas & Electric 
Comments (2018 RM18-9) at 5.
    \214\ TAPS Comments (2018 RM18-9) at 12.
    \215\ NRECA Comments (2018 RM18-9) at 29, 30.
    \216\ Pacific Gas & Electric Comments (2018 RM18-9) at 14-15, 
18.
---------------------------------------------------------------------------

    87. On the other hand, several commenters raise concerns about the 
use of distribution interconnection processes to limit participation of 
distributed energy resources in wholesale markets. Advanced Energy 
Economy argues that the distribution interconnection process should not 
be used as a lever to unduly limit participation in wholesale 
markets.\217\ Similarly, Stem asserts that the Commission must prevent 
a distribution utility from imposing discriminatory state-level 
interconnection requirements that are intended to foreclose distributed 
energy resources from participating in the RTO/ISO markets.\218\ Stem 
asserts that, for instance, the Commission should not allow the 
distribution utilities to effectively veto distributed energy resource 
participation in wholesale markets by unreasonably delaying necessary 
updates to interconnection tariffs.\219\ Advanced Energy Management and 
Icetec agree that distributed energy resources should comply with 
distribution interconnection requirements, but argue that the exercise 
of state and local regulatory and distribution utility authority should 
occur prior to a distributed energy resource's registration in an RTO/
ISO.\220\ Specifically, they argue that state and local regulatory 
authorities and distribution utilities should define non-discriminatory 
interconnection procedures that ensure the distribution grid can 
accommodate distributed energy resources.\221\ NRG argues that 
distributed energy resources should only be required to have one 
interconnection study and should not be subject to additional review, 
noting that collaboration on transmission and distribution impact 
studies may be necessary, and that NYISO, PJM, and CAISO are already 
engaged in some form of collaboration with distribution utilities on 
these matters.\222\
---------------------------------------------------------------------------

    \217\ Advanced Energy Economy Comments (2018 RM18-9) at 18.
    \218\ Stem Comments (2018 RM18-9) at 15.
    \219\ Id. at 16.
    \220\ Advanced Energy Management Comments (2018 RM18-9) at 18; 
Icetec Comments (2018 RM18-9) at 18.
    \221\ Advanced Energy Management Comments (2018 RM18-9) at 18; 
Icetec Comments (2018 RM18-9) at 18-19.
    \222\ NRG Comments (2018 RM18-9) at 8-9.
---------------------------------------------------------------------------

    88. Several commenters argue that the relevant electric retail 
regulatory authorities must have discretion to allocate any 
distribution system-related costs incurred by utilities as a result of 
distributed energy resource participation in RTO/ISO markets.\223\ Some 
commenters warn that, without proper cost allocation methods, retail 
customers effectively would be subsidizing wholesale market 
participation.\224\ EEI argues that distribution utilities should not 
have to absorb any stranded costs if they invest in upgrades needed for 
distributed energy resource aggregation that are ultimately not 
utilized.\225\ APPA and EEI argue that there is little evidence of 
significant demand for distributed energy resource aggregation 
programs, and so distribution utilities may have to invest in upgrades 
to the distribution system that are ultimately never needed.\226\ The 
Indiana Commission asserts that distribution utilities may have to 
procure additional capacity to account for uncertainty in their 
forecasts regarding the amount of future distributed generation 
available to them.\227\
---------------------------------------------------------------------------

    \223\ Vice Chairman Place Comments (2018 RM18-9) at 3; APPA 
Comments (2018 RM18-9) at 21; EEI Comments (2018 RM18-9) at 20; New 
Jersey Board Comments (2018 RM18-9) at 4.
    \224\ APPA Comments (2018 RM18-9) at 10; Indiana Commission 
Comments (2018 RM18-9) at 8; NRECA Comments (2018 RM18-9) at 12.
    \225\ EEI Comments (2018 RM18-9) at 20.
    \226\ APPA Comments (2018 RM18-9) at 10-12; EEI Comments (2018 
RM18-9) at 21.
    \227\ Indiana Commission Comments (2018 RM18-9) at 8.
---------------------------------------------------------------------------

    89. Other commenters argue that any cost allocation associated with 
a distributed energy resource aggregator participating in RTO/ISO 
markets would fall under the Commission's jurisdiction because the 
aggregator would be acting as a wholesale entity engaged in a 
Commission-jurisdictional transaction.\228\ Hence, a few commenters 
suggest that, to the extent a distribution utility incurs additional 
costs to provide service to distributed energy resource aggregations, 
those costs should be recovered through a wholesale distribution tariff 
filed with the Commission.\229\ NRECA asserts that the impact of a 
distributed energy resource or distributed energy resource aggregation 
interconnection on a host distribution utility must be considered in 
the interconnection process, whether under RTO/ISO procedures or state-
jurisdictional procedures.\230\ NRECA notes that to do so will require 
that cooperatives in RTO/ISO regions develop new distributed energy 
resource interconnection agreements and procedures.\231\
---------------------------------------------------------------------------

    \228\ Icetec Comments (2018 RM18-9) at 12 (citing PJM 
Interconnection, LLC, 149 FERC ] 61,185, order on reh'g, 151 FERC ] 
61,231); SoCal Edison Comments (2018 RM18-9) at 6 (citing Detroit 
Edison Co., 334 F.3d 48 (D.C. Cir. 2003)).
    \229\ Advanced Energy Economy Comments (2018 RM18-9) at 18 
(citing Order No. 841, 162 FERC ] 61,127 at P 301); Icetec Comments 
(2018 RM18-9) at 12; Stem Comments (2018 RM18-9) at 3.
    \230\ NRECA Comments (2019 RM18-9) at 6-7.
    \231\ Id. at 7.
---------------------------------------------------------------------------

b. Commission Determination
    90. For the reasons discussed below, we decline to exercise our 
jurisdiction over the interconnections of distributed energy resources 
to distribution facilities for the purpose of participating in RTO/ISO 
markets exclusively as part of a distributed energy resource 
aggregation. Thus, we will not require standard interconnection 
procedures and agreements or wholesale distribution tariffs for such 
interconnections.
    91. In Order Nos. 2003 and 2006, the Commission first adopted 
standard interconnection procedures and agreements that apply when an 
interconnection customer ``that plans to engage in a sale for resale in 
interstate commerce or to transmit electric energy

[[Page 67111]]

in interstate commerce'' \232\ requests interconnection to the 
facilities of a public utility's Transmission System \233\ or 
Distribution System \234\ that, at the time that the interconnection is 
requested, are used either to transmit electric energy in interstate 
commerce or to sell electric energy at wholesale in interstate commerce 
pursuant to a Commission-filed OATT.\235\ The Commission recognized 
that ``some [lower-voltage facilities] are used for jurisdictional 
service such as carrying power to a wholesale power customer for resale 
and are included in a public utility's OATT,'' and that ``in some 
instances, there is a separate OATT rate for using them, sometimes 
called a Wholesale Distribution Rate.'' \236\ The Commission also noted 
that, with respect to a Commission-jurisdictional interconnection to a 
distribution facility, the cost of upgrades needed on the Distribution 
System to accommodate the interconnection must be directly assigned to 
the interconnection customer because an upgrade to the Distribution 
System generally does not benefit all transmission customers.\237\ In 
Order No. 2003-C, the Commission concluded that, while it does not have 
the authority to directly regulate a ``local distribution'' facility 
that is used to transmit energy being sold at wholesale, ``the 
Commission may regulate the entire transmission component (rates, terms 
and conditions) of the wholesale transaction.'' \238\
---------------------------------------------------------------------------

    \232\ Order No. 2003, 104 FERC ] 61,103 at P 804; see also Order 
No. 845, 163 FERC ] 61,043.
    \233\ The Commission defined ``Transmission System'' as ``[t]he 
facilities owned, controlled or operated by the Transmission 
Provider or the Transmission Owner that are used to provide 
transmission service under the Tariff.'' Order No. 2006, 111 FERC ] 
61,220 at P 6.
    \234\ The Commission defined ``Distribution System'' as ``[t]he 
Transmission Provider's facilities and equipment used to transmit 
electricity to ultimate usage points such as homes and industries 
directly from nearby generators or from interchanges with higher 
voltage transmission networks which transport bulk power over longer 
distances. The voltage levels at which Distribution Systems operate 
differ among areas.'' Id. P 7.
    \235\ Order No. 2003, 104 FERC ] 61,103 at P 804; see Order No. 
2006, 111 FERC ] 61,220 at P 5; see also Order No. 845, 163 FERC ] 
61,043.
    \236\ Order No. 2003, 104 FERC ] 61,103 at P 803; see also Order 
No. 845, 163 FERC ] 61,043.
    \237\ Order No. 2003, 104 FERC ] 61,103 at P 697; see also Order 
No. 845, 163 FERC ] 61,043.
    \238\ Order No. 2003-C, 111 FERC ] 61,401 at P 53; see also 
Order No. 845, 163 FERC ] 61,043.
---------------------------------------------------------------------------

    92. In practice, Order Nos. 2003 and 2006 established what some 
RTOs/ISOs have labeled the ``first use'' test, under which the first 
interconnection to a distribution facility for the purpose of making 
wholesale sales is not subject to Commission jurisdiction. This is 
because, at the time of the request, the distribution facility is not 
used to transmit electric energy in interstate commerce or subject to 
wholesale open access under an OATT. Therefore, the first 
interconnecting resource ``that plans to engage in a sale for resale in 
interstate commerce or to transmit electric energy in interstate 
commerce'' \239\ on a distribution facility is not required to use the 
transmission provider's Commission-jurisdictional Generator 
Interconnection Procedures or obtain a Commission-jurisdictional 
Generator Interconnection Agreement.\240\ As a result, such 
interconnections are governed by the applicable state or local law.
---------------------------------------------------------------------------

    \239\ Order No. 2003, 104 FERC ] 61,103 at P 804; see also Order 
No. 845, 163 FERC ] 61,043.
    \240\ See Order No. 2003-C, 111 FERC ] 61,401 at P 53; Order No. 
2006, 111 FERC ] 61,220 at P 7; Order No. 845, 163 FERC ] 61,043; 
see also PJM Interconnection, L.L.C., 114 FERC ] 61,191, at P 14, 
order on reh'g, 116 FERC ] 61,102 (2006).
---------------------------------------------------------------------------

    93. However, under the ``first use'' test, subsequent 
interconnections of resources to the same distribution facility for the 
purpose of engaging in wholesale sales or transmission in interstate 
commerce are subject to Commission jurisdiction because the 
distribution facilities are already being used to facilitate wholesale 
transactions and therefore are subject to an OATT. Thus, any subsequent 
resources interconnecting to the same distribution facility for 
Commission-jurisdictional purposes (e.g., to make wholesale sales in 
interstate commerce) must use the Commission-jurisdictional Generator 
Interconnection Procedures and Generator Interconnection Agreement 
established in Order Nos. 2003 and 2006 and later amended in Order No. 
845. The United States Court of Appeals for the District of Columbia 
Circuit upheld this jurisdictional application as consistent with the 
FPA.\241\
---------------------------------------------------------------------------

    \241\ See Nat'l Ass'n of Regulatory Util. Comm'rs v. FERC, 475 
F.3d at 1280-82 (``By establishing standard agreements FERC has 
exercised its jurisdiction over the terms of those relationships.'') 
(citing Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667, 
696 (D.C. Cir. 2000) (``FPA [section] 201 makes clear that all 
aspects of wholesale sales are subject to federal regulation, 
regardless of the facilities used.'')).
---------------------------------------------------------------------------

    94. The Commission adopted this limited jurisdictional approach to 
avoid ``allow[ing] a potential wholesale seller to cause the 
involuntary conversion of a facility previously used exclusively for 
state jurisdictional interconnections and delivery, and subject to the 
exclusive jurisdiction of the state, into a facility also subject to 
the Commission's interconnection jurisdiction,'' believing that this 
outcome would cross the jurisdictional line established by 
Congress.\242\ Nevertheless, the Commission anticipated that its 
standard interconnection procedures and agreement terms would rarely 
apply to distributed generation: ``We recognize that Order No. 2003 
does not apply to most distributed generation, since these facilities 
almost always interconnect to facilities that are not subject to an 
OATT.'' \243\
---------------------------------------------------------------------------

    \242\ Order No. 2003-C, 111 FERC ] 61,401 at P 51; see also 
Order No. 845, 163 FERC ] 61,043.
    \243\ Order No. 2003-A, 106 FERC ] 61,220 at P 739; see also 
Order No. 2006, 111 FERC ] 61,220 at P 8 (``Because of the limited 
applicability of this Final Rule, and because the majority of small 
generators interconnect with facilities that are not subject to an 
OATT, this Final Rule will not apply to most small generator 
interconnections.''); Order No. 845, 163 FERC ] 61,043.
---------------------------------------------------------------------------

    95. We agree with commenters that the integration of distributed 
energy resource aggregations into the RTO/ISO markets warrants our 
addressing the application of the Commission's interconnection policy 
to the distributed energy resource aggregations enabled by this final 
rule. As the Commission recognized in Order No. 792, renewable 
portfolio standards, state policies promoting distributed generation, 
and decreases in capital costs have driven a substantial increase in 
small generator interconnection requests.\244\ In the intervening 
years, those trends have only intensified, further stimulating 
distributed energy resource development.\245\ We anticipate that 
increased participation of distributed energy resources in RTO/ISO 
markets via distributed energy resource aggregations will substantially 
increase the number of distributed energy resource interconnections to 
distribution facilities for the purpose of engaging in wholesale 
transactions and/or transmission in interstate commerce. Such growth 
could increase the number of distribution-level interconnections 
subject to the Commission's jurisdiction. As Public Interest 
Organizations suggest, a large influx of distribution-level 
interconnections could create uncertainty as to whether certain 
interconnections are subject to Commission jurisdiction or state/local 
jurisdiction, and whether they would require the use of the 
Commission's

[[Page 67112]]

standard interconnection procedures and agreement.\246\ It could 
additionally burden RTOs/ISOs with an overwhelming volume of 
interconnection requests.\247\
---------------------------------------------------------------------------

    \244\ Small Generator Interconnection Agreements & Procedures, 
Order No. 792, 145 FERC ] 61,159, at P 23 (2013), as modified, 
errata notice, 146 FERC ] 61,019, as modified, errata notice, 148 
FERC ] 61,215, clarified, Order No. 792-A, 146 FERC ] 61,214 (2014).
    \245\ See Public Interest Organizations Comments (2019 RM18-9) 
at 6-7. See also EIA, August 2019 Monthly Energy Review at Figure 
7.2a, https://www.eia.gov/totalenergy/data/monthly; Office of Energy 
Projects, Energy Infrastructure Update For July2019 at 4 (July 
2019), https://www.ferc.gov/legal/staff-reports/2019/july-energy-infrastructure.pdf).
    \246\ Public Interest Organizations Comments (2019 RM18-9) at 9.
    \247\ Id. at 5.
---------------------------------------------------------------------------

    96. Given these concerns and the confluence of local, state, and 
federal authority over distributed energy resource interconnections, in 
this final rule, we decline to exercise jurisdiction over the 
interconnections of distributed energy resources to distribution 
facilities for those distributed energy resources that seek to 
participate in RTO/ISO markets exclusively as part of a distributed 
energy resource aggregation. We do not believe that requiring standard 
interconnection procedures and agreement terms for these 
interconnections is necessary to advance the objectives of Order Nos. 
2003, 2006 and 845, which established standard interconnection 
procedures and agreements in order to prevent undue discrimination, 
preserve reliability, increase energy supply, lower wholesale prices 
for customers by increasing the number and types of new generation that 
would compete in the wholesale electricity market, reduce 
interconnection time and costs, and facilitate development of non-
polluting alternative energy sources.\248\ Rather, we agree with 
commenters that state and local authorities, which have traditionally 
regulated distributed energy resource interconnections, have the 
requisite experience, interest, and capacity to oversee these 
distribution-level interconnections.
---------------------------------------------------------------------------

    \248\ See Order No. 2003, 104 FERC ] 61,103 at P 1; Order No. 
2006, 111 FERC ] 61,220 at P 1; Order No. 845, 163 FERC ] 61,043; 
see also New York v. FERC, 535 U.S. 1, 26-27 (2002) (upholding the 
Commission's discretion to issue a tailored remedy where ``the 
remedy it ordered constituted a sufficient response to the problems 
. . . identified in the wholesale market''). In issuing Order Nos. 
2003 and 2006, the Commission acknowledged that their requirements 
would rarely apply to the interconnections of distributed energy 
resources. See Order No. 2003-A, 106 FERC ] 61,220 at P 739; Order 
No. 2006, 111 FERC ] 61,220 at P 8; Order No. 845, 163 FERC ] 
61,043.
---------------------------------------------------------------------------

    97. Because we decline here to exercise our jurisdiction over the 
interconnection of a distributed energy resource to a distribution 
facility for the purpose of participating in RTO/ISO markets 
exclusively through a distributed energy resource aggregation, the 
interconnection of such a resource for the purpose of participating in 
a distributed energy resource aggregation would not constitute a first 
interconnection for the purpose of making wholesale sales under the 
``first use'' test. As such, only a distributed energy resource 
requesting interconnection to the distribution facility for the purpose 
of directly engaging in wholesale transactions (i.e., not through a 
distributed energy resource aggregation) would create a ``first use'' 
and any subsequent distributed energy resource interconnecting for the 
purpose of directly engaging in wholesale transactions would be 
considered a Commission-jurisdictional interconnection. We believe that 
this approach will minimize any increase in the number of distribution-
level interconnections subject to the Commission's jurisdiction that 
this final rule may cause.
    98. This final rule does not require any changes to the pro forma 
Generator Interconnection Procedures or Generator Interconnection 
Agreements. To the extent that the jurisdictional conditions described 
in Order Nos. 2003 and 2006 are met, those standard interconnection 
procedures and agreement terms originally established in Order Nos. 
2003 and 2006 and later amended by Order No. 845 will continue to apply 
to the interconnections of distributed energy resources that 
participate in RTO/ISO markets individually, independent of a 
distributed energy resource aggregation. This final rule also does not 
revise the Commission's jurisdictional approach to the interconnections 
of QFs that participate in distributed energy resource 
aggregations.\249\
---------------------------------------------------------------------------

    \249\ See Order No. 2003, 104 FERC ] 61,103 at PP 813-815; Order 
No. 2006, 111 FERC ] 61,220 at PP 516-518; Order No. 845, 163 FERC ] 
61,043.
---------------------------------------------------------------------------

    99. With respect to arguments that distributed energy resources 
should only be required to have one interconnection study--at the 
distribution interconnection stage--and should not be subject to 
additional review in connection with the possibility of RTO/ISO market 
participation, and competing arguments that both distribution 
interconnection studies and separate distributed energy resource 
aggregation studies are needed when distributed energy resources join 
an aggregation, we believe that there could be different approaches to 
this issue that would work in appropriate circumstances. We therefore 
decline to create new universal requirements or initiate a process to 
standardize tariffs with respect to these matters at this time. In 
response to increased demand for distributed energy resource 
aggregations for wholesale market participation, some state or local 
authorities may choose to voluntarily update their distribution 
interconnection processes to assess the impacts of distributed energy 
resource aggregations on the distribution system at the initial 
interconnection stage, while other state and local authorities may not. 
In the latter scenario, it may be both necessary and appropriate for 
the RTO/ISO, in coordination with affected distribution utilities, to 
conduct separate studies of the impact on the distribution system after 
a distributed energy resource joins a distributed energy resource 
aggregation. Moreover, as the individual distributed energy resources 
in an aggregation may change over time,\250\ we cannot discount the 
possibility that the electrical characteristics of the aggregation will 
change significantly enough to require restudy. In practice, we expect 
that modifications to the list of resources in a distributed energy 
resource aggregation could occasionally indicate changes to the 
electrical characteristics of the distributed energy resource 
aggregation that are significant enough to potentially adversely impact 
the reliability of the distribution or transmission systems and justify 
restudy of the full distributed energy resource aggregation; therefore, 
RTOs/ISOs and distribution utilities may perform such aggregation 
restudies if necessary. Similarly, while the interconnections of 
distributed energy resources seeking to participate in RTO/ISO markets 
as part of a distributed energy resource aggregation would be subject 
to state or local interconnection procedures, we believe that 
coordination between RTOs/ISOs and distribution utilities, as discussed 
in Section IV.H below, should ensure that RTOs/ISOs have the 
information that they need to study the impact of the aggregations on 
the transmission system. In general, where needed, such studies of the 
impact of an aggregation as a whole on the transmission system should 
be the only aggregation-related studies that the RTO/ISO needs to 
undertake.\251\
---------------------------------------------------------------------------

    \250\ See infra Section IV.I (Modifications to List of Resources 
in Aggregation).
    \251\ However, as explained earlier, RTOs/ISOs may still need to 
study individually those distributed energy resources intending to 
individually participate in RTO/ISO markets rather than through 
aggregations.
---------------------------------------------------------------------------

    100. In response to the comments of Advanced Energy Economy, we 
decline to require standard interconnection tariffs in those states 
where no retail tariff exists for distributed energy resources that are 
not QFs under PURPA. We believe that such a situation should be 
addressed at the state level, as discussed above.
    101. While some commenters raise concerns that declining to create 
new

[[Page 67113]]

universal distribution interconnection requirements or initiate a 
process to standardize distribution interconnection tariffs could 
result in uncertainty and delay, or could be used to unduly limit 
participation of distributed energy resource aggregations in wholesale 
markets, we believe that such concerns are speculative at this time. In 
this regard, we note that, while we are herein declining to exercise 
jurisdiction over the interconnections of distributed energy resources 
to distribution facilities for the purpose of participating in 
distributed energy resource aggregations, the Commission may revisit 
this policy decision in the future, should we discover abuses of the 
distribution interconnection process or the rise of unnecessary 
barriers to the participation of distributed energy resource 
aggregations in RTO/ISO markets.
    102. With respect to the related arguments that the distribution 
interconnection process and the distributed energy resource aggregation 
registration process are separate but require coordination, we agree, 
and believe that the coordination requirements discussed in Section 
IV.H of this final rule appropriately address this need.
    103. Although we find it appropriate to decline to exercise 
jurisdiction over the interconnections of distributed energy resources 
intending to participate in RTO/ISO markets exclusively through a 
distributed energy resource aggregation, we recognize that such 
distributed energy resources may already have interconnected pursuant 
to procedures that were accepted by the Commission prior to the 
effective date of this final rule. Therefore, to minimize disruption to 
existing interconnection agreements for distributed energy resources, 
we are not requiring distributed energy resources that already 
interconnected under Commission-jurisdictional procedures to convert to 
state or local interconnection agreements.
    104. Accordingly, in its compliance filing, we require each RTO/ISO 
to make any necessary tariff changes to reflect the guidance above.

B. Definitions of Distributed Energy Resource and Distributed Energy 
Resource Aggregator

1. NOPR Proposal
    105. In the NOPR, the Commission proposed to define a distributed 
energy resource as ``a source or sink of power that is located on the 
distribution system, any subsystem thereof, or behind a customer 
meter.'' \252\ The Commission added that these resources may include, 
but are not limited to, electric storage resources, distributed 
generation, thermal storage, and electric vehicles and their supply 
equipment. The Commission proposed to define a distributed energy 
resource aggregator as ``an 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 operators and independent system operators.'' \253\
---------------------------------------------------------------------------

    \252\ NOPR, 157 FERC ] 61,121 at PP 1 n.2, 104.
    \253\ Id. P 5 n.13.
---------------------------------------------------------------------------

2. Comments
    106. Several commenters raise concerns with the proposed definition 
of distributed energy resource. EEI suggests that the Commission use a 
term besides ``source or sink of power'' to reflect the Commission's 
desire to include all electric devices that can produce or consume 
energy because a source or sink is a location and not a resource.\254\ 
AES Companies, MISO Transmission Owners, and NYISO Indicated 
Transmission Owners seek clarification whether the definition of 
distributed energy resources includes resources that are behind and in 
front of the meter. AES Companies explain that it is not out of the 
ordinary for resources such as solar or batteries to be interconnected 
at the distribution system but not behind the meter, and NYISO 
Indicated Transmission Owners state that aggregations of front-of-the-
meter distributed energy resources should be able to elect to 
participate in wholesale markets as part of a distributed energy 
resource aggregation.\255\
---------------------------------------------------------------------------

    \254\ EEI Comments (RM16-23) at 16 n.23.
    \255\ AES Companies Comments (RM16-23) at 40-41; NYISO Indicated 
Transmission Owners Comments (RM16-23) at 13.
---------------------------------------------------------------------------

    107. NYISO Indicated Transmission Owners caution that, while a 
general definition of a distributed energy resource is appropriate, 
rules for elective participation in RTO/ISO markets may still require 
individual classifications for types of distributed energy resources 
because differences in their capabilities may warrant specific 
operational, reliability, and compensation considerations.\256\ NYISO 
points out that it has a broader definition of distributed energy 
resource than that proposed in the NOPR and therefore asks the 
Commission to permit regional flexibility to allow NYISO to fashion 
rules and market designs that meet its needs while still achieving the 
Commission's goal of integrating distributed energy resources into the 
wholesale markets.\257\ NYISO notes that it has also proposed to allow 
small aggregations of community distributed generation to provide 
wholesale market services as distributed energy resources.\258\ NRG 
encourages the Commission to direct the RTOs/ISOs to use a definition 
of distributed energy resources based on technology-neutral principles, 
including the capability to provide load curtailment, load consumption 
or charging, injection, and ancillary services (e.g., regulation, 
reserves, and flexible ramping services).\259\ According to NRG, 
regulatory authorities may differ in their definition of distributed 
energy resources, but generally reference their ability to ``generate 
and inject power into the distribution and/or transmission systems.'' 
Thus, NRG states, distributed energy resources should be defined as a 
class of assets that can both inject and curtail electricity.\260\
---------------------------------------------------------------------------

    \256\ NYISO Indicated Transmission Owner Comments (RM16-23) at 
15.
    \257\ NYISO Comments (RM16-23) at 11 (stating it defines 
distributed energy resource as ``a resource, or a set of resources, 
typically located on an end-use customer's premises that can provide 
wholesale market services but are usually operated for the purpose 
of supplying the customer's electric load''). We note that, on 
January 23, 2020, the Commission accepted NYISO's proposed tariff 
revisions related to aggregations, including its proposal to define 
Distributed Energy Resource as: (i) A facility comprising two or 
more Resource types behind a single point of interconnection with an 
Injection Limit of 20 MW or less; or (ii) a Demand Side Resource; or 
(iii) a Generator with an Injection Limit of 20 MW or less, that is 
electrically located in the [New York Control Area]. NYISO 
Aggregation Order, 170 FERC ] 61,033; see NYISO, NYISO Tariffs, 
NYISO MST, Section 2.4 MST Definitions--D (15.0.0).
    \258\ NYISO Comments (RM16-23) at 11.
    \259\ NRG Comments (2018 RM18-9) at 3.
    \260\ Id. at 5-6.
---------------------------------------------------------------------------

    108. EEI asks the Commission to clarify the types of distributed 
energy resources that qualify as ``thermal storage,'' noting that if 
the thermal energy cannot be readily transformed into electric energy, 
then the storage device cannot be used as an electric resource.\261\ 
Public Interest Organizations seek clarification that thermal storage 
includes, but is not limited to, both grid-enabled water heaters and 
grid-enabled thermostats, which can precool or preheat to avoid energy 
usage during peak demand, make and store ice to use as air 
conditioning, and direct control of smart-home energy management.\262\
---------------------------------------------------------------------------

    \261\ EEI Comments (RM16-23) at 16 n.23.
    \262\ Public Interest Organizations Comments (RM16-23) at 15-16 
& nn.45-46.
---------------------------------------------------------------------------

    109. Some commenters seek to capture a broad range of distributed

[[Page 67114]]

energy resources in the definition. Advanced Energy Economy asks the 
Commission to revise the definition to explicitly include energy 
efficiency and demand response resources of all types as well as 
``customer site[s] capable of demand reduction.'' \263\ Other 
commenters also request or support including energy efficiency 
resources in the definition of distributed energy resource.\264\ NYISO 
Indicated Transmission Owners request clarification that intermittent 
generation may be considered a distributed energy resource, which can 
be aggregated into dispatchable distributed energy resource 
aggregations.\265\ They add that certain behind-the-meter intermittent 
generation may not be a distributed energy resource if it participates 
in a distribution utility's net metering or other program regarding 
which the Commission has clarified that the resource is not engaging in 
a wholesale sale for jurisdictional purposes.\266\
---------------------------------------------------------------------------

    \263\ Advanced Energy Economy Comments (RM16-23) at 21.
    \264\ E4TheFuture Comments (RM16-23) at 1; Efficient Holdings 
Comments (RM16-23) at 6-7; Public Interest Organizations Comments 
(RM16-23) at 15-16.
    \265\ NYISO Indicated Transmission Owners Comments (RM16-23) at 
15.
    \266\ Id. at n.17.
---------------------------------------------------------------------------

    110. Advanced Energy Management requests that the Commission 
clarify that its definition of distributed energy resources includes 
demand response resources, or that demand response resources can choose 
to participate in distributed energy resource participation models 
where they are a better fit.\267\
---------------------------------------------------------------------------

    \267\ Advanced Energy Management Comments (RM16-23) at 8-10.
---------------------------------------------------------------------------

    111. Commenters ask for assurance that the NOPR does not change 
existing demand response rules, and that resources currently 
participating as demand response could continue to do so, even if they 
would fall under the definition of a distributed energy resource.\268\ 
They note that certain reforms may drive existing, low-cost commercial 
and industrial demand response from the market.\269\ Advanced Energy 
Management argues that the NOPR may be more applicable to newer forms 
of distributed energy resources that currently are not accommodated by 
a demand response model and that the demand response model should not 
be changed.\270\
---------------------------------------------------------------------------

    \268\ Advanced Energy Economy Comments (RM16-23) at 50-51 
(noting that existing market rules recognize a distinction between 
demand response and distributed energy resource aggregations, such 
as in CAISO, where there are separate programs for exporting 
distributed energy resources and non-exporting distributed energy 
resources that operate as demand response); Advanced Energy 
Management Comments (RM16-23) at 6 (noting specifically the reforms 
in Section III.B.4 of the NOPR for distributed energy resource 
aggregators as it applies to commercial and industrial demand 
response); IRC Comments (RM16-23) at 7; PJM Comments (RM16-23) at 6.
    \269\ Advanced Energy Management Comments (RM16-23) at 7.
    \270\ Id. at 6-8.
---------------------------------------------------------------------------

    112. PJM, however, states that it does not view energy efficiency 
or load curtailment as distributed energy resources, based upon PJM's 
distinction between its existing and robust participation models for 
energy efficiency and demand response.\271\ To limit disruption to its 
models, PJM distinguishes distributed energy resources by limiting them 
to generation and electric storage resources capable of injecting 
energy onto the distribution system.\272\
---------------------------------------------------------------------------

    \271\ PJM Comments (2018 RM18-9) at 1.
    \272\ Id. at 2.
---------------------------------------------------------------------------

    113. A few commenters discuss the definition of a distributed 
energy resource aggregator. E4TheFuture supports the Commission's 
proposal to require each RTO/ISO to revise its tariff to define 
distributed energy resource aggregators as a type of market 
participant.\273\ Efficient Holdings asks the Commission to create a 
universal and comprehensive market participant definition for 
distributed energy resource aggregators that would be flexible enough 
to incorporate emerging technologies and provide these resources the 
same ability to offer multiple products afforded to large scale 
generators.\274\ MISO Transmission Owners also assert that the term 
``distributed energy resource aggregator'' should be formally defined; 
in addition, they ask whether that term is inclusive of behind- and 
front-of-the-meter products and whether a utility could bid its 
existing demand response peak shaving assets into the market as a 
distributed energy resource aggregator.\275\ Advanced Energy Management 
requests clarification on the distinction between demand response and 
distributed energy resource aggregators, arguing that the former should 
consist of behind-the-meter resources that participate only in the 
demand response framework, while the latter could be either behind- or 
front-of-the-meter resources and participate in any model.\276\
---------------------------------------------------------------------------

    \273\ E4TheFuture Comments (RM16-23) at 2.
    \274\ Efficient Holdings Comments (RM16-23) at 7.
    \275\ MISO Transmission Owners Comments (RM16-23) at 17-18.
    \276\ Advanced Energy Management Comments (RM16-23) at 6.
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3. Commission Determination
    114. Upon consideration of the comments received, we modify the 
definition of distributed energy resource proposed in the NOPR. 
Specifically, we amend Sec.  35.28(b) of the Commission's regulations 
to define a distributed energy resource as ``any resource located on 
the distribution system, any subsystem thereof or behind a customer 
meter.'' These resources may include, but are not limited to, resources 
that are in front of and behind the customer meter, electric storage 
resources, intermittent generation, distributed generation, demand 
response, energy efficiency, thermal storage, and electric vehicles and 
their supply equipment--as long as such a resource is ``located on the 
distribution system, any subsystem thereof or behind a customer 
meter.'' \277\ The revised definition of distributed energy resource 
that we adopt in this final rule is technology-neutral, thereby 
ensuring that any resource that is technically capable of providing 
wholesale services through aggregation is eligible to do so, which 
enhances competition in the RTO/ISO markets and, in turn, helps to 
ensure that these markets produce just and reasonable rates.\278\
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    \277\ As discussed further in Section IV.C.2 below, we find that 
RTOs/ISOs may not prohibit any particular type of distributed energy 
resource technology from participating in distributed energy 
resource aggregations. We note that the types of thermal storage 
described by EEI and Public Interest Organizations may qualify as 
demand response or energy efficiency resources under RTO/ISO market 
rules.
    \278\ See infra Section IV.C.2 (Types of Technologies).
---------------------------------------------------------------------------

    115. In response to Advanced Energy Economy's request, we clarify 
that energy efficiency and demand response resources are capable of 
providing demand reductions at customer sites, and therefore ``customer 
sites capable of demand reduction'' may meet the definition of a 
distributed energy resource.\279\ In response to requests for regional 
flexibility, we further note that RTOs/ISOs can propose their own 
definitions for the Commission's evaluation as long as the scope and 
applicability of the proposed definitions are consistent with the 
Commission's definition of distributed energy resource and consistent 
with all aspects of this final rule.
---------------------------------------------------------------------------

    \279\ See Advanced Energy Economy Comments (RM16-23) at 21.
---------------------------------------------------------------------------

    116. We find that the NOPR proposal to define a distributed energy 
resource as a source or sink of power risked creating unnecessary 
confusion because it was not clear as to which resources could qualify 
and the definition inadvertently excluded some resources

[[Page 67115]]

that could be aggregated to sell energy, capacity, or ancillary 
services. The revised definition of distributed energy resource is 
intended to be broad enough to encompass current and future 
technologies that qualify as distributed energy resources with no 
further need to clarify or revise the definition as new technologies 
are developed.
    117. As discussed further below in Sections IV.C, IV.F, and IV.H, 
we clarify that distributed energy resource aggregations must be able 
to meet the qualification and performance requirements to provide the 
service that they are offering into RTO/ISO markets. For example, 
because a type of resource like energy efficiency cannot be dispatched, 
metered, or telemetered, it would likely be impossible for distributed 
energy resource aggregations comprised exclusively of energy efficiency 
resources to be able to provide energy or ancillary services to the 
RTOs/ISOs because the aggregation would not be technically capable of 
providing those services.
    118. We also adopt a modified definition of distributed energy 
resource aggregator than was proposed in the NOPR, and therefore amend 
Sec.  35.28(b) of the Commission's regulations to define a distributed 
energy resource aggregator as ``the entity that aggregates one or more 
distributed energy resources for purposes of participation in the 
capacity, energy and/or ancillary service markets of the regional 
transmission organizations and/or independent system operators.'' \280\ 
We clarify that, because demand response falls under the definition of 
distributed energy resource, an aggregator of demand response could 
participate as a distributed energy resource aggregator. However, this 
final rule does not affect existing demand response rules.
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    \280\ As discussed further in Section IV.C.6, consistent with 
Order No. 719, we require each RTO/ISO to allow a single qualifying 
distributed energy resource to serve as its own distributed energy 
resource aggregator. See Order No. 719, 125 FERC ] 61,071 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.'').
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C. Eligibility To Participate in RTO/ISO Markets Through a Distributed 
Energy Resource Aggregator

1. Participation Model
a. NOPR Proposal
    119. In the NOPR, the Commission proposed 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 RTO/ISO markets.\281\ Specifically, the Commission proposed to 
require that each RTO/ISO revise its tariff to define distributed 
energy resource aggregators as a type of market participant that can 
participate in RTO/ISO markets under the participation model that best 
accommodates the physical and operational characteristics of its 
distributed energy resource aggregation. The Commission explained that 
this 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.\282\ The Commission stated that, while it expects 
efficiencies to be gained by allowing distributed energy resource 
aggregations to participate under existing participation models, it 
also acknowledges that the use of existing participation models may not 
be possible in every RTO/ISO based on how market participation is 
structured. However, the Commission emphasized that, where 
participation under existing participation models is possible, the 
distributed energy resource aggregation must still satisfy the 
eligibility requirements of the applicable participation model before 
it can participate in RTO/ISO markets under that participation model. 
Therefore, to accommodate the participation of distributed energy 
resource aggregations, the Commission proposed that each RTO/ISO modify 
the eligibility requirements for existing participation models as 
necessary to allow for such participation.
---------------------------------------------------------------------------

    \281\ NOPR, 157 FERC ] 61,121 at P 124.
    \282\ Id. P 128.
---------------------------------------------------------------------------

b. Comments
    120. Several commenters assert that a new participation model for 
distributed energy resource aggregations is necessary.\283\ The Ohio 
Commission, Tesla/SolarCity, and Public Interest Organizations support 
the Commission's efforts to require each RTO/ISO to modify its tariff 
to provide a participation model for distributed energy resource 
aggregators.\284\ AES Companies explain that a new and separate 
participation model is necessary to facilitate market participation of 
distributed energy resource aggregations due to their unique impacts on 
the bulk electric system and state-jurisdictional considerations.\285\ 
Stem also asserts that each RTO/ISO needs to implement a model that 
accommodates behind-the-meter exporting resources or, if that is 
impractical, to implement a model in which behind-the-meter non-
exporting resources can fully participate.\286\ Microgrid Resources 
Coalition notes its support for allowing aggregations of behind-the-
meter distributed energy resources to participate fully and notes that 
it is important to allow for the participation of distributed energy 
resources that have flexible controllable output.\287\
---------------------------------------------------------------------------

    \283\ See, e.g., Microsoft Comments (2018 RM18-9) at 15; NRG 
Comments (2018 RM18-9) at 4.
    \284\ Ohio Commission Comments (RM16-23) at 4; Public Interest 
Organizations Comments (RM16-23) at 21; Tesla/SolarCity Comments 
(RM16-23) at 20.
    \285\ AES Companies Comments (RM16-23) at 32 (noting that, 
because the proposed definition of a distributed energy resource 
aggregation includes resources that are both a source and a sink, 
the aggregation can be a distributed generation entity or a micro 
grid (includes generation, load, and distribution lines)).
    \286\ Stem Comments (RM16-23) at 12-13.
    \287\ Microgrid Resources Coalition Comments (2018 RM18-9) at 3, 
4-5.
---------------------------------------------------------------------------

    121. Commenters offer a range of views regarding how distributed 
energy resource aggregations should be treated under an RTO's/ISO's 
participation model. Some commenters suggest that when acting as a 
generator, distributed energy resource aggregations should be treated 
like any generator.\288\ Other commenters focus on the need for clarity 
around what services distributed energy resources will be allowed to 
provide and how they can be aggregated.\289\ For example, Xcel Energy 
Services contends that distributed energy resources will likely not 
have firm transmission service and may not be able to deliver services 
to the system that depend on firm transmission such as capacity or 
black start capability.\290\ Some commenters argue that an aggregation 
of distributed energy resources should be treated as a single resource 
by the wholesale market operator, noting that this would reduce 
barriers and may improve performance.\291\ Other commenters similarly 
support the ability of an aggregator to transact directly in the 
wholesale market without a load serving entity or electric distribution 
company as agent.\292\
---------------------------------------------------------------------------

    \288\ NYISO Comments (RM16-23) at 13; PJM Comments (RM16-23) at 
5-6.
    \289\ AES Companies Comments (RM16-23) at 39; Avangrid Comments 
(RM16-23) at 10; Tesla/SolarCity Comments (RM16-23) at 20; Xcel 
Energy Services Comments (RM16-23) at 12-13.
    \290\ Xcel Energy Services Comments (RM16-23) at 12-13.
    \291\ Advanced Microgrid Solutions Comments (RM16-23) at 7; NRG 
Comments (RM16-23) at 10; Stem Comments (RM16-23) at 5; Tesla/
SolarCity Comments (RM16-23) at 20-21.
    \292\ Mosaic Power Comments (RM16-23) at 5.
---------------------------------------------------------------------------

    122. Some commenters posit that the Commission should allow the

[[Page 67116]]

distributed energy resource aggregator to determine the participation 
model for distributed energy resource aggregations based on the 
characteristics of the aggregation as a whole, even if it includes 
diverse technologies,\293\ and that aggregators should be able to 
define the capabilities of the resources in their aggregations.\294\ 
Some commenters stress the importance of allowing diverse technologies 
(e.g., solar, storage, and demand response) \295\ to be in the same 
aggregation, while others argue that entities that own multiple 
distributed energy resources should be allowed to participate in more 
than one aggregation.\296\ Stem asserts that, if behind-the-meter 
resources are directed to an existing participation model, then the 
Commission should require a detailed review to show that the existing 
model does not discriminate against the capabilities of new 
resources.\297\
---------------------------------------------------------------------------

    \293\ Advanced Energy Economy Comments (RM16-23) at 21.
    \294\ Microgrid Resources Coalition Comments (RM16-23) at 6.
    \295\ Advanced Energy Economy Comments (RM16-23) at 21.
    \296\ NextEra Comments (RM16-23) at 14; Public Interest 
Organizations Comments (RM16-23) at 16.
    \297\ Stem Comments (RM16-23) at 13.
---------------------------------------------------------------------------

    123. Advanced Energy Management states that, if an end-use customer 
is capable of curtailing load and discharging a battery located behind 
its meter, it is unclear whether the customer's distributed energy 
resource aggregator could aggregate both the storage and load 
curtailment into the same resource. Advanced Energy Management also 
states that it would be inefficient to have the same customer 
participate as part of two different resources or through two 
unnecessarily separate participation models.\298\ MISO Transmission 
Owners request clarity on the interplay between the rules that apply to 
storage and the rules that apply to distributed energy resources, 
noting that some resources may fall into both categories, and any 
potential conflicts should be resolved. For example, MISO Transmission 
Owners seek clarity on whether an aggregator of electric vehicles is 
considered storage or a distributed energy resource aggregator, or 
both.\299\
---------------------------------------------------------------------------

    \298\ Advanced Energy Management Comments (RM16-23) at 9.
    \299\ MISO Transmission Owners Comments (RM16-23) at 20.
---------------------------------------------------------------------------

    124. Microgrid Resources Coalition argues that RTOs/ISOs should 
allow aggregators to bid their resources together or separately as 
demand response and delivered power.\300\ Energy Storage Association 
also argues that any final rule should account for distributed energy 
resources' provision of bi-directional services,\301\ and Icetec 
asserts that a participation model should allow sites that mix load 
reductions and distributed energy resources to offer their combined 
capacity as a single market resource.\302\ Microgrid Resources 
Coalition also argues that distributed energy resource aggregations, 
particularly microgrids, do not fit neatly into existing participation 
models or the new participation model for electric storage resources 
proposed in the NOPR.\303\
---------------------------------------------------------------------------

    \300\ Microgrid Resources Coalition Comments (2018 RM18-9) at 8.
    \301\ Energy Storage Association Comments (2018 RM18-9) at 2.
    \302\ Icetec Energy Services Comments (2018 RM18-9) at 6.
    \303\ Microgrid Resources Coalition Comments (RM16-23) at 5-6 
(noting that demand response participation models that are based on 
shutting down an industrial process or activating a seldom used 
generator are not appropriate for resources like a microgrid that 
uses multiple conventional and unconventional resources to manage 
multiple loads of varying flexibility and is optimized by 
sophisticated controls).
---------------------------------------------------------------------------

    125. Other commenters recommend that the Commission require the 
RTOs/ISOs to incorporate sufficient flexibility into their 
participation models. Public Interest Organizations suggest that, in 
order to take advantage of distributed energy resources' ability to 
absorb excess electricity, shift load, and reinject electricity onto 
the grid at peak times, participation models should be flexible and 
enable resources to act as demand-side resources and/or as generation 
and should not require resources to choose one participation model 
exclusively.\304\ Efficient Holdings similarly contends that 
participation models should not force distributed energy resources to 
choose between individual categories of services to offer into the 
market at any given time.\305\ NYISO Indicated Transmission Owners 
request that energy-only distributed energy resource aggregations be 
allowed in the distributed energy resource participation model, and 
consistent with existing practice for other energy-only resources, 
should not be required to offer in the day-ahead market and should be 
permitted in both the day-ahead and real-time markets.\306\ NYISO also 
asks the Commission to permit regional flexibility that would allow 
NYISO to create rules and market designs that meet its needs while 
meeting the Commission's desire to integrate distributed energy 
resources into the wholesale energy, ancillary service, and capacity 
markets.\307\
---------------------------------------------------------------------------

    \304\ Public Interest Organizations Comments (RM16-23) at 19.
    \305\ Efficient Holdings Comments (RM16-23) at 7-8.
    \306\ NYISO Indicated Transmission Owners Comments (RM16-23) at 
10-11 (citing Cal. Indep. Sys. Operator Corp., 155 FERC ] 61,229 at 
P 11 (accepting CAISO model that allows intermittent resources to 
participate in a dispatchable aggregation)).
    \307\ NYISO Comments (RM16-23) at 11.
---------------------------------------------------------------------------

    126. New York State Entities ask the Commission to grant RTOs/ISOs 
the flexibility to devise participation models that reflect market 
conditions and ongoing initiatives such as those described in NYISO's 
Distributed Energy Resource Roadmap.\308\ New York State Entities 
highlight that NYISO is attempting to harmonize the developing 
wholesale market enhancements with the complementary retail programs 
emerging from New York's Reforming the Energy Vision initiative.\309\
---------------------------------------------------------------------------

    \308\ New York State Entities Comments (RM16-23) at 12, 13 
(citing Distributed Energy Resources Roadmap for New York's 
Wholesale Electricity Markets, (January 2017), New York Independent 
System Operator, Inc.) (Distributed Energy Resource Roadmap); see 
supra note 21.
    \309\ New York State Entities Comments (RM16-23) at 13 (citing 
Distributed Energy Resource Roadmap at 4-6).
---------------------------------------------------------------------------

    127. Some commenters note that the RTOs/ISOs need new and revised 
market rules to incorporate distributed energy resources, but not 
necessarily a new participation model.\310\ ISO-NE argues that a new 
participation model would be costly and disruptive and create no 
additional value because distributed energy resources can monetize 
their value to the grid through several existing avenues.\311\
---------------------------------------------------------------------------

    \310\ Advanced Energy Economy Comments (2018 RM18-9) at 5-6; 
Advanced Energy Management Comments (2018 RM18-9) at 3; Icetec 
Energy Comments (2018 RM18-9) at 3-4, 6; NYISO Indicated 
Transmission Owners Comments (2018 RM18-9) at 5.
    \311\ ISO-NE Comments (2018 RM18-9) at 2-4.
---------------------------------------------------------------------------

    128. Advanced Energy Management argues that a final rule should not 
require RTOs/ISOs to replace their existing programs, such as demand 
response programs.\312\ Icetec argues, however, that existing 
``interconnected generation'' models and demand response models are not 
sufficient for distributed energy resource participation, and states 
that capacity market requirements for year-round performance in PJM 
prevent distributed energy resources from offering their full capacity 
value.\313\ Tesla argues that, regardless of model, distributed energy 
resources should receive comparable compensation.\314\
---------------------------------------------------------------------------

    \312\ Advanced Energy Management Comments (2018 RM18-9) at 3.
    \313\ Icetec Comments (2018 RM18-9) at 5
    \314\ Tesla Comments (2018 RM18-9) at 1, 9.
---------------------------------------------------------------------------

c. Commission Determination
    129. In this final rule, we adopt the NOPR proposal to require each 
RTO/ISO to have tariff provisions that allow

[[Page 67117]]

distributed energy resource aggregations to participate directly in 
RTO/ISO markets. We conclude that existing participation models may 
create barriers to the participation of distributed energy resource 
aggregators in RTO/ISO markets by limiting the operation of distributed 
energy resource aggregations and the services that they may be eligible 
to provide.
    130. We therefore adopt the NOPR proposal to add Sec.  
35.28(g)(12)(i) to the Commission's regulations and require each RTO/
ISO to establish distributed energy resource aggregators as a type of 
market participant and to allow distributed energy resource aggregators 
to register distributed energy resource aggregations under one or more 
participation models in the RTO's/ISO's tariff that accommodate the 
physical and operational characteristics of the distributed energy 
resource aggregation. However, upon consideration of the comments, we 
modify the NOPR proposal to provide each RTO/ISO with greater 
flexibility to determine how best to revise the participation models 
set forth in its market rules to facilitate the participation of 
distributed energy resource aggregations. Specifically, to meet the 
goals of the final rule, each RTO/ISO can comply with the requirement 
to allow distributed energy resource aggregators to participate in its 
markets by modifying its existing participation models to facilitate 
the participation of distributed energy resource aggregations, by 
establishing one or more new participation models for distributed 
energy resource aggregations, or by adopting a combination of those two 
approaches. The Commission will evaluate each proposal submitted on 
compliance to determine whether it meets the goals of this final rule 
to allow distributed energy resources to provide all services that they 
are technically capable of providing through aggregation.
    131. This approach will provide each RTO/ISO with the flexibility 
to facilitate the participation of distributed energy resource 
aggregations in its markets in a way that is efficient and cost-
effective as well as fits the market design of the RTO/ISO. Permitting 
each RTO/ISO to create one or more new participation models for 
distributed energy resources addresses commenter concerns about the 
limitations of existing models. Likewise, permitting each RTO/ISO to 
modify existing participation models, instead of requiring creation of 
one or more new participation models, addresses commenter concerns that 
creating a new participation model may be too costly or disruptive, or 
that existing models do not need to be replaced.
    132. Providing RTOs/ISOs with the flexibility to determine whether 
to modify existing participation models, create one or more new 
participation models, or use a combination of existing and new 
participation models will allow each RTO/ISO to reflect varying 
regional needs in its approach to allow distributed energy resource 
aggregators to participate in its markets.
2. Types of Technologies
a. NOPR Proposal
    133. In the NOPR, the Commission stated that distributed energy 
resources may include, but are not limited to, electric storage 
resources, distributed generation, thermal storage, and electric 
vehicles and their supply equipment.\315\ The Commission also 
preliminarily found that limiting the types of technologies that are 
allowed to participate in the RTO/ISO markets through distributed 
energy resource aggregators 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.\316\ The Commission 
stated that, while some individual resources or certain technologies 
may not be able to meet the qualification or performance requirements 
to provide services to the RTO/ISO markets on their own, they may 
satisfy such requirements as part of a distributed energy resource 
aggregation where resources complement one another's capabilities. The 
Commission further stated that 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.\317\
---------------------------------------------------------------------------

    \315\ NOPR, 157 FERC ] 61,121 at P 104; see supra Section IV.B. 
(Definitions of Distributed Energy Resource and Distributed Energy 
Resource Aggregation).
    \316\ NOPR, 157 FERC ] 61,121 at P 133.
    \317\ Id. P 133 n.231.
---------------------------------------------------------------------------

    134. In the NOPR, the Commission proposed to require that each RTO/
ISO revise its tariff so that it does not prohibit the participation of 
any particular type of technology in the RTO/ISO markets through a 
distributed energy resource aggregator.\318\ This was to help ensure 
that the market rules that RTOs/ISOs develop to comply with any final 
rule issued in this proceeding were sufficiently flexible to 
accommodate the participation of new distributed energy resources as 
technology evolves, and to acknowledge the potential that a distributed 
energy resource may meet qualification or performance requirements by 
participating in a distributed energy resource aggregation that it 
cannot on its own. The Commission stated, however, that, to the extent 
that existing rules or regulations explicitly prohibit certain 
technologies from participating in RTO/ISO markets, it did not intend 
to overturn those rules or regulations.
---------------------------------------------------------------------------

    \318\ Id. P 133.
---------------------------------------------------------------------------

b. Comments
    135. Several commenters support the Commission's proposal not to 
prohibit the participation of any particular type of technology in RTO/
ISO markets through a distributed energy resource aggregation.\319\ 
Generally, they state that it is important for the market rules to be 
resource neutral, allowing other attributes such as cost, quality, 
flexibility, and other attributes sought by market participants, to 
dictate which resources can successfully participate in RTO/ISO 
markets. They assert that resource neutrality reduces risk for 
investment in new technologies and preserves flexibility for the 
participation of future technologies and avoid unnecessary barriers to 
entry.
---------------------------------------------------------------------------

    \319\ See, e.g., AES Companies (RM16-23) at 32-33; CAISO 
Comments (RM16-23) at 23; City of New York Comments (RM16-23) at 8; 
Massachusetts Commission Comments (RM16-23) at 8-10; R Street 
Institute Comments (RM16-23) at 8.
---------------------------------------------------------------------------

    136. Several commenters argue that distributed energy resource 
aggregation participation models must allow a variety of technology 
configurations. Efficient Holdings argues that third party aggregators 
of behind-the-meter resources must have better access to the markets, 
which can be achieved through reforms including refined product 
definitions, reduction of burdensome and expensive operational 
requirements, and rules to address distribution utility non-compliance, 
embracing the broadest array of technologies possible.\320\ Energy 
Storage Association and Stem seek to ensure that front-of-the-meter 
resources, behind-the-meter exporting and non-exporting resources, and 
heterogeneous groups of resources are all able to participate in 
distributed energy

[[Page 67118]]

resource aggregations.\321\ Stem states that it is reasonable to 
restrict the mixing of front-of-the-meter, behind-the-meter exporting, 
and behind-the-meter non-exporting resources within a single 
aggregation.\322\
---------------------------------------------------------------------------

    \320\ Efficient Holdings Comments (RM16-23) at 7-9.
    \321\ Energy Storage Association (RM16-23) at 24-25; Stem 
Comments (RM16-23) at 7, 12, 13.
    \322\ Stem Comments (RM16-23) at 12, 13.
---------------------------------------------------------------------------

    137. Commenters also note that allowing distributed energy resource 
aggregations to include multiple types of distributed technologies 
allows multi-technology aggregations such as microgrids and 
complementary resources such as solar and storage to participate in 
RTO/ISO markets, will provide RTOs/ISOs another source of flexible 
controllable output. CAISO states that, consistent with the 
Commission's proposal, its Commission-approved Distributed Energy 
Resource Provider model allows aggregations to consist of different 
distributed energy resource types.\323\ AES Companies encourage the 
Commission to review the validity of any prohibitions on the 
participation of existing technologies (i.e., rules currently exist 
prohibiting certain types of resources in the tariffs for direct market 
participation) in a separate docket rather than in this 
proceeding.\324\
---------------------------------------------------------------------------

    \323\ CAISO Comments (RM16-23) at 23.
    \324\ AES Companies Comments (RM16-23) at 32-33.
---------------------------------------------------------------------------

    138. In contrast, some commenters express general concerns about 
aggregations that include different types of technologies.\325\ 
American Petroleum Institute contends that aggregating different types 
of distributed energy resources will make market optimization more 
difficult.\326\ TAPS urges the Commission to give RTOs/ISOs discretion, 
claiming that combining multiple types of distributed energy resources 
within a single aggregation may be beneficial but could pose issues 
when determining locational and minimum size requirements for mixed 
aggregations.\327\
---------------------------------------------------------------------------

    \325\ American Petroleum Institute Comments (RM16-23) at 10; 
ISO-NE Comments (RM16-23) at 31-35; TAPS Comments (RM16-23) at 27.
    \326\ American Petroleum Institute Comments (RM16-23) at 10.
    \327\ TAPS Comments (RM16-23) at 27.
---------------------------------------------------------------------------

    139. Several commenters state that RTOs/ISOs will need flexibility 
to avoid imposing additional costs or barriers to entry on different 
types and configurations of prospective distributed energy resource 
aggregations.\328\ SPP argues that managing an aggregation as a 
discrete set of different assets may be infeasible in commitment and 
dispatch and that sub-categorizing different types of distributed 
energy resources within a single aggregation would be extremely 
complex.\329\ PJM Market Monitor states that distributed generation and 
distributed storage should not be mixed within aggregations and that 
resources should be aggregated by type for each wholesale market node. 
For example, according to PJM Market Monitor, distributed generation 
should be aggregated, at the same node with other distributed 
generation, while distributed storage should be aggregated at the same 
node with other distributed storage.\330\
---------------------------------------------------------------------------

    \328\ CAISO Comments (RM16-23) at 38; Fresh Energy/Sierra Club/
Union of Concerned Scientists Comments (RM16-23) at 3; New York 
State Entities Comments (RM16-23) at 21.
    \329\ SPP Comments (RM16-23) at 22.
    \330\ PJM Market Monitor Comments (RM16-23) at 15-16.
---------------------------------------------------------------------------

    140. ISO-NE also asks for flexibility and provides several 
arguments as to why certain heterogeneous aggregations are not 
desirable.\331\ More specifically, ISO-NE argues that (1) demand-side 
load resources should only be allowed to participate in aggregations 
with other load because of how certain charges and credits are 
allocated to load; \332\ (2) electric storage resources would not 
benefit from participating in aggregations with non-storage distributed 
energy resources because of state-of-charge management issues; \333\ 
and (3) aggregations of non-intermittent resources with different 
physical and economic characteristics would need to self-schedule, 
potentially adding financial risk for the participant, reducing the 
efficiency of the dispatch, and contributing to uplift or excess 
generation conditions.\334\ In addition, ISO-NE states that demand 
response resources should not be allowed to participate in distributed 
energy resource aggregations because of their distinct settlement 
rules.\335\ According to ISO-NE, in order to accommodate aggregations 
that include both demand response and non-demand response resource 
components, ISO-NE would need to establish rules to disaggregate these 
components for purposes of settlement. ISO-NE requests that, if they 
are not required to participate separately, the Commission clarify 
which rules must apply to such resources.\336\ ISO-NE adds that its 
region is steadily transitioning its energy market away from self-
scheduling and toward requiring all energy supply and demand to be 
priced and that being required to implement rules that accommodate 
aggregations composed of heterogenous resource types would be a 
significant step backwards in that effort.\337\
---------------------------------------------------------------------------

    \331\ ISO-NE Comments (RM16-23) at 31-36.
    \332\ Id. at 33.
    \333\ Id. at 33-34.
    \334\ Id. at 34-35.
    \335\ Id. at 32.
    \336\ Id. at 32-33.
    \337\ Id. at 34-35.
---------------------------------------------------------------------------

c. Commission Determination
    141. To implement Sec.  35.28(g)(12)(ii)(a) of the Commission's 
regulations, we require that each RTO's/ISO's rules do not prohibit any 
particular type of distributed energy resource technology from 
participating in distributed energy resource aggregations. We find that 
limiting the types of technologies that are allowed to participate in 
RTO/ISO markets through a 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. Requiring that each RTO's/ISO's rules do not 
exclude any particular types of technology from participating in 
distributed energy resource aggregations in RTO/ISO markets will ensure 
a technology-neutral approach to distributed energy resource 
aggregations, which will ensure that more resources are able to 
participate in such aggregations, thereby helping to enhance 
competition and ensure just and reasonable rates.
    142. We agree with commenters that generally support requiring 
RTOs/ISOs to allow groupings of different technology types in 
distributed energy resource aggregations.\338\ Additionally, we agree 
with NRG that, while some individual resources or certain technologies 
may not be able to meet the qualification or performance requirements 
to provide certain services to RTO/ISO markets on their own, they may 
be able to satisfy such requirements as part of a distributed energy 
resource aggregation where resources complement one another's 
capabilities.\339\ For instance, in the NOPR, the Commission stated 
that aggregating electric storage resources with distributed generation 
could allow the aggregation 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

[[Page 67119]]

distributed generation may not be able to provide on its own.\340\ 
Therefore, to implement Sec.  35.28(g)(12)(ii)(a) of the Commission's 
regulations, we clarify the NOPR proposal and require each RTO/ISO to 
revise its tariff to allow different types of distributed energy 
resource technologies to participate in a single distributed energy 
resource aggregation (i.e., allow heterogeneous distributed energy 
resource aggregations).\341\ Requiring that RTOs/ISOs allow 
heterogeneous aggregations will further enhance competition in RTO/ISO 
markets by ensuring that complementary resources, including those with 
different physical and operational characteristics, can meet 
qualification and performance requirements such as minimum run times, 
which will help ensure that these markets produce just and reasonable 
rates.
---------------------------------------------------------------------------

    \338\ See, e.g., AES Companies (RM16-23) at 32-33; CAISO 
Comments (RM16-23) at 23; City of New York Comments (RM16-23) at 8; 
Energy Storage Association (RM16-23) at 24-25; Fresh Energy/Sierra 
Club/Union of Concerned Scientists Comments (RM16-23) at 3; 
Massachusetts Commission Comments (RM16-23) at 8-10; New York State 
Entities Comments (RM16-23) at 21; R Street Institute Comments 
(RM16-23) at 8; Stem Comments (RM16-23) at 7, 12, 13.
    \339\ NRG Comments (RM16-23) at 19.
    \340\ NOPR, 157 FERC ] 61,121 at P 133 n.231.
    \341\ ISO-NE defines a heterogeneous aggregation as consisting 
of ``different resource types, such that, for example, a single 
aggregation might consist of a battery, distributed generation 
assets, and electric vehicles.'' ISO-NE Comments (RM16-23) at 31.
---------------------------------------------------------------------------

    143. We are unconvinced by arguments in favor of homogeneous 
aggregations. We find that the benefits of allowing heterogeneous 
aggregations outweigh the concerns regarding complexity of 
implementation. While SPP and ISO-NE indicate that market rules 
allowing for heterogeneous aggregations would be challenging to develop 
and implement,\342\ neither explains why their markets are unique such 
that it would be necessary for the Commission to permit regional 
flexibility. In addition, concerns about RTOs'/ISOs' ability to manage 
a diverse set of distributed energy resources are misplaced because the 
distributed energy resource aggregator, not an individual distributed 
energy resource in the aggregation, is the market participant with whom 
the RTO/ISO would be interacting. Moreover, the aggregator, not the 
RTO/ISO, would be responsible for ensuring that the distributed energy 
resource aggregation meets applicable RTO/ISO performance and 
registration requirements.
---------------------------------------------------------------------------

    \342\ ISO-NE Comments (RM16-23) at 32; SPP Comments (RM16-23) at 
21-22.
---------------------------------------------------------------------------

    144. We also are not persuaded by ISO-NE's reservations related to 
state-of-charge management and self-scheduling. We find that market 
participants are best positioned to make these participation decisions. 
If ISO-NE is correct that self-scheduling adds financial risk for the 
participant and that, because of state-of-charge management issues, 
electric storage resources would not benefit from participating in 
distributed energy resource aggregations, then we would expect market 
participants to act in their economic interest.
    145. As to ISO-NE's concerns about incorporating demand response 
resources into distributed energy resource aggregations, we note that 
demand response aggregations and the resources in them that effectuate 
load reductions currently are not necessarily composed of the same 
types of technologies and are already providing services in numerous 
RTO/ISO markets. Therefore, similar to the Commission's finding in 
Order No. 745-A, from the perspective of the RTO/ISO, the means by 
which an aggregation is able to provide wholesale services does not 
change the value of that service to the wholesale grid.\343\ In 
response to ISO-NE's request for clarification about which settlement 
rules apply to distributed energy resource aggregations composed of 
both demand response and non-demand response resources, we clarify that 
the requirements in Order No. 745 would apply to demand response 
resources participating in heterogeneous aggregations. In addition, 
while ISO-NE would prefer to exclude demand response resources from 
distributed energy resource aggregations to simplify settlement and the 
allocation of charges and credits to load, we reiterate that the 
benefits of allowing heterogeneous aggregations outweigh ISO-NE's 
preference to limit the types of resources that can participate in 
aggregations. We clarify, however, that the participation of demand 
response in distributed energy resource aggregations is subject to the 
opt-out and opt-in requirements of Order Nos. 719 and 719-A. Therefore, 
if the relevant electric retail regulatory authority where a demand 
response resource is located has either chosen to opt out or has not 
opted in, then the demand response resource may not participate in a 
distributed energy resource aggregation.\344\
---------------------------------------------------------------------------

    \343\ As the Commission stated in Order No. 745-A, ``[f]rom the 
perspective of the grid, the manner in which a customer is able to 
produce such a load reduction from its validly established baseline 
(whether by shifting production, using internal generation, 
consuming less electricity, or other means) does not change the 
effect or value of the reduction to the wholesale grid.'' Demand 
Response Compensation in Organized Wholesale Energy Markets, Order 
No. 745-A, 137 FERC ] 61,215, at P 66 (2011), reh'g denied, Order 
No. 745-B, 138 FERC ] 61,148 (2012), vacated sub nom. Elec. Power 
Supply Ass'n v. FERC, 753 F.3d 216 (D.C. Cir. 2014), rev'd & 
remanded sub nom. EPSA, 136 S. Ct. 760.
    \344\ See supra P 59.
---------------------------------------------------------------------------

    146. As to ISO-NE's concern that self-scheduling will reduce the 
efficiency of the dispatch and contribute to uplift or excess 
generation conditions, we note that no other RTOs/ISOs raise this 
concern. Market rules allowing for heterogeneous aggregations are 
already in place in CAISO,\345\ and the Commission recently accepted 
market rules allowing for heterogeneous aggregations in NYISO.\346\ 
Based on the record before us, ISO-NE has not sufficiently demonstrated 
why it is uniquely unable to implement market rules that can overcome 
these dispatch, uplift, and excess generation challenges.
---------------------------------------------------------------------------

    \345\ Cal. Indep. Sys. Operator Corp., 155 FERC ] 61,229 at P 
11.
    \346\ NYISO Aggregation Order, 170 FERC ] 61,033.
---------------------------------------------------------------------------

3. Double Counting of Services
a. NOPR Proposal
    147. In the NOPR, the Commission stated that it is appropriate for 
each RTO/ISO to limit the participation of resources in RTO/ISO markets 
through a distributed energy resource aggregator that are receiving 
compensation for the same services as part of another program.\347\ The 
Commission explained that, because resources able to register as part 
of a distributed energy resource 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, the Commission proposed 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 
RTO/ISO markets as part of a distributed energy resource aggregation.
---------------------------------------------------------------------------

    \347\ NOPR, 157 FERC ] 61,121 at P 134.
---------------------------------------------------------------------------

b. Comments
    148. Most commenters that address the issue of double counting 
agree that distributed energy resources should not be compensated twice 
for providing the same service but disagree on what constitutes ``the 
same service,'' how to implement such a requirement, or who should be 
responsible.\348\ In this regard, Pacific Gas & Electric supports 
prevention of double compensation and discusses the processes in 
California that protects against the bypass of retail rates for behind-
the-meter distributed energy resources that both consume and

[[Page 67120]]

export electricity for both retail and wholesale purposes.\349\ Some 
commenters also assert that the NOPR proposal provides a solution to 
prevent double compensation,\350\ provides clear jurisdictional 
lines,\351\ reduces confusion,\352\ and could ease coordination issues 
for distributed energy resources and alleviate the limitations of 
metering and accounting practices to distinguish between wholesale and 
retail activities.\353\ In addition, some commenters posit that 
allowing distributed energy resources that earn compensation in out-of-
market retail programs to participate in RTO/ISO markets may distort 
price formation, skewing market results and clearing prices.\354\ Other 
commenters express concern that dual wholesale and retail participation 
could enable distributed energy resources to arbitrage between retail 
and wholesale markets, creating opportunities for market 
manipulation,\355\ or to cherry pick between retail and wholesale 
constructs, preventing effective distribution system planning.\356\ To 
address this concern, some commenters suggest that the Commission 
should require RTOs/ISOs to restrict the ability of distributed energy 
resources to switch between wholesale and retail participation by 
imposing a waiting period of at least one year.\357\
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    \348\ See, e.g., Advanced Energy Economy Comments (RM16-23) at 
33-34; Calpine Comments (2018 RM18-9) at 6-7; Dominion Comments 
(RM16-23) at 9-10; Microsoft Corporation Comments (2018 RM18-9) at 
17; New York State Entities Comments (RM16-23) at 13.
    \349\ Pacific Gas & Electric Comments (2019 RM18-9) at 5.
    \350\ Avangrid Comments (RM16-23) at 11; Pacific Gas & Electric 
Comments (RM16-23) at 17.
    \351\ Delaware Commission Comments (RM16-23) at 4.
    \352\ See, e.g., Calpine Comments (2018 RM18-9) at 6; 
Organization of MISO States Comments (2018 RM18-9) at 8; PJM 
Utilities Coalition Comments (2018 RM18-9) at 13.
    \353\ See, e.g., APPA/NRECA Comments (RM16-23) at 39-40; EEI 
Comments (RM16-23) at 25-26; Massachusetts Municipal Electric 
Comments (RM16-23) at 3; National Hydropower Association Comments 
(RM16-23) at 11; Six Cities Comments (RM16-23) at 6.
    \354\ Calpine Comments (2018 RM18-9) at 6; EPSA Comments (2018 
RM18-9) at 15; TAPS Comments (2018 RM18-9) at 25.
    \355\ TAPS Comments (2018 RM18-9) at 26.
    \356\ PJM Utilities Coalition Comments (2018 RM18-9) at 13.
    \357\ APPA Comments (2018 RM18-9) at 25 (suggesting a waiting 
period of one year); Calpine Comments (2018 RM18-9) at 7 (suggesting 
a waiting period of five years as in PJM's Fixed Resource 
Requirement process).
---------------------------------------------------------------------------

    149. CAISO comments that, consistent with the NOPR proposal, its 
Distributed Energy Resource Provider model specifies that resources 
participating in a wholesale market aggregation may not participate in 
a retail net energy metering program if that program does not expressly 
also permit wholesale market participation.\358\ CAISO states that this 
rule extends to various aspects of retail net metering programs such as 
net metering with storage or virtual net metering.\359\ CAISO explains 
that the rationale for this rule is that CAISO's Distributed Energy 
Resource Provider model requires continuous wholesale 
participation.\360\ Additionally, CAISO states that under California's 
current net energy metering program rules, a participating resource 
already benefits from netting its excess energy against subsequent 
electricity bills.\361\ Based on this netting approach, there is no 
energy available to offer into the CAISO markets because the excess 
energy is banked for later withdrawal. CAISO believes the Commission's 
approach in the NOPR is consistent with Commission orders determining 
that exports to the transmission grid under a net energy metering 
program do not constitute a sale for resale of electricity under the 
FPA because these customers are, on a net basis, consumers.
---------------------------------------------------------------------------

    \358\ CAISO Comments (RM16-23) at 24 (citing Cal. Indep. Sys. 
Operator Corp., 155 FERC ] 61,229 at P 6).
    \359\ Id. at 24.
    \360\ CAISO Comments (2018 RM18-9) at 15.
    \361\ CAISO Comments (RM16-23) at 24.
---------------------------------------------------------------------------

    150. Some commenters ask the Commission to modify or clarify 
certain issues related to the NOPR proposal to prevent double counting. 
For instance, several commenters urge the Commission to give clear 
guidance about the definition of a retail compensation program or to 
clarify the scope of the retail prohibition.\362\ A number of 
commenters argue that the RTOs/ISOs should be responsible for 
demonstrating how they will prevent duplicate compensation for the same 
service.\363\ To that end, some commenters urge the Commission to, at a 
minimum, direct RTOs/ISOs to establish protocols that address duplicate 
compensation,\364\ monitor distributed energy resource offers for true 
cost, and hold distributed energy resources accountable for 
performance, among other measures.\365\ ISO-NE notes that if 
distributed energy resources have to choose between wholesale and 
retail participation, retail programs and behind-the-meter demand 
response may be more attractive in New England.\366\
---------------------------------------------------------------------------

    \362\ ISO-NE Comments (RM16-23) at 54; SEIA Comments (RM16-23) 
at 16-17; TAPS Comments (RM16-23) at 11.
    \363\ See, e.g., Advanced Microgrid Solutions Comments (RM16-23) 
at 6; Dominion Comments (RM16-23) at 9-10; EEI Comments (RM16-23) at 
25-26; Gridwise Comments (RM16-23) at 2; Public Interest 
Organizations Comments (RM16-23) at 23-24; Stem Comments (RM16-23) 
at 4, 7-8.
    \364\ EPSA Comments (2018 RM18-9) at 14; TAPS Comments (2018 
RM18-9) at 26-27.
    \365\ Calpine Comments (2018 RM18-9) at 7; EPSA Comments (2018 
RM18-9) at 20.
    \366\ ISO-NE Comments (2018 RM18-9) at 3.
---------------------------------------------------------------------------

    151. Conversely, numerous commenters assert that the Commission 
should permit distributed energy resource aggregations to participate 
in both wholesale and retail markets,\367\ provided that the 
distributed energy resources are technically capable of doing so and 
there are not physical system limitations that would prevent such 
participation.\368\ Some of these commenters argue that distributed 
energy resources should not receive duplicate compensation for the same 
service but should receive compensation for each distinct or 
incremental value they provide at the retail or wholesale level, and 
that being allowed to do so will improve efficiency and lower overall 
costs.\369\ Some commenters that are in favor of RTOs/ISOs allowing 
dual participation also note that relevant electric retail regulatory 
authorities have the ability to prevent it.\370\ Several commenters 
contend that there is precedent for dual participation \371\ and argue 
that a blanket ban would create a barrier to distributed energy 
resource participation, underestimating their capabilities, and inhibit 
competition, undermining the NOPR.\372\ Icetec and Tesla point out that 
capacity markets have long avoided duplicate compensation for demand 
response and for generators providing multiple services at once (e.g., 
energy and reserves) and urge the Commission to apply the logic of 
these constructs to

[[Page 67121]]

distributed energy resources.\373\ Advanced Energy Economy claims that 
the NOPR proposal would prevent the RTOs/ISOs from accessing a growing 
pool of resources located close to load that can be cost-effectively 
dispatched to ensure reliability.\374\ Several commenters argue that 
requiring resources to choose between markets would diminish the 
incremental value of distributed energy resources, leading to less 
efficient and flexible markets and reducing distributed energy 
resources' commercial viability.\375\ Commenters contend that, even if 
some services could qualify generally as the same service, it would be 
possible to distinguish them.\376\ Some commenters identify a number of 
scenarios in which providing distinct wholesale and retail services is 
feasible and explain that dispatch triggers for these programs usually 
do not overlap, which further indicates that they are not the same 
services.\377\ Additional commenters note potential discrepancies 
between the NOPR proposal and the Commission's recent policy statement 
enabling multiple-use applications for electric storage resources,\378\ 
and contend that experience in CAISO has demonstrated that it is 
possible to differentiate between services.\379\
---------------------------------------------------------------------------

    \367\ See, e.g., Advanced Energy Buyers Comments (2018 RM18-9) 
at 2; Genbright Comments (RM16-23) at 2-4; Global Cold Chain 
Alliance Comments (2018 RM18-9) at 2; MISO Transmission Owners 
Comments (RM16-23) at 6; New York Commission Comments (2018 RM18-9) 
at 16.
    \368\ Energy Storage Association (2018 RM18-9) at 2; Microsoft 
Corporation Comments (2018 RM18-9) at 17; NRG Comments (2018 RM18-9) 
at 6-8; SEIA Comments (RM16-23) at 16; Sunrun Comments (RM16-23) at 
3.
    \369\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9) 
at 8, 12-13; American Petroleum Institute Comments (RM16-23) at 13; 
Direct Energy Comments (2018 RM18-9) at 11-13; EPSA Comments (2018 
RM18-9) at 15; NARUC Comments (RM16-23) at 5; Viking Cold Solutions 
Comments (2018 RM18-9) at 2.
    \370\ California Commission Comments (2018 RM18-9) at 10-11; New 
York Commission Comments (2018 RM18-9) at 17-18.
    \371\ See, e.g., Advanced Energy Economy Comments (RM16-23) at 
39; Advanced Energy Management Comments (RM16-23) at 11-14; City of 
New York Comments (RM16-23) at 10-11; NRG Comments (2018 RM18-9) at 
7-8; NYPA Comments (2018 RM18-9) at 2.
    \372\ See, e.g., California Energy Storage Alliance Comments 
(RM16-23) at 4-6; Genbright Comments (RM16-23) at 3-4; Microgrid 
Resources Coalition Comments (RM16-23) at 12; SEIA Comments (RM16-
23) at 16; Stem Comments (RM16-23) at 4, 7.
    \373\ Icetec Comments (2018 RM18-9) at 14; Tesla Comments (2018 
RM18-9) at 4.
    \374\ Advanced Energy Economy Comments (RM16-23) at 33-34.
    \375\ See, e.g., Advanced Energy Management Comments (RM16-23) 
at 10-11; Advanced Microgrid Solutions Comments (RM16-23) at 6; 
Energy Storage Association Comments (RM16-23) at 22-23; Public 
Interest Organizations Comments (RM16-23) at 22-24; Tesla/SolarCity 
Comments (RM16-23) at 3.
    \376\ Energy Storage Association Comments (2018 RM18-9) at 2; 
New York Commission Comments (2018 RM18-9) at 15; NYISO Indicated 
Transmission Owners Comments (2018 RM18-9) at 13. See also 
California Commission Comments (2018 RM18-9) at 8 (noting that the 
California Commission declined to categorize the 22 services defined 
for the multiple use application framework adopted in D.18-01-003 by 
their service elements, which are either energy or capacity).
    \377\ See, e.g., Advanced Energy Economy Comments (RM16-23) at 
34-35; California Energy Storage Alliance Comments (RM16-23) at 5-6; 
DER/Storage Developers Comments (RM16-23) at 2-3; Tesla/SolarCity 
Comments (RM16-23) at 5-7. Advanced Energy Management notes that 
dispatch for the Consolidated Edison programs only overlapped with 
dispatch for the NYISO programs in six percent of hours from 2011 to 
2015. Advanced Energy Management Comments (RM16-23) at 12-13.
    \378\ Institute for Policy Integrity Comments (RM16-23) at 7; 
Open Access Technology Comments (RM16-23) at 4-5; Stem Comments 
(RM16-23) at 4 (citing Utilization of Elec. Storage Res. for 
Multiple Servs. When Receiving Cost-Based Rate Recovery, 158 FERC ] 
61,051 (2017)).
    \379\ Leadership Group Comments (RM16-23) at 3 (citing Cal. 
Indep. Sys. Operator Corp., 155 FERC ] 61,229 at P 11).
---------------------------------------------------------------------------

    152. However, many commenters disagree over how the Commission 
should assess what constitutes ``the same service.'' Some commenters 
assert that ``same service'' should refer narrowly to retail and 
wholesale programs that compensate a distributed energy resource for 
the exact same kW or kWh for the same value, providing no incremental 
value to the system.\380\ Other commenters argue that tools are 
necessary to prevent double compensation for the same service and 
suggest using performance requirements and dispatch triggers, 
contracting, market/participation rules, registration,protections, 
mathematical/accounting solutions, and/or a coordination framework, 
among other measures, to prevent double counting.\381\ According to 
some of these commenters, market rules could prevent double 
compensation when a resource is dispatched simultaneously for multiple 
programs or to prevent a resource from being permitted to sell the same 
market product as both an individual resource and as part of an 
aggregation in the same timeframe.\382\ Some commenters suggest using 
certain criteria to determine when a service provides incremental value 
to the retail or wholesale system or using metrics to enable 
segmentation of time or service provided.\383\ PJM asks the Commission 
not to prohibit PJM from using accounting rules to delineate between a 
behind-the-meter distributed energy resource aggregation's wholesale 
and retail transactions, as applicable.\384\
---------------------------------------------------------------------------

    \380\ Advanced Energy Management Comments (2018 RM18-9) at 13; 
New York Commission Comments (2018 RM18-9) at 15.
    \381\ See, e.g., California Commission Comments (2018 RM18-9) at 
9-10; Microgrid Resources Coalition Comments (2018 RM18-9) at 12-14; 
New York Commission Comments (2018 RM18-9) at 16, 18-19; NYISO 
Indicated Transmission Owners Comments (2018 RM18-9) at 13-14; Tesla 
Comments (2018 RM18-9) at 3-7.
    \382\ Advanced Energy Management Comments (RM16-23) at 13; AES 
Companies Comments (RM16-23) at 39; New York State Entities Comments 
(RM16-23) at 15-16.
    \383\ Advanced Energy Buyers Comments (2018 RM18-9) at 6; 
Advanced Energy Economy Comments (2018 RM18-9) at 13; Advanced 
Energy Management Comments (2018 RM18-9) at 14-15.
    \384\ PJM Comments (RM16-23) at 23.
---------------------------------------------------------------------------

    153. IRC urges the Commission to work with states to set forth 
clear processes for resolving jurisdictional and rate issues to prevent 
double compensation based on the details of a particular retail 
program.\385\ Some commenters suggest that the Commission collaborate 
with local regulatory authorities because local conditions may warrant 
special rules and restrictions for distributed energy resource 
participation in multiple markets or defer to state jurisdictions.\386\ 
Some commenters request that the Commission clarify the right of state 
regulators to monitor and regulate potential duplicate compensation 
\387\ and request that the Commission provide guidance to distribution 
utilities regarding the proposal.\388\
---------------------------------------------------------------------------

    \385\ IRC Comments (RM16-23) at 3-5.
    \386\ EEI Comments (RM16-23) at 26-27; Pacific Gas & Electric 
Comments (2018 RM18-9) at 10.
    \387\ Massachusetts Commission Comments (RM16-23) at 11.
    \388\ ISO-NE Comments (RM16-23) at 54.
---------------------------------------------------------------------------

    154. In addition, several commenters seek clarification that RTOs/
ISOs are not precluded from allowing distributed energy resources to 
provide multiple non-overlapping wholesale services.\389\ NYISO 
requests clarification on whether distributed energy resources are 
permitted to offer the ``same service'' to the wholesale markets and 
distribution system-level retail programs.\390\ Lastly, some commenters 
state that the Commission should revisit and further examine the issue 
of dual participation in the future.\391\
---------------------------------------------------------------------------

    \389\ NextEra Comments (RM16-23) at 14; NYISO Comments (RM16-23) 
at 14-15; Public Interest Organizations Comments (RM16-23) at 21-22.
    \390\ NYISO Comments (RM16-23) at 14-15.
    \391\ EEI Comments (RM16-23) at 25; New York Utility 
Intervention Unit Comments (RM16-23) at 6; Pacific Gas & Electric 
Comments (RM16-23) at 17-18; SoCal Edison Comments (RM16-23) at 10.
---------------------------------------------------------------------------

    155. Other commenters argue that the NOPR proposal would undermine 
state policy.\392\ Numerous commenters argue that the NOPR proposal 
conflicts with the Commission's findings in New York State Public 
Service Commission v. New York Independent System Operator, Inc., in 
which the Commission stated that ``[w]hile the wholesale- and the 
retail-level demand response programs may complement each other, they 
serve different purposes, provide different benefits, and compensate 
distinctly different services,'' \393\ and would interfere with New 
York's existing programs and state objectives.\394\ The California 
Commission maintains that dual participation of a distributed energy 
resource in retail programs and RTO/ISO markets is a retail matter 
under state jurisdiction.\395\ The

[[Page 67122]]

Arkansas Commission, with support from Advanced Energy Economy, states 
that dual participation of distributed energy resource aggregations in 
RTO/ISO and retail markets requires a cooperative federalism approach 
in which the Commission has authority over RTO/ISO eligibility rules, 
states have exclusive jurisdiction over retail customer programs and 
may set terms and conditions so long as they do not conflict with 
Commission orders, and state regulators play a complementary role.\396\
---------------------------------------------------------------------------

    \392\ California Commission Comments (RM16-23) at 6-7; City of 
New York Comments (RM16-23) at 13; New York State Entities Comments 
(RM16-23) at 18.
    \393\ N.Y. Pub. Serv. Comm'n v. N.Y. Indep. Sys. Operator, Inc., 
158 FERC ] 61,137, at P 33 (2017).
    \394\ See, e.g., Advanced Energy Economy Comments (RM16-23) at 
35-36; Advanced Energy Management Comments (RM16-23) at 11-13; 
Harvard Environmental Policy Initiative Comments (RM16-23) at 7; New 
York State Entities Comments (RM16-23) at 14,16-18; Union of 
Concerned Scientists Comments (RM16-23) at 19.
    \395\ California Commission Comments (2018 RM18-9) at 10-11.
    \396\ Supplemental Comments of Arkansas Commission (2018 RM18-9-
000) at 1-2; Answer of Advanced Energy Economy to Supplemental 
Comments of Arkansas Commission (2018 RM18-9) at 2.
---------------------------------------------------------------------------

    156. In addition, some commenters assert that the Commission does 
not have authority to prevent distributed energy resources from selling 
retail services.\397\ The Harvard Environmental Policy Initiative 
argues that there is no legal barrier that prevents distributed energy 
resources from participating in both state and Commission programs, and 
that the Commission has the authority to allow each RTO/ISO to 
determine how to allow distributed energy resources to participate in 
both state-level and wholesale programs, though they note it may be 
operationally complex.\398\ Tesla/SolarCity asserts that differences in 
jurisdiction must not prevent distributed energy resources from 
receiving compensation for distinct services \399\ and argues that 
effects on retail rates should not be relevant.\400\ Several commenters 
add that the Commission's decision in this final rule will not affect 
the ability of relevant electric retail regulatory authorities to 
restrict wholesale participation for distributed energy resources 
wishing to participate in retail programs.\401\
---------------------------------------------------------------------------

    \397\ California Commission Comments (RM16-23) at 6; DER/Storage 
Developers Comments (RM16-23) at 2; SEIA Comments (RM16-23) at 16; 
Stem Comments (RM16-23) at 7.
    \398\ Harvard Environmental Policy Initiative Comments (RM16-23) 
at 6-7 (citing NOPR, 157 FERC ] 61,121 at P 134).
    \399\ Tesla/SolarCity Comments (RM16-23) at 2-3.
    \400\ Id. at 3 (quoting EPSA, 136 S. Ct. 760 at 776 (``When FERC 
regulates what takes place on the wholesale market, as a part of 
carrying out its charge to improve how that market runs, then no 
matter that effect on retail rates . . .'')).
    \401\ APPA Comments (2018 RM18-9) at 25-26; PJM Utilities 
Coalition Comments (2018 RM18-9) at 13; TAPS Comments (2018 RM18-9) 
at 25.
---------------------------------------------------------------------------

    157. However, some commenters disagree with other commenters' 
proposed approaches to differentiate between wholesale and retail 
services. APPA contends that the methods proposed by some commenters of 
determining what constitutes the same service are flawed, an 
incremental value approach is conceptually complicated, and using 
dispatch triggers to distinguish services is problematic because a 
resource could not respond to a reliability event in both the wholesale 
and retail markets at once.\402\ Similarly, Sunrun argues that a 
universal characterization of services would create litigation and 
confusion.\403\ PJM asserts that the Commission should not ``over-
define'' the services that distributed energy resources provide but 
instead should focus on the services traditionally addressed in the 
wholesale market (e.g., capacity, energy and ancillary services), and 
require that any unit of capacity/resource adequacy only be compensated 
once across the wholesale and retail domains.\404\ NYISO Indicated 
Transmission Owners point out that the ability to differentiate 
services is dependent on particular programs and markets, and suggest 
that the Commission consider programs as they are filed by the relevant 
RTOs/ISOs.\405\ MISO states that it defers to relevant electric retail 
regulatory authorities to address any double compensation matters.\406\ 
NYISO states that if competing dispatch obligations still arise, it 
will be the aggregator's responsibility to resolve the conflict and 
face penalties, as appropriate.\407\
---------------------------------------------------------------------------

    \402\ APPA Comments (2018 RM18-9) at 24-25.
    \403\ Sunrun Comments (2018 RM18-9) at 9-10.
    \404\ PJM Comments (2018 RM18-9) at 14.
    \405\ NYISO Indicated Transmission Owners Comments (2018 RM18-9) 
at 7-8.
    \406\ MISO Comments (2018 RM18-9) at 22.
    \407\ NYISO Comments (2018 RM18-9) at 9-11.
---------------------------------------------------------------------------

    158. NRG and Stem argue that the Commission should only be 
concerned with double compensation if retail participation interferes 
with the provision of wholesale services.\408\ Similarly, other 
commenters argue that the Commission should focus on preventing 
distributed energy resources from receiving double payment for the same 
wholesale service and not whether those resources are also receiving 
retail level compensation.\409\ NYISO Indicated Transmission Owners 
note that many distribution utilities have established programs to 
accommodate technology within retail service programs and argue that 
any changes to market rules for participation of distributed energy 
resource aggregations in wholesale markets should avoid encroaching 
upon or abrogating the jurisdictional status of these distribution-
level programs, which, they state, do not involve wholesale sales.\410\
---------------------------------------------------------------------------

    \408\ NRG Comments (RM16-23) at 8; Stem Comments (RM16-23) at 7.
    \409\ Advanced Energy Economy Comments (2018 RM18-9) at 13; 
Energy Storage Association Comments (2018 RM18-9) at 5; New York 
Commission Comments (2018 RM18-9) at 18; Stem Comments (RM16-23) at 
7.
    \410\ NYISO Indicated Transmission Owners Comments (RM16-23) at 
8.
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c. Commission Determination
    159. To implement Sec.  35.28(g)(12)(ii)(a) of the Commission's 
regulations and upon consideration of the comments received, we adopt 
the NOPR proposal, as modified and clarified below, to allow RTOs/ISOs 
to limit the participation of resources in RTO/ISO markets through a 
distributed energy resource aggregator that are receiving compensation 
for the same services as part of another program.
    160. However, we agree with many commenters that the NOPR proposal 
to prohibit distributed energy resources that are receiving 
compensation in a retail program from being eligible to participate in 
the RTO/ISO markets as part of a distributed energy resource 
aggregation was overly broad. Commenters identify multiple examples 
where participation in both wholesale and retail markets is feasible 
\411\ and is already permitted and occurring,\412\ and they identify a 
variety of existing and potential approaches to address reasonable 
concerns about double counting and overcompensation.\413\ Therefore, 
rather than barring participation in both wholesale and retail or 
multiple wholesale programs, we modify the NOPR proposal to require 
each RTO/ISO to revise its tariff to: (1) Allow distributed energy 
resources that participate in one or more retail programs to 
participate in its wholesale markets; (2) allow distributed energy 
resources to provide multiple wholesale services; and (3) include any 
appropriate restrictions on the distributed energy resources' 
participation in RTO/ISO markets through distributed energy resource 
aggregations, if narrowly designed to avoid counting more than once the 
services provided by distributed energy resources in RTO/ISO markets. 
In compliance with this final rule, we

[[Page 67123]]

require each RTO/ISO to describe how it will properly account for the 
different services that distributed energy resources provide in the 
RTO/ISO markets.
---------------------------------------------------------------------------

    \411\ See, e.g., Advanced Microgrid Solutions Comments (RM16-23) 
at 5-6; American Petroleum Institute Comments (RM16-23) at 13; NRG 
Comments (RM16-23) at 8; Open Access Technology Comments (RM16-23) 
at 5; Public Interest Organizations Comments (RM16-23) at 22.
    \412\ Direct Energy Comments (2018 RM18-9) at 11-13; Energy 
Storage Association Comments (2018 RM18-9) at 5; NRG Comments (2018 
RM18-9) at 6-8.
    \413\ NESCOE Comments (RM16-23) at 14-15 (citing Utilization of 
Electric Storage Resources for Multiple Services When Receiving 
Cost-Base Rate Recovery, 158 FERC ] 61,051 at P 2); SEIA Comments 
(RM16-23) at 16 (citing Utilization of Electric Storage Resources 
for Multiple Services When Receiving Cost-Based Rate Recovery, 158 
FERC ] 61,051).
---------------------------------------------------------------------------

    161. We find that it is appropriate for RTOs/ISOs to place narrowly 
designed restrictions on the RTO/ISO market participation of 
distributed energy resources through aggregations, if necessary to 
prevent double counting of services. For instance, if a distributed 
energy resource is offered into an RTO/ISO market and is not added back 
to a utility's or other load serving entity's load profile, then that 
resource will be double counted as both load reduction and a supply 
resource. Also, if a distributed energy resource is registered to 
provide the same service twice in an RTO/ISO market (e.g., as part of 
multiple distributed energy resource aggregations, as part of a 
distributed energy resource aggregation and a standalone demand 
response resource, and/or a standalone distributed energy resource), 
then that resource would also be double counted and double compensated 
if it clears the market as part of both market participants. Thus, we 
find that it is appropriate for RTOs/ISOs to place restrictions on the 
RTO/ISO market participation of distributed energy resources through 
aggregations after determining whether a distributed energy resource 
that is proposing to participate in a distributed energy resource 
aggregation is (1) registered to provide the same services either 
individually or as part of another RTO/ISO market participant; \414\ or 
(2) included in a retail program to reduce a utility's or other load 
serving entity's obligations to purchase services from the RTO/ISO 
market.
---------------------------------------------------------------------------

    \414\ For example, as part of another distributed energy 
resource aggregation, a demand response resource, and/or a 
standalone distributed energy resource.
---------------------------------------------------------------------------

    162. This restriction is similar to that adopted by the Commission 
in Order No. 719 in the context of aggregations of demand response, 
which states that ``[a]n RTO or ISO may place appropriate restrictions 
on any customer's participation in an [aggregation of retail 
customers]-aggregated demand response bid to avoid counting the same 
demand response resource more than once.'' \415\ In addition, as 
discussed in Section IV.A.2 above, relevant electric retail regulatory 
authorities may decide whether to permit the customers of small 
utilities to participate in the RTO/ISO markets through distributed 
energy resource aggregations and relevant electric retail regulatory 
authorities continue to have authority to condition participation in 
their retail distributed energy resource programs on those resources 
not also participating in RTO/ISO markets,\416\ which should allow them 
to mitigate any double-compensation concerns.
---------------------------------------------------------------------------

    \415\ Order No. 719, 125 FERC ] 61,071 at P 158.
    \416\ Supplemental Comments of Arkansas Commission (RM16-23-000) 
at 2.
---------------------------------------------------------------------------

    163. We agree with many commenters that the NOPR proposal could 
undermine the effectiveness of existing retail and wholesale programs, 
render current RTO/ISO market participants ineligible to continue their 
participation, and reduce competition in RTO/ISO markets, which could 
lead to unjust and unreasonable rates. Further, there may be instances 
in which an individual distributed energy resource could technically, 
reliably, and economically provide multiple, distinct services at 
wholesale and retail levels, and therefore preventing it from doing so 
may undermine the final rule by creating a new barrier to participation 
in RTO/ISO markets, thereby inhibiting competition and decreasing 
reliability. We believe the modified rules that we adopt herein will 
enable efficient outcomes in RTO/ISO markets by capturing the full 
value of distributed energy resources and enabling efficient resource 
allocation while also requiring RTOs/ISOs to address double-counting 
concerns.
    164. In addition to addressing the potential market and reliability 
impacts of the NOPR proposal described above, we find that the reforms 
we adopt here are consistent with the Commission's determination that a 
single distributed energy resource can participate in both retail and 
wholesale programs and be compensated in each for providing 
``distinctly different services.'' \417\ While commenters suggest 
several tests to identify duplicate services, the record does not 
include a consistent or practical method for the Commission to 
universally define ``same services'' across wholesale and retail 
markets, and we therefore do not believe that it is appropriate to 
prescribe an approach across all RTOs/ISOs. For this reason, we will 
grant RTOs/ISOs regional flexibility with respect to the restrictions 
they propose in their tariffs to minimize market impacts caused by the 
double counting of services provided by distributed energy resources in 
the RTO/ISO markets.
---------------------------------------------------------------------------

    \417\ N.Y. Pub. Serv. Comm'n v. N.Y. Indep. Sys. Operator, Inc., 
158 FERC ] 61,137 at P 33.
---------------------------------------------------------------------------

4. Minimum and Maximum Size of Aggregation
a. NOPR Proposal
    165. In the NOPR, the Commission proposed that distributed energy 
resource aggregations must meet any minimum size requirements of the 
participation model under which they elect to participate in RTO/ISO 
markets.\418\ The Commission stated that, for example, if a distributed 
energy resource aggregator decides to register using the participation 
model for electric storage resources 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 that the 
Commission required for that participation model. The Commission stated 
that, alternatively, if the distributed energy resource aggregator 
registered 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.
---------------------------------------------------------------------------

    \418\ NOPR, 157 FERC ] 61,121 at P 136.
---------------------------------------------------------------------------

    166. After the April 2018 technical conference, the Commission 
sought comments on whether reducing the minimum size of distributed 
energy resource aggregations to participate in RTO/ISO markets would 
help alleviate concerns about requiring distributed energy resource 
aggregations to locate only at a single node.\419\
---------------------------------------------------------------------------

    \419\ Notice Inviting Post-Technical Conference Comments at 3.
---------------------------------------------------------------------------

b. Comments
    167. SPP agrees with the Commission's proposal for aggregations to 
meet any minimum size requirements of the participation model under 
which they elect to participate, noting that that is consistent with 
SPP's registration requirements for any resource type.\420\
---------------------------------------------------------------------------

    \420\ SPP Comments (RM16-23) at 16.
---------------------------------------------------------------------------

    168. In contrast, several commenters argue that the Commission 
should require RTOs/ISOs to adopt a minimum size requirement of 100 kW 
for all distributed energy resource aggregations, regardless of the 
participation model in which they elect to participate.\421\ NYISO 
states that it is currently working with stakeholders on a distributed 
energy resource market design proposal that would set a minimum 
aggregation size of 100 kW

[[Page 67124]]

because this is the smallest increment that NYISO believes it can 
accurately model, commit, and dispatch with its current grid operations 
software.\422\ Some of those commenters contend that a minimum size 
requirement above 100 kW runs counter to the NOPR's goal of improving 
competition in the wholesale markets while avoiding excessive 
registration of individual small resources and modeling 
complexity.\423\ Tesla/SolarCity state that a minimum size requirement 
of 100 kW across all markets would avoid any confusion caused by 
artificial differences between the electric storage and distributed 
energy resource aggregation participation models.\424\ Some commenters 
argue that minimum size requirements greater than 100 kW pose a 
significant barrier to entry.\425\ Direct Energy disagrees with ISO-
NE's assertion at the technical conference that there is no real need 
for aggregation because there is no minimum size limitation for 
participating in ISO-NE's markets, stating that while Direct Energy is 
supportive of establishing a framework without minimum size limitations 
for distributed energy resources, the lack of such limitations should 
not serve as an alternative for aggregation.\426\ NRG states that 100 
kW is an efficient minimum size requirement but that the participation 
model for distributed energy resource aggregations should set minimum 
resource participation thresholds only to the extent necessary to 
accommodate existing metering and data management systems 
infrastructure.\427\
---------------------------------------------------------------------------

    \421\ See, e.g., Advanced Energy Management Comments (RM16-23) 
at 16-17, 25-26; Mensah Comments (RM16-23) at 3; Efficient Holdings 
Comments (RM16-23) at 8; NYISO Comments (RM16-23) at 15-16; Tesla/
SolarCity Comments (RM16-23) at 17, 26.
    \422\ NYISO Comments (RM16-23) at 15-16; PJM Comments (RM16-23) 
at 27. On January 23, 2020, the Commission accepted NYISO's tariff 
revisions establishing a new participation model for aggregations of 
resources, including distributed energy resources, which requires 
that each energy, ancillary service, and capacity transaction on 
behalf of an aggregation must have a minimum offer of 100 kW, and if 
an aggregation offers a combination of withdrawals, injections, and/
or demand reductions, it must offer at least 100 kW of each. See 
NYISO Aggregation Order, 170 FERC ] 61,033 at P 14.
    \423\ Advanced Energy Management Comments (RM16-23) at 16-17; 
Advanced Energy Economy Comments (RM16-23) at 51-52 (citing NOPR, 
157 FERC ] 61,121 at P 94); California Energy Storage Alliance 
Comments (RM16-23) at 7-8.
    \424\ Tesla/SolarCity Comments (RM16-23) at 26.
    \425\ Fresh Energy/Sierra Club/Union of Concerned Scientists 
Comments (RM16-23) at 2 (citing MISO Market Subcommittee 
Presentation, November 29th, 2016, https://www.misoenergy.org/Library/Repository/Meeting%20Material/Stakeholder/MSC/2016/20161129/20161) (stating that the integration of distributed energy resources 
and smaller-scale resources is within the ``probable limit of 
current systems''); Tesla/SolarCity Comments (RM16-23) at 27 (citing 
N.Y. Indep. Sys. Operator, Inc., 155 FERC ] 61,166 (2016)).
    \426\ Direct Energy Comments (2018 RM18-9) at 8-9 (citing 
Technical Conference Transcript at 22).
    \427\ NRG Comments (RM16-23) at 12; NRG Comments (2018 RM18-9) 
at 4.
---------------------------------------------------------------------------

    169. Several commenters argue that the Commission should provide 
the RTOs/ISOs with flexibility to establish any minimum size 
requirement for distributed energy resource aggregations based on their 
ability to model and dispatch these resources.\428\ SoCal Edison states 
that each RTO/ISO should be allowed to determine its own minimum size 
requirements, providing the example of CAISO's requirement that 
distributed energy resource aggregations be at least 500 kW to help 
ensure that an aggregation is large enough to have a measurable impact 
on the transmission system.\429\ EPRI and SoCal Edison both highlight 
the software challenges and potential costs associated with 
implementing a minimum size requirement at or below 100 kW.\430\ 
Pacific Gas & Electric asserts that RTOs/ISOs must be allowed to 
account for the differences between interacting with aggregations and 
stand-alone resources in their markets.\431\ MISO states that, to the 
extent the Commission deems it necessary to set a volume threshold for 
aggregated participation, the threshold should apply to registration 
minimums and not be related to how RTOs/ISOs model or dispatch 
resources.\432\ NYISO Indicated Transmission Owners assert that 
aggregations should be subject to the same minimum size requirements as 
traditional resources that are based on the services they are 
providing.\433\
---------------------------------------------------------------------------

    \428\ See, e.g., AES Companies Comments (RM16-23) at 34; IRC 
Comments (RM16-23) at 7; ISO-NE Comments (RM16-23) at 36; MISO 
Comments (RM16-23) at 20; Pacific Gas & Electric Comments (RM16-23) 
at 17.
    \429\ SoCal Edison Comments (RM16-23) at 11 (citing CAISO 
Tariff, Section 4.17.5.1; CAISO, Transmittal Letter, Docket No. 
ER16-1085, at 9 (filed March 4, 2016)).
    \430\ EPRI Comments (2018 RM18-9) at 7-8; SoCal Edison Comments 
(2018 RM18-9) at 5.
    \431\ Pacific Gas & Electric Comments (RM16-23) at 17.
    \432\ MISO Comments (2018 RM18-9) at 16-17.
    \433\ NYISO Indicated Transmission Owners Comments (RM16-23) at 
12.
---------------------------------------------------------------------------

    170. Energy Storage Association agrees that a lower limit is 
necessary but asserts that the Commission should not allow RTOs/ISOs to 
place upper limits on the size of distributed energy resource 
aggregations.\434\ In contrast, CAISO believes that the Commission 
should adopt an upper limit on the size of these aggregations to ensure 
reliable operation of the transmission system while obtaining more 
experience with distributed energy resource aggregations. CAISO notes 
that its Distributed Energy Resource Provider model imposes a maximum 
capacity requirement of 20 MW on aggregations that span multiple 
pricing nodes to limit the impact of these aggregations on congestion 
on the CAISO grid without severely constraining the ability of 
distributed energy resource providers to form viable aggregations.\435\ 
Similarly, SPP argues that the Commission should consider a maximum 
size requirement for aggregations across multiple nodes but that no 
maximum requirement is necessary for aggregations located at a single 
node.\436\ University of Delaware's EV R&D Group argues that upper 
power limits should allow for an aggregation of 100-200 kW resources as 
this will better permit the participation of electric bus fleets.\437\
---------------------------------------------------------------------------

    \434\ Energy Storage Association Comments (RM16-23) at 25-26.
    \435\ CAISO Comments (RM16-23) at 25-26.
    \436\ SPP Comments (RM16-23) at 16.
    \437\ University of Delaware EV R&D Group Comments (2018 RM18-9) 
at 1.
---------------------------------------------------------------------------

c. Commission Determination
    171. We adopt the NOPR proposal, with modifications, and add Sec.  
35.28(g)(12)(iii) to the Commission's regulations to require each RTO/
ISO to implement a minimum size requirement not to exceed 100 kW for 
all distributed energy resource aggregations. We agree with commenters 
that a minimum size requirement not to exceed 100 kW will help improve 
competition in the RTO/ISO markets and avoid confusion about 
appropriate minimum size requirements for distributed energy resource 
aggregations under existing or new participation models. We do not 
expect this requirement to overburden RTO/ISO modeling software with an 
excessive number of small resources because 100 kW is currently a 
commonly used resource size. In contrast, larger minimum size 
requirements that may have been designed for different types of 
resources could pose a significant barrier to entry for distributed 
energy resource aggregations. In addition, this minimum size 
requirement is consistent with the Commission's minimum size 
requirement for electric storage resources in Order No. 841.\438\
---------------------------------------------------------------------------

    \438\ Order No. 841, 162 FERC ] 61,127 at P 270.
---------------------------------------------------------------------------

    172. Several RTOs/ISOs support a minimum size requirement not to 
exceed 100 kW. PJM and SPP have a minimum size requirement of 100 kW 
for all resources and support the same requirement for distributed 
energy resource aggregations, and all of the RTOs/ISOs have at least 
one participation model that allows resources as small as 100 kW to

[[Page 67125]]

participate in their markets.\439\ However, we recognize concerns about 
the ability of modeling and dispatch software to handle a large number 
of small distributed energy resource aggregations. Therefore, while we 
require each RTO/ISO to implement on compliance a minimum size 
requirement not to exceed 100 kW for all distributed energy resource 
aggregations, we will consider any future post-implementation requests 
to increase the minimum size requirement above 100 kW if the RTO/ISO 
demonstrates that it is experiencing difficulty calculating efficient 
market results and there is not a viable software solution for 
improving such calculations.\440\
---------------------------------------------------------------------------

    \439\ See, e.g., CAISO Data Request Response (AD16-20) at 10-11; 
ISO-NE Data Request Response (AD16-20) at 13-14; MISO Data Request 
Response (AD16-20) at 10; NYISO Data Request Response (AD16-20) at 
9; PJM Data Request Response (AD16-20) at 10.
    \440\ The Commission offered the RTOs/ISOs a similar 
accommodation for the minimum size requirement for electric storage 
resources. See Order No. 841, 162 FERC ] 61,127 at P 275.
---------------------------------------------------------------------------

    173. We agree with the post-technical conference comments that a 
minimum size requirement that is lower than some existing RTO/ISO 
minimum size requirements will help alleviate concerns about the 
ability of single node aggregations to achieve the necessary minimum 
size, particularly given our findings on locational requirements for 
distributed energy resource aggregations.\441\ NYISO recently adopted 
this approach, stating that because it decided to limit distributed 
energy resource aggregations to a single pricing node in its 
distributed energy resources roadmap, NYISO thought it was appropriate 
to lower the minimum size threshold for distributed energy resource 
aggregations to 100 kW.\442\ Therefore, not only will a minimum size 
requirement that does not exceed 100 kW remove a barrier to distributed 
energy resource aggregations, improve competition in RTO/ISO markets, 
avoid confusion about appropriate requirements, and help ensure just 
and reasonable rates, but application of this requirement in 
conjunction with our findings on locational requirements, discussed in 
Section IV.D below, will help alleviate any adverse competitive impacts 
that single node aggregations may have.\443\
---------------------------------------------------------------------------

    \441\ See infra Section IV.D (Locational Requirements).
    \442\ Technical Conference Transcript at 27; see NYISO 
Aggregation Order, 170 FERC ] 61,033.
    \443\ See infra Section IV.D (Locational Requirements).
---------------------------------------------------------------------------

    174. We are not persuaded by commenters to adopt a maximum size 
requirement for distributed energy resource aggregations that span 
multiple pricing nodes. We do not see a need to adopt such a 
requirement because, as explained in Section IV.E below, to the extent 
that RTOs/ISOs allow for multi-node distributed energy resource 
aggregations, distribution factors and bidding parameters should 
provide the RTOs/ISOs with the information from geographically 
dispersed resources in a distributed energy resource aggregation 
necessary to reliably operate their systems regardless of the size of 
the aggregation.\444\ We also note that, given our findings on 
locational requirements, we are not requiring RTOs/ISOs to establish 
multi-node distributed energy resource aggregations.\445\
---------------------------------------------------------------------------

    \444\ See infra Section IV.E (Distribution Factors and Bidding 
Parameters).
    \445\ See infra Section IV.D (Locational Requirements).
---------------------------------------------------------------------------

5. Minimum and Maximum Capacity Requirements for Distributed Energy 
Resources Participating in an Aggregation
a. NOPR Proposal
    175. The Commission proposed not to establish a minimum or maximum 
capacity requirement for an individual distributed energy resource to 
be able to participate in RTO/ISO markets through a distributed energy 
resource aggregator.\446\ The Commission stated that it believes 
participation in RTO/ISO markets through a distributed energy resource 
aggregator should not be conditioned on the size of the resource but 
recognized that existing RTO/ISO market rules may require distributed 
energy resources to meet certain minimum or maximum capacity 
requirements under certain participation models. Therefore, the 
Commission sought comment on whether to establish a minimum or maximum 
capacity limit for individual distributed energy resources seeking to 
participate in RTO/ISO markets through a distributed energy resource 
aggregator, or whether to 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 
believe that the Commission should adopt a minimum or maximum capacity 
requirement for individual distributed energy resources participating 
in RTO/ISO markets through a distributed energy resource aggregator, 
the Commission sought comment on what that requirement should be.
---------------------------------------------------------------------------

    \446\ NOPR, 157 FERC ] 61,121 at P 135.
---------------------------------------------------------------------------

b. Comments
    176. Several commenters support the Commission's proposal not to 
establish a minimum capacity requirement for individual distributed 
energy resources participating in RTO/ISO markets through distributed 
energy resource aggregations.\447\ Some commenters state that minimum 
or maximum capacity requirements are not necessary for individual 
distributed energy resources because the aggregator will interact with 
the wholesale market as a single resource and, as such, that 
aggregation will be subject to eligibility rules.\448\ Fluidic, Fresh 
Energy/Sierra Club/Union of Concerned Scientists, and Tesla/SolarCity 
argue that aggregators should be allowed to optimize their portfolio 
with any mix of resources to ensure the most cost-effective 
aggregation.\449\ Energy Storage Association notes that, while many 
behind-the-meter electric storage resources are relatively small (only 
a few kW in some cases), in aggregate, they can operate nearly 
identically to a single, much larger electric storage resource.\450\
---------------------------------------------------------------------------

    \447\ See, e.g., APPA/NRECA Comments (16-23) at 43; Fluidic 
Comments (RM16-23) at 5; Fresh Energy/Sierra Club/Union of Concerned 
Scientists Comments (RM16-23) at 2; ISO-NE Comments (RM16-23) at 36; 
NYISO Indicated Transmission Owners Comments (RM16-23) at 12.
    \448\ See, e.g., NYISO Indicated Transmission Owners Comments 
(RM16-23) at 12; R Street Institute Comments (RM16-23) at 8; SEIA 
Comments (RM16-23) at 18; SPP Comments (RM16-23) at 16; Tesla/
SolarCity Comments (RM16-23) at 27.
    \449\ Fluidic Comments (RM16-23) at 5, Fresh Energy/Sierra Club/
Union of Concerned Scientists Comments (RM16-23) at 2; Tesla/
SolarCity Comments (RM16-23) at 27.
    \450\ Energy Storage Association Comments (RM16-23) at 25-26.
---------------------------------------------------------------------------

    177. Several commenters ask the Commission to defer to the RTOs/
ISOs to propose and justify to the Commission any minimum and maximum 
capacity requirements for individual distributed energy resources 
participating in RTO/ISO markets through distributed energy resource 
aggregations.\451\ EEI argues that the RTO/ISO-established requirements 
should be based on their individual market rules and their ability to 
verify the accuracy of the metering and the verification process for 
the resource.\452\ NYISO notes that it is evaluating whether there 
should be a maximum size for a distributed energy resource in an 
aggregation in order to permit

[[Page 67126]]

independent modeling of relatively large distributed energy resources 
and provide grid operators more operational awareness and control over 
distributed energy resources that may be needed to address system 
conditions.\453\
---------------------------------------------------------------------------

    \451\ See, e.g., Advanced Energy Economy Comments (RM16-23) at 
51; Duke Energy Comments (RM16-23) at 5; ISO-NE Comments (RM16-23) 
at 36; MISO Transmission Owners Comments (RM16-23) at 20; Pacific 
Gas & Electric Comments (RM16-23) at 16.
    \452\ EEI Comments (RM16-23) at 27.
    \453\ NYISO Comments (RM16-23) at 15. The Commission accepted 
NYISO's proposal to limit the size of resources in an aggregation to 
20 MW or less. NYISO Aggregation Order, 170 FERC ] 61,033 at P 9.
---------------------------------------------------------------------------

    178. MISO Transmission Owners argue that capacity limits should be 
identified at the RTO/ISO level unless a distribution utility is 
impacted, in which case the distribution utility should have discretion 
to set its own requirements so that any minimum size requirement 
respects capacity limitations on a distribution circuit, whether 
individual or in the aggregate.\454\ Similarly, APPA/NRECA assert that 
the Commission has no jurisdiction over facilities used for generation 
or local distribution and that state and local regulators are likely 
best equipped to address minimum or maximum capacity requirements.\455\
---------------------------------------------------------------------------

    \454\ MISO Transmission Owners Comments (RM16-23) at 20.
    \455\ APPA/NRECA Comments (RM16-23) at 43.
---------------------------------------------------------------------------

c. Commission Determination
    179. To implement Sec.  35.28(g)(12)(ii)(a) of the Commission's 
regulations, we adopt the NOPR proposal, as modified below, and will 
not establish a minimum or maximum capacity requirement for individual 
distributed energy resources to participate in RTO/ISO markets through 
a distributed energy resource aggregation. Although we decline to 
establish a specific maximum capacity requirement for individual 
distributed energy resources in an aggregation, we direct each RTO/ISO 
to propose a maximum capacity requirement for individual distributed 
energy resources participating in its markets through a distributed 
energy resource aggregation or, alternatively, to explain why such a 
requirement is not necessary, as discussed further below.
    180. We decline to require RTOs/ISOs to adopt minimum capacity 
requirements for individual distributed energy resources to participate 
in their markets through a distributed energy resource aggregation. We 
agree with commenters that minimum capacity requirements for 
distributed energy resources to participate in an aggregation are not 
necessary because each individual resource will participate in the 
market via an aggregation, which acts as a single resource. To this 
end, we note that distributed energy resource aggregators, as market-
interfacing entities, are responsible for meeting applicable RTO/ISO 
qualification and performance requirements, including minimum size 
requirements, and for determining how any performance penalties or 
deratings determined by the RTO/ISO would apply to the individual 
resources in an aggregation.
    181. While we find that minimum capacity requirements are 
unnecessary, we recognize the concerns raised by EEI and NYISO with 
respect to each RTO's/ISO's ability to accurately model and verify the 
metering of larger distributed energy resources. We believe that 
capping the maximum capacity size of an individual distributed energy 
resource participating in a distributed energy resource aggregation 
would ensure that larger resources are required to participate 
individually, thereby allowing RTOs/ISOs to independently model and 
verify the metering of these larger resources. Independent modeling and 
verification may provide system operators with greater operational 
awareness and control to address changing system conditions. Therefore, 
to implement Sec.  35.28(g)(12)(ii)(a) of the Commission's regulations, 
we require each RTO/ISO, in compliance with this final rule, to either 
propose a maximum capacity requirement for individual distributed 
energy resources participating in its markets through a distributed 
energy resource aggregation or, alternatively, to explain why such a 
requirement is not necessary.
6. Single Resource Aggregation
a. NOPR Proposal
    182. The NOPR proposed, consistent with Order No. 719, 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.\456\
---------------------------------------------------------------------------

    \456\ NOPR, 157 FERC ] 61,121 at P 137 (citing Order No. 719, 
125 FERC ] 61,071 at P 158(d)).
---------------------------------------------------------------------------

b. Comments
    183. AES Companies, NextEra, and NYISO agree with the Commission's 
proposal to require each RTO/ISO to 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.\457\ CAISO states that, 
consistent with the NOPR proposal, CAISO allows a distributed energy 
resource provider to aggregate one or more distributed energy resources 
for purposes of wholesale market participation.\458\
---------------------------------------------------------------------------

    \457\ AES Companies Comments (RM16-23) at 39; NextEra Comments 
(RM16-23) at 14; NYISO Comments (RM16-23) at 16.
    \458\ CAISO Comments (RM16-23) at 26.
---------------------------------------------------------------------------

    184. Xcel Energy Services suggests that a higher minimum threshold 
size should be established for single distributed energy resource 
aggregations because a proliferation of individual aggregators could 
increase administrative costs.\459\
---------------------------------------------------------------------------

    \459\ Xcel Energy Services Comments (RM16-23) at 24.
---------------------------------------------------------------------------

c. Commission Determination
    185. To implement Sec.  35.28(g)(12)(ii)(a) of the Commission's 
regulations, we adopt the NOPR proposal to require each RTO/ISO to 
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.\460\
---------------------------------------------------------------------------

    \460\ See supra P 118 n.280.
---------------------------------------------------------------------------

    186. We decline to require a minimum size greater than 100 kW for a 
single qualifying distributed energy resource that serves as its own 
distributed energy resource aggregator, as requested by Xcel Energy 
Services. We find that such a requirement is unnecessary at this time 
as the 100 kW minimum size requirement is a commonly used resource size 
that should not overburden RTO/ISO modeling software even if many 
individual resources choose to participate as such single distributed 
energy resource aggregations. In addition, a consistent minimum size 
requirement for aggregations of both single and multiple distributed 
energy resources will minimize barriers in the event that an individual 
distributed energy resource ceases to participate in a multi-resource 
aggregation and subsequently seeks to participate in RTO/ISO markets as 
a single qualifying distributed energy resource aggregation. As 
discussed above in Section IV.C.5, a single distributed energy resource 
aggregation would need to comply with all of the applicable RTO's/ISO's 
requirements, including any minimum or maximum capacity requirements 
for individual distributed energy resources.\461\ We clarify that, like 
other distributed energy resources seeking to participate in RTO/ISO 
markets exclusively through a distributed energy resource aggregation, 
we will not exercise jurisdiction over the interconnection to a 
distribution facility of a distributed energy resource for the purpose 
of participating in RTO/ISO markets exclusively through a single-

[[Page 67127]]

resource aggregation. We also clarify that a single qualifying 
distributed energy resource that serves as its own aggregator would 
also be subject to any requirements applicable to distributed energy 
resource aggregators.
---------------------------------------------------------------------------

    \461\ See supra Section IV.C.5 (Minimum and Maximum Capacity 
Requirements).
---------------------------------------------------------------------------

D. Locational Requirements

a. NOPR Proposal
    187. In the NOPR, the Commission stated that it was concerned that 
some existing requirements for aggregations to be located behind a 
single point of interconnection or pricing node may be overly stringent 
and may unnecessarily restrict opportunities for distributed energy 
resources to participate in the RTO/ISO markets through a distributed 
energy resource aggregator.\462\ The Commission noted that recent 
improvements in metering, telemetry, and communication technology 
should facilitate better situational awareness and enable management of 
geographically dispersed distributed energy resource aggregations, 
potentially rendering such restrictive locational requirements 
unnecessary.
---------------------------------------------------------------------------

    \462\ NOPR, 157 FERC ] 61,121 at P 138.
---------------------------------------------------------------------------

    188. Thus, the Commission proposed 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.\463\ The Commission stated that this proposal would give each 
RTO/ISO flexibility to adopt locational requirements that both allow 
for the participation of geographically dispersed distributed energy 
resources in the RTO/ISO markets through a distributed energy resource 
aggregation, where technically feasible, and also account for the 
modeling and dispatch of the RTO's/ISO's transmission system. The 
Commission further acknowledged 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 ancillary service markets).
---------------------------------------------------------------------------

    \463\ Id. P 139.
---------------------------------------------------------------------------

    189. To the extent that commenters would prefer that the Commission 
require the RTOs/ISOs to adopt consistent locational requirements, the 
Commission sought comment on what locational requirements it 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 RTO/ISO 
markets.\464\ The Commission noted 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.\465\ The Commission also sought 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.\466\
---------------------------------------------------------------------------

    \464\ Id. P 140.
    \465\ Id. n.233 (citing CAISO and NYISO tariff provisions).
    \466\ Id. P 141. The Commission noted that its proposal to allow 
the relevant distribution utility or utilities to review the list of 
distributed energy resources in a distributed energy resource 
aggregation would help ensure that dispatch of the aggregated 
distributed energy resources as a single resource will not cause any 
reliability concerns.
---------------------------------------------------------------------------

    190. At the April 2018 technical conference, the Commission sought 
comment on how to establish locational requirements for distributed 
energy resource aggregations that are as broad as technically 
feasible.\467\ After the technical conference, the Commission sought 
further comment on how RTOs/ISOs can accurately represent distributed 
energy resources in each node within a multi-node aggregation.\468\
---------------------------------------------------------------------------

    \467\ Supplemental Notice of Technical Conference at 2-3.
    \468\ Notice Inviting Post-Technical Conference Comments at 2-3.
---------------------------------------------------------------------------

b. Comments
    191. Several commenters support the Commission's proposal to 
require distributed energy resource aggregations that are as 
geographically broad as technically feasible and cite numerous benefits 
of broad aggregation.\469\ IRC states that this proposal strikes the 
appropriate balance between accommodating smaller distributed energy 
resources and providing the necessary flexibility to RTOs/ISOs.\470\ 
Advanced Energy Economy contends that aggregation across a broad 
geographic area is fundamental to the distributed energy resource 
business model.\471\ Advanced Energy Management contends that the 
larger the aggregation, the lower the chance of underperformance.\472\ 
Several commenters support multi-node aggregation, stating that it will 
improve market entry and overall competitive benefits.\473\ Others 
assert that multi-node aggregation will improve the services that 
distributed energy resource aggregations can provide, enhancing grid 
resilience and reliability.\474\
---------------------------------------------------------------------------

    \469\ See, e.g., Advanced Energy Management Comments (RM16-23) 
at 24; DER/Storage Developers Comments (RM16-23) at 4; Efficient 
Holdings Comments (RM16-23) at 17-18; IRC Comments (RM16-23) at 8; 
NRG Comments (RM16-23) at 10-11.
    \470\ IRC Comments (RM16-23) at 8.
    \471\ Advanced Energy Economy Comments (RM16-23) at 45.
    \472\ Advanced Energy Management Comments (RM16-23) at 24.
    \473\ See, e.g., Advanced Energy Buyers Comments (2018 RM18-9) 
at 7; CAISO Comments (2018 RM18-9) at 10-11; EPRI Comments (2018 
RM18-9) at 6; NRG Comments (2018 RM18-9) at 4-5; SEIA Comments (2018 
RM18-9) at 14.
    \474\ Advanced Energy Management Comments (2018 RM18-9) at 5; 
Direct Energy Comments (2018 RM18-9) at 2-3; Lorenzo Kristov 
Comments (2018 RM18-9) at 14; SEIA Comments (2018 RM18-9) at 14.
---------------------------------------------------------------------------

    192. Several commenters highlight examples of current RTO/ISO 
activities supporting broad geographic aggregation. Advanced Energy 
Economy states that PJM and NYISO have allowed aggregation at a broad 
level for behind-the-meter resources.\475\ Several commenters note that 
CAISO allows aggregation across nodes by permitting an aggregator to 
submit distribution factors.\476\ Advanced Energy Management highlights 
that ISO-NE allows aggregation at the dispatch zone level, stating that 
this suggests that it is technically feasible to aggregate behind-the-
meter resources to that level even for energy and ancillary services 
participation.\477\
---------------------------------------------------------------------------

    \475\ Advanced Energy Economy Comments (RM16-23) at 45.
    \476\ Id.; DER/Storage Developers Comments (RM16-23) at 4; 
Tesla/SolarCity Comments (RM16-23) at 28. CAISO uses load 
distribution factors to reflect the relative amount of load at each 
node. The sum of all load distribution factors for a single 
aggregation is one. See CAISO Tariff, Appendix A.
    \477\ Advanced Energy Management Comments (RM16-23) at 25.
---------------------------------------------------------------------------

    193. Multiple commenters also articulate concerns regarding 
limiting distributed energy resource aggregations to a single 
node.\478\ Advanced Energy Economy and Advanced Energy Management 
contend that aggregation limited to the nodal level will not meet the 
``geographically broad as technically feasible'' standard, and Advanced 
Energy Management asks the Commission to clarify that it does not.\479\ 
Advanced Energy Economy and CAISO further caution against the economic 
effects of single-node aggregation, stating that it would erode

[[Page 67128]]

the economics of aggregating distributed energy resources and create a 
barrier to their wholesale market participation.\480\
---------------------------------------------------------------------------

    \478\ See, e.g., AES Companies Comments (RM16-23) at 36; 
Efficient Holdings Comments (RM16-23) at 18; Public Interest 
Organizations Comments (RM16-23) at 24; R Street Institute Comments 
(RM16-23) at 9; Sunrun Comments (2018 RM18-9) at 14.
    \479\ Advanced Energy Economy Comments (RM16-23) at 46-47; 
Advanced Energy Management Comments (RM16-23) at 24.
    \480\ Advanced Energy Economy Comments (2018 RM18-9) at 22; 
CAISO Comments (2018 RM18-9) at 10-11.
---------------------------------------------------------------------------

    194. Several commenters state that, at the technical conference, 
CAISO and PJM described workable approaches to mitigate any reliability 
concerns and to achieve proper price formation for multi-node 
aggregations of distributed energy resources.\481\ Other commenters 
point to approaches used elsewhere, such as multi-node aggregations of 
demand response resources in other regions.\482\ Organization of MISO 
States comments that, in MISO, multi-node aggregation is allowed for 
purposes of capacity accreditation, but only for a limited set of 
resource types.\483\
---------------------------------------------------------------------------

    \481\ Advanced Energy Economy Comments (2018 RM18-9) at 22; 
Advanced Energy Management Comments (2018 RM18-9) at 5-6; Direct 
Energy Comments (2018 RM18-9) at 6 (citing Technical Conference 
Transcript at 17, 18, 53); Sunrun Comments (2018 RM18-9) at 14.
    \482\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9) 
at 22; Advanced Energy Management Comments (2018 RM18-9) at 6 
(citing ISO-NE Comments, Docket No. AD16-20-000 (filed Feb. 13, 
2017) (``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. 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.'')); CAISO 
Comments (2018 RM18-9) at 10, 12-13; Lorenzo Kristov Comments (2018 
RM18-9) at 14; PJM Market Monitor Comments (2018 RM18-9) at 7-8.
    \483\ Organization of MISO States Comments (2018 RM18-9) at 2 
(citing Midcontinent Independent System Operator, Open Access 
Transmission, Energy, and Operating Reserve Markets Tariff, Module 
E-1, Section 69A.3.5).
---------------------------------------------------------------------------

    195. Other commenters further express support for the feasibility 
of dispatching and settling distributed energy resource aggregations 
across multiple nodes. For instance, PJM explains that it already 
dispatches demand response resources across varying levels of 
geographic areas, including across different pricing nodes, which could 
be used as a foundation for developing similar rules to dispatch 
distributed energy resources injecting past the applicable retail 
meter.\484\ Xcel Energy Services states that it is not concerned with 
aggregations across multiple nodes if the region has accurate topology 
models, volumetric weightings, and billing/settlement metering at each 
location (and penalties are assessed at the individual resource level 
to disincentivize gaming, manipulation, and price formation 
errors).\485\ Avangrid contends that provisions that would allow 
``settlement-only'' generation treatment for aggregated distributed 
energy resources would allow aggregation of these resources on a 
broader load zone basis for energy market settlement.\486\
---------------------------------------------------------------------------

    \484\ PJM Comments (RM16-23) at 28.
    \485\ Xcel Energy Services Comments (RM16-23) at 25.
    \486\ Avangrid Comments (RM16-23) at 12.
---------------------------------------------------------------------------

    196. Some commenters address the relationship between the minimum 
and maximum size requirement for distributed energy resource 
aggregations and the locational requirements for them. Eversource and 
other commenters state that limiting the maximum size of a distributed 
energy resource aggregation can also mitigate any negative operational 
impacts of geographically broad aggregations.\487\ Tesla/Solar City 
state that a minimum size requirement of 100 kW would allow the 
reasonable development of aggregations within any locational 
requirement established for distributed energy resource 
aggregations.\488\ In their comments in response to the Notice Inviting 
Post-Technical Conference Comments, multiple commenters agree that 
reducing the minimum size requirement for distributed energy resource 
aggregations to 100 kW may alleviate concerns about requiring 
aggregations to be located at a single node.\489\ Organization of MISO 
States observes that lowering the minimum size requirement for 
distributed energy resource aggregations would decrease the need for 
broad aggregation across Local Balancing Authorities and that this 
could also reduce the size of resources, which inherently lowers any 
related reliability risk to the system.\490\ Lorenzo Kristov states 
that single-node distributed energy resource aggregations that meet the 
minimum size threshold would be useful resources for the wholesale 
market, so the question is whether the additional complexity of multi-
node distributed energy resource aggregations has commensurate 
benefits.\491\ SEIA states that it supports a 100 kW minimize size 
limit, but does not support limiting aggregations to single pricing 
nodes.\492\
---------------------------------------------------------------------------

    \487\ Advanced Energy Economy Comments (2018 RM18-9) at 22 
(citing Technical Conference Transcript, Comments of Andrew Levitt, 
Senior Market Strategist, PJM Interconnection, L.L.C., at p. 20, 
lines 2-8, and P 49, lines 21-24 (noting the ability of economic 
dispatch engines to manage any constraints that may be caused by 
dispatching individual resources within an aggregation)); CAISO 
Comments (2018 RM18-9) at 5; Eversource Comments (2018 RM18-9) at 
13; PJM Comments (2018 RM18-9) at 5, 11-12; SEIA Comments (2018 
RM18-9) at 14.
    \488\ Tesla/SolarCity Comments (RM16-23) at 26.
    \489\ See, e.g., EPRI Comments (2018 RM18-9) at 7-8; Lorenzo 
Kristov Comments (2018 RM18-9) at 14; Organization of MISO States 
Comments (2018 RM18-9) at 2; PJM Comments (2018 RM18-9) at 12.
    \490\ Organization of MISO States Comments (2018 RM18-9) at 2.
    \491\ Lorenzo Kristov Comments (2018 RM18-9) at 14.
    \492\ SEIA Comments (2018 RM18-9) at 14.
---------------------------------------------------------------------------

    197. Other commenters, however, recommend that the Commission 
restrict aggregation to one pricing node or interconnection point.\493\ 
Some commenters are concerned that a geographically broad locational 
requirement could have potential reliability impacts on the 
distribution system or the bulk electric system.\494\ For instance, 
several RTOs/ISOs, including those that support multi-node 
aggregations, express concerns related to managing the aggravation of 
transmission constraints and resulting pricing and operational 
implications in real time if aggregated resources were to span both 
sides of a constraint.\495\ PJM Market Monitor states that the 
potential addition of more distributed energy resources means they 
should be aggregated at a single node to allow operators to have 
visibility and control.\496\ PJM Market Monitor asserts that it is 
impossible to ensure that dispatch of a multi-node aggregation of 
distributed energy resources does not exacerbate a transmission 
constraint in a nodal system.\497\
---------------------------------------------------------------------------

    \493\ ISO-NE Comments (RM16-23) at 37-40; NYISO Comments (RM16-
23) at 17; NYISO Indicated Transmission Owners Comments (RM16-23) at 
13-14; PJM Market Monitor Comments (RM16-23) at 13.
    \494\ See, e.g., American Petroleum Institute Comments (RM16-23) 
at 10-11; Duke Energy Comments (RM16-23) at 3, 5-6; EEI Comments 
(RM16-23) at 28-29; Institute for Policy Integrity Comments (RM16-
23) at 9; Pacific Gas & Electric Comments (RM16-23) at 18-19.
    \495\ See, e.g., CAISO Comments (RM16-23) at 27; ISO-NE Comments 
(RM16-23) at 37; MISO Comments (RM16-23) at 21-22; NYISO Comments 
(2018 RM18-9) at 6, 16; SPP Comments (RM16-23) at 17-19.
    \496\ PJM Market Monitor Comments (2018 RM18-9) at 12.
    \497\ Id. at 4.
---------------------------------------------------------------------------

    198. NYISO Indicated Transmission Owners argue that aggregations 
spanning more than one transmission zone could present both 
administrative and operational difficulties for the RTO/ISO and the 
distribution utility and that aggregations should be limited to a 
single transmission node unless price separation does not exist.\498\ 
EPSA and the PJM Market Monitor argue that because all the RTOs/ISOs 
rely on nodal security constrained economic dispatch, it is appropriate 
for a generic rule to limit aggregations to a single node to ensure 
that the markets continue to be

[[Page 67129]]

efficient and competitive.\499\ EPRI states that aggregations at single 
nodes would generally be the most beneficial for the distributed energy 
resources financially, for the RTOs/ISOs with respect to reliability, 
and for consumers economically.\500\ NYISO states that single-node 
aggregation allows NYISO to telemeter only the aggregation rather than 
each individual resource within the aggregation, reducing the cost of 
participation and better allowing smaller resources to participate in 
the NYISO markets.\501\
---------------------------------------------------------------------------

    \498\ NYISO Indicated Transmission Owners Comments (RM16-23) at 
13-14.
    \499\ EPSA Comments (2018 RM18-9) at 8-9; PJM Market Monitor 
Comments (2018 RM18-9) at 2-3.
    \500\ EPRI Comments (2018 RM18-9) at 6.
    \501\ NYISO Comments (2018 RM18-9) at 6, 8.
---------------------------------------------------------------------------

    199. Commenters also address the dynamic nature of managing multi-
node aggregations of distributed energy resources--such as the 
challenges that come from frequent changes in congestion patterns and 
system topology.\502\ Several commenters express concerns that a 
geographically broad locational requirement for distributed energy 
resource aggregations could disrupt nodal pricing methods and result in 
different treatment of resources located at a single node (i.e., among 
multi-node distributed energy resource aggregations and 
generators).\503\ Calpine states that it may be possible to revisit 
procedures for multi-node aggregation of distributed energy resources 
as the system topology changes due to congestion, but that rules 
associated with locational requirements may not provide the flexibility 
necessary for the RTOs/ISOs to manage dynamic grid conditions in real 
time.\504\
---------------------------------------------------------------------------

    \502\ CAISO Comments (2018 RM18-9) at 5-6; EPRI Comments (2018 
RM18-9) at 3-4; MISO Comments (2018 RM18-9) at 18; NYISO Comments 
(2018 RM18-9) at 6; PJM Market Monitor Comments (2018 RM18-9) at 3.
    \503\ See, e.g., American Petroleum Institute Comments (RM16-23) 
at 10-11; EEI Comments (RM16-23) at 28-30; ISO-NE Comments (RM16-23) 
at 37-40; NYISO Indicated Transmission Owners at 16-17; PJM Market 
Monitor Comments (RM16-23) at 13.
    \504\ Calpine Comments (2018 RM18-9) at 4-5 (citing comments of 
Dr. Joseph Bowring, Technical Conference Transcript at 37; comments 
of Jeff Bladen, Technical Conference Transcript at 36).
---------------------------------------------------------------------------

    200. With respect to whether the Commission should require the 
RTOs/ISOs to adopt consistent locational requirements for distributed 
energy resource aggregations, commenters provide varied 
recommendations. Tesla/SolarCity recommend that the Commission 
establish consistent locational requirements across the RTOs/ISOs, 
similar to CAISO's Distributed Energy Resource Provider framework.\505\ 
Mensah supports locational requirements by distribution utility zones 
or defined sub-zones, while noting locational requirements may vary 
across RTOs/ISOs.\506\ Mensah asserts that locational requirements 
should be consistent for all wholesale market services within an 
individual RTO/ISO in order to avoid unnecessary complications.
---------------------------------------------------------------------------

    \505\ Tesla/SolarCity Comments (RM16-23) at 27.
    \506\ Mensah Comments (RM16-23) at 3.
---------------------------------------------------------------------------

    201. Other commenters suggest that the RTOs/ISOs should have 
flexibility to determine the locational requirements appropriate for 
their region. Noting CAISO's approach to distributed energy resource 
aggregation within ``sub-zones,'' ISO-NE's approach to self-scheduling 
distributed energy resources, and the PJM Market Monitor's desire for 
nodal aggregations, MISO argues that the Commission should allow each 
RTO/ISO to establish tailored approaches based on its regional 
needs.\507\ Similarly, Calpine and SoCal Edison assert that the 
Commission should allow regional variations.\508\ PJM asserts that the 
Commission should require RTOs/ISOs to adopt measures necessary to 
ensure control of congestion, but should allow flexibility to tailor 
those measures for individual systems.\509\
---------------------------------------------------------------------------

    \507\ MISO Comments (2018 RM18-9) at 20 (citing Technical 
Conference Transcript at 9-11, 14-15, 20-23).
    \508\ Calpine Comments (2018 RM18-9) at 5-6; SoCal Edison 
Comments (2018 RM18-9) at 3.
    \509\ PJM Comments (2018 RM18-9) at 6-7.
---------------------------------------------------------------------------

    202. Other commenters, including AES Companies and MISO 
Transmission Owners, argue for regional flexibility but recommend that 
other entities besides the RTOs/ISOs, such as affected balancing 
authorities, distribution utilities, states, and non-regulated 
distribution cooperatives, determine the locational requirements.\510\
---------------------------------------------------------------------------

    \510\ AES Companies Comments (RM16-23) at 10, 34; MISO 
Transmission Owners Comments (RM16-23) at 21.
---------------------------------------------------------------------------

    203. Several of the commenters that support the Commission adopting 
rules for multi-node aggregations suggest that the RTOs/ISOs could be 
permitted to present evidence in their compliance filings demonstrating 
that limiting aggregations is necessary for reliability reasons.\511\ 
Direct Energy and NRG argue that any limits or boundaries on 
aggregations of distributed energy resources must be supported by a 
transparent, comprehensive, and data-driven regional analysis, and that 
a distributed energy resource's participation should only be precluded 
if its participation would undermine reliability.\512\
---------------------------------------------------------------------------

    \511\ Advanced Energy Economy Comments (2018 RM18-9) at 22-23; 
Advanced Energy Management Comments (2018 RM18-9) at 6; Direct 
Energy Comments (2018 RM18-9) at 3-4 (describing examples of 
distributed energy resource aggregations being operated in Belgium, 
France and Australia); NRG Comments (2018 RM18-9) at 5.
    \512\ Direct Energy Comments (2018 RM18-9) at 4-5, 6-7 (citing 
Technical Conference Transcript at 9, 34).
---------------------------------------------------------------------------

c. Commission Determination
    204. We adopt the NOPR proposal and add Sec.  35.28(g)(12)(ii)(b) 
to the Commission's regulations 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. However, 
given the variety of approaches to locational requirements proposed by 
commenters, we will provide each RTO/ISO with flexibility to determine 
the locational requirements for its region, as long as it demonstrates 
that those requirements are as geographically broad as technically 
feasible. To the extent that an RTO/ISO seeks to continue its currently 
effective locational requirements for distributed energy resources, it 
must demonstrate on compliance that its approach meets this 
requirement. To comply with this rule, each RTO/ISO must provide a 
detailed, technical explanation for the geographical scope of its 
proposed locational requirements. This explanation could include, for 
example, a discussion of the RTO/ISO's system topology and regional 
congestion patterns, or any other factors that necessitate its proposed 
locational requirements.
    205. We recognize the arguments for both multi-node and single-node 
aggregations. There are several benefits of multi-node aggregations, 
such as improved market entry and competition, lower chance of 
underperformance, and improved services that aggregations can provide. 
However, single-node aggregations may reduce the cost of participation 
for smaller resources by telemetering the aggregation rather than each 
individual resource and allows RTOs/ISOs to better manage intra-zonal 
price congestion. Additionally, as discussed above, the reduction of 
the minimum size requirement for distributed energy resource 
aggregations will help alleviate commenters' concerns about requiring 
aggregations to locate only at a single node.\513\
---------------------------------------------------------------------------

    \513\ See supra Section IV.C.4 (Minimum and Maximum Size of 
Aggregation).
---------------------------------------------------------------------------

    206. We are persuaded by comments that identify the various 
benefits of multi-node distributed energy resource

[[Page 67130]]

aggregations. In particular, we are persuaded by CAISO's arguments that 
multi-node aggregations allow for greater market participation by 
reducing transaction costs and assembling appropriately sized resources 
optimized for the wholesale electricity markets, and by PJM's assertion 
that it already dispatches demand response resources across different 
pricing nodes.\514\ We believe that the challenges of managing a multi-
node aggregation--especially around a transmission constraint--can be 
overcome through coordination between RTOs/ISOs, aggregators, and 
distribution system operators. However, we also recognize that existing 
differences--both operational and administrative--among RTOs/ISOs make 
such a uniform requirement challenging. Those differences are relevant 
here because some RTOs/ISOs already aggregate resources in a different 
manner, dynamic changes in system topology and congestion patterns vary 
across each RTO/ISO, and each RTO/ISO may have different solutions 
addressing reliability impacts on their respective systems. 
Accordingly, while each RTO/ISO must provide a detailed, technical 
explanation for the geographical scope of its proposed locational 
requirements, this final rule provides RTOs/ISOs with a certain degree 
of flexibility as to the technical aspects of a locational requirement 
that is as geographically broad as possible.
---------------------------------------------------------------------------

    \514\ See CAISO Comments (2018 RM18-9) at 10; PJM Comments 
(RM16-23) at 28.
---------------------------------------------------------------------------

    207. As to arguments regarding the relative merits of single node 
and multi-node aggregations, we find that providing RTOs/ISOs with the 
flexibility to establish their own locational requirements on 
compliance that are as geographically broad as technically feasible 
will allow such arguments to be considered in the stakeholder process 
and in each RTO/ISO-specific compliance proceeding. We also are not 
persuaded by Mensah's and Tesla/SolarCity's arguments for consistent 
locational requirements either across the RTOs/ISOs or for all 
wholesale market services within an individual RTO/ISO. We find that 
there is no need to standardize the locational requirements and 
therefore instead provide the RTOs/ISOs the flexibility to develop more 
tailored approaches based on their regional needs. In addition, we are 
not persuaded by AES Companies' and MISO Transmission Owners' arguments 
that entities other than the RTO/ISO should determine the locational 
requirements of distributed energy resources. We find that RTOs/ISOs 
have the primary responsibility of administering the regional markets 
and reliably operating the system, and are therefore in the best 
position to propose on compliance the appropriate locational 
requirements, as long as they demonstrate that those requirements are 
as geographically broad as technically feasible, to enable distributed 
energy resources to participate in a distributed energy resource 
aggregation for their regions.

E. Distribution Factors and Bidding Parameters

a. NOPR Proposal
    208. In the NOPR, the Commission proposed to require each RTO/ISO 
to revise its tariff to include the requirement that distributed energy 
resource aggregators (1) provide default distribution factors \515\ 
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 RTO/ISO markets.\516\ The 
Commission also proposed 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 RTO/ISO markets. The Commission sought 
comment on this proposal as well as comment on alternative approaches 
that may provide the RTOs/ISOs with the information from geographically 
or electrically dispersed resources in a distributed energy resource 
aggregation necessary to reliably operate their systems. The Commission 
also sought 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.
---------------------------------------------------------------------------

    \515\ Distribution factors indicate how much of the total 
response from a distributed energy resource aggregation would be 
coming from each node at which one or more resources participating 
in the aggregation are located.
    \516\ NOPR, 157 FERC ] 61,121 at P 143.
---------------------------------------------------------------------------

    209. After the April 2018 technical conference, the Commission 
sought additional information about bidding parameters or other 
potential mechanisms needed to represent the physical and operational 
characteristics of distributed energy resource aggregations in RTO/ISO 
markets.\517\
---------------------------------------------------------------------------

    \517\ Notice Inviting Post-Technical Conference Comments at 4-5.
---------------------------------------------------------------------------

b. Comments
    210. A number of commenters support the Commission's proposed 
requirement for distributed energy resource aggregators to provide 
default distribution factors to the RTO/ISO when registering 
distributed energy resource aggregations and to update those 
distribution factors as necessary.\518\ Tesla/SolarCity states that 
this method strikes the proper balance between providing flexibility 
and market access to distributed energy resource aggregators while 
providing sufficient information to RTOs/ISOs about the locations of 
the individual distributed energy resources and how dispatching them 
will affect the system.\519\ DER/Storage Developers assert that 
distribution factors would provide the RTO/ISO with sufficient 
information to maintain reliability without requiring unnecessary 
information about individual distributed energy resources.\520\
---------------------------------------------------------------------------

    \518\ See, e.g., CAISO Comments (RM16-23) at 30; DER/Storage 
Developers Comments (RM16-23) at 4; NextEra Comments (RM16-23) at 
15; SEIA Comments (RM16-23) at 19; Xcel Energy Services Comments 
(RM16-23) at 25.
    \519\ Tesla/SolarCity Comments (RM16-23) at 28.
    \520\ DER/Storage Developers Comments (RM16-23) at 4.
---------------------------------------------------------------------------

    211. CAISO generally supports the Commission's proposal and notes 
that its Distributed Energy Resource Provider model rules require an 
aggregator to submit generation distribution factors with its bid.\521\ 
CAISO states that multi-node aggregations require distribution factors 
to model the impact of the resource on the transmission system and that 
allowing resources to update distribution factors in the bid submission 
process mitigates the potential for inaccuracies. If an aggregator does 
not submit distribution factors with its bid, CAISO states that it uses 
the aggregation's default generation distribution factors registered in 
CAISO's Master File for a reasonable expectation of how the resource 
will perform across applicable pricing nodes.\522\ CAISO notes that 
using distribution factors to schedule load is an acceptable and 
feasible practice despite inherent inaccuracies.\523\ Microgrid 
Resources Coalition notes that CAISO's Distributed Energy Resource 
Provider model permits participation in aggregations of separately 
metered resources independent of the various attributes of the other 
loads and resources behind the meter and that the critical feature of 
this arrangement is the ability to define the limits of participation 
so that the aggregator and the system operator can dispatch the 
aggregation within those

[[Page 67131]]

limits.\524\ Lorenzo Kristov also notes that the CAISO Distributed 
Energy Resource Provider structure enables multi-node aggregations 
using both default and biddable distribution factors.\525\ Lorenzo 
Kristov states, however, that these provisions have not yet been 
practically tested by a non-demand-response resource. Conversely, NYISO 
states that it does not need distribution factors to dispatch 
distributed energy resource aggregations accurately because it intends 
to limit distributed energy resource aggregations to resources at a 
single transmission node.\526\
---------------------------------------------------------------------------

    \521\ CAISO Comments (2018 RM18-9) at 11.
    \522\ CAISO Comments (RM16-23) at 30-31.
    \523\ CAISO Comments (2018 RM18-9) at 11.
    \524\ Microgrid Resources Coalition (2018 RM18-9) at 9.
    \525\ Lorenzo Kristov Comments (2018 RM18-9) at 14.
    \526\ NYISO Comments (RM16-23) at 17. The Commission accepted 
NYISO's tariff provisions related to aggregations, which require 
that facilities within an aggregation are electrically connected to 
the same transmission node. NYISO Aggregation Order, 170 FERC ] 
61,033 at PP 6, 11.
---------------------------------------------------------------------------

    212. Other RTOs/ISOs assert that implementing the Commission's 
proposal may be technically difficult. SPP states that implementing 
distribution factors in the software is not trivial.\527\ MISO states 
that it currently updates the distribution factors daily and that 
updating more frequently may result in a significantly large amount of 
data exchange and processing in the market system.\528\
---------------------------------------------------------------------------

    \527\ SPP Comments (RM16-23) at 19.
    \528\ MISO Comments (RM16-23) at 23.
---------------------------------------------------------------------------

    213. Several RTOs/ISOs also describe the limitations of 
distribution factor requirements. SPP notes that distribution factors 
provide the reliability coordinator with the distribution of the 
resources in the aggregation, but those factors do not guarantee that 
the resources in the aggregation will move pro-rata. SPP asserts that 
the uncertainty in the aggregate response may cause a reliability issue 
by introducing uncertainty in its effective dispatch to resolve 
constraints. SPP adds that the economics and pricing of the aggregate 
may not reflect the actual response on the sub-aggregate level.\529\ 
Similarly, ISO-NE also argues that distribution factors may vary based 
on the actual level of dispatch of the aggregate, for example, there 
could be a large difference between distribution factors based upon the 
maximum MW output and the minimum MW output of an aggregation.\530\ 
Pacific Gas & Electric suggests that, because the distribution factors 
will impact settlements and congestion, distributed energy resource 
aggregations should use an outage management-like system to report if 
real-time distribution factors differ from those that are used for the 
market award.\531\
---------------------------------------------------------------------------

    \529\ SPP Comments (RM16-23) at 19-20.
    \530\ ISO-NE Comments (RM16-23) at 42-43.
    \531\ Pacific Gas & Electric Comments (RM16-23) at 19.
---------------------------------------------------------------------------

    214. Some commenters assert that the Commission should not impose 
the distribution factor requirements in all regions. NYISO Indicated 
Transmission Owners state that the application of distribution factors 
may not be the optimal approach for dispatching resources within an 
aggregation in all systems, especially if it leads to dispatching 
resources on either side of a single constraint.\532\ NYISO Indicated 
Transmission Owners argue that the Commission should require RTOs/ISOs 
to develop solutions that are regionally appropriate and that promote 
efficient dispatch of resources with effective resolution of 
constraints on both the transmission and distribution systems.
---------------------------------------------------------------------------

    \532\ NYISO Indicated Transmission Owners Comments (RM16-23) at 
20.
---------------------------------------------------------------------------

    215. Similarly, ISO-NE asks the Commission to allow each RTO/ISO to 
develop an approach that works well in light of each region's 
particular network configuration, infrastructure, and existing 
operational processes.\533\ ISO-NE explains that, rather than providing 
distribution factors, an aggregator could, for example, report the 
expected MW capability at each node, or that size limits for being 
dispatchable in the markets could be lowered, reducing the need to 
aggregate across multiple nodes to participate.\534\ ISO-NE states 
that, for a mesh network such as most of New England, using 
distribution factors as the basis for dispatch is problematic.\535\ 
ISO-NE explains that a participant would be unable to predict the 
changing power flows to multiple connected nodes without possessing the 
same detailed knowledge of grid configuration used by ISO-NE and the 
distribution utilities in real-time operations. As a result, ISO-NE 
contends that any stated distribution factors could bear little 
relation to real-time operations.
---------------------------------------------------------------------------

    \533\ ISO-NE Comments (RM16-23) at 41.
    \534\ Id. at 45.
    \535\ Id. at 42.
---------------------------------------------------------------------------

    216. ISO-NE contends that, in scenarios where the distribution 
system is not radial to the transmission system, a single resource 
located in the distribution network may have sensitivities to multiple 
nodes in the transmission system.\536\ ISO-NE argues that it is not 
reasonable for an aggregator to try to submit distribution factors for 
each node as they would not have visibility to these sensitivities. 
ISO-NE notes that it has addressed this problem with Asset-Related 
Demand by only supporting aggregations of Asset-Related Demand that 
have similar sensitivities to each node, so that an aggregated node can 
be modeled to reflect the impacts to the system of the Asset-Related 
Demand for which the Asset-Related Demand has a 100% distribution 
factor. ISO-NE states that this approach may or may not be appropriate 
for distributed energy resource aggregations and would require further 
evaluation and coordination with the distribution utilities.\537\
---------------------------------------------------------------------------

    \536\ Id. at 44.
    \537\ Id. at 44-45.
---------------------------------------------------------------------------

    217. In response to the Commission's request for 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, some commenters argue that RTOs/ISOs 
should be allowed to require additional bidding parameters for 
distributed energy resource aggregations to reliably operate the bulk 
power system and accurately reflect resources in the wholesale 
markets.\538\ Stem suggests that bidding parameters in current RTO/ISO 
rules assume that a resource's physical attributes, such as ramp rate 
or maximum charge limit, are fixed values and that the resource is 
dispatchable to those levels at all times, which will need to 
change.\539\ Stem argues that behind-the-meter resources should be able 
to elect to be out of the market at certain times, as long as their 
existing service obligations are met.\540\ PJM Market Monitor asserts 
that, as long as distributed energy resources are priced and dispatched 
locationally, the existing offer parameters should address the 
characteristics of the resources.\541\ Dominion argues that distributed 
energy resource aggregators should be allowed to communicate 
distributed energy resource aggregations' operating limitations to the 
RTO/ISO and control their dispatch to the same extent as other 
resources.\542\ Dominion adds that certain distributed energy 
resources, such as solar generators, should also have the option to 
only be curtailed for reliability concerns.
---------------------------------------------------------------------------

    \538\ Dominion Comments (RM16-23) at 11; NYISO Comments (RM16-
23) at 17.
    \539\ Stem Comments (RM16-23) at 15, 16.
    \540\ Id. at 16.
    \541\ PJM Market Monitor Comments (2018 RM18-9) at 5.
    \542\ Dominion Comments (RM16-23) at 11.
---------------------------------------------------------------------------

    218. NYISO Indicated Transmission Owners assert that distributed 
energy resource aggregations participating in capacity markets should 
bid a capacity value that reflects the aggregation's

[[Page 67132]]

value in satisfying the peak period resource adequacy 
requirements.\543\ NYISO Indicated Transmission Owners state that the 
capacity value for distributed energy resource aggregations should take 
into account various factors, such as variability of the aggregation, 
extent to which the distributed energy resource aggregation is energy 
limited, and composition of technologies that comprise the aggregation, 
but underscores that solutions should be addressed during 
implementation in each RTO's/ISO's stakeholder process to ensure 
regional variations are accommodated.\544\
---------------------------------------------------------------------------

    \543\ NYISO Indicated Transmission Owners Comments (RM16-23) at 
11.
    \544\ Id. at 11-12.
---------------------------------------------------------------------------

    219. MISO states that it needs more time to further investigate and 
better understand the potential need for additional bidding parameters 
for distributed energy resource aggregations.\545\ MISO asserts that 
such parameters will likely be needed to the extent a distributed 
energy resource may involve an aggregation of electric storage 
resources and if the RTO/ISO is expected to manage their state of 
charge. MISO explains that, as an example, distributed energy resource 
aggregations might need to provide information describing sub-
aggregations for MISO to address security constraints associated with 
separate distribution networks or separate nodes within a distribution 
network.\546\
---------------------------------------------------------------------------

    \545\ MISO Comments (RM16-23) at 23.
    \546\ Id. at 23-24.
---------------------------------------------------------------------------

    220. Advanced Microgrid Solutions asserts that RTOs/ISOs must have 
separate rules regarding attributes, bidding parameters, and dispatch 
in order to recognize the multiple uses for behind-the-meter electric 
storage resources.\547\ Advanced Microgrid Solutions further explains 
that some requirements relevant to a single-site resource are 
irrelevant for an aggregation.\548\ For instance, Advanced Microgrid 
Solutions states that an aggregation of behind-the-meter resources does 
not have an equivalent to a state of charge for a single-site 
distributed energy resource to be used as a bidding parameter for a 
fleet of aggregated distributed energy resources and, instead, the 
aggregator must bid based on calculated availability and should be 
penalized if the fleet does not perform as bid. Furthermore, Microgrid 
Resources Coalition asserts that microgrids can also provide wholesale 
services with suitable metering and controls but that their 
participation is frequently restricted.\549\ Microgrid Resources 
Coalition argues that it is important that the resource be able to 
define the limits of participation within the aggregation, so that it 
can be dispatched within its own limits, noting that an aggregation 
would be subject to penalties if it cannot comply.
---------------------------------------------------------------------------

    \547\ Advanced Microgrid Solutions Comments (RM16-23) at 7.
    \548\ Id. at 8.
    \549\ Microgrid Resources Coalition Comments (RM16-23) at 6.
---------------------------------------------------------------------------

    221. EPRI states that an injection of energy from a resource on the 
distribution system usually results in reduced losses as compared to 
the same injection on the transmission bus.\550\ EPRI argues that this 
reduction of losses is one of the substantial values that distributed 
energy resources can provide and that this value should be reflected in 
marginal prices at distributed energy resource locations.\551\ EPRI 
states that the RTO/ISO may not be able to calculate the value without 
information on the distribution system, so this value may need to be 
included as a bidding parameter, which may require verification by the 
distribution utility.
---------------------------------------------------------------------------

    \550\ EPRI Comments (RM16-23) at 28.
    \551\ Id. at 29.
---------------------------------------------------------------------------

    222. Several RTOs/ISOs do not believe that the Commission should 
mandate additional universal bidding parameters. SPP believes that each 
RTO/ISO should have the discretion to develop bidding parameters that 
reflect their unique needs relative to their individual software and 
applications.\552\ CAISO notes that its existing market participation 
models available to distributed energy resource aggregations provide 
the means to account for the physical and operational characteristics 
of an aggregation and argues that no universal bidding parameters need 
to be established.\553\
---------------------------------------------------------------------------

    \552\ SPP Comments (RM16-23) at 20.
    \553\ CAISO Comments (RM16-23) at 31.
---------------------------------------------------------------------------

    223. Duke Energy argues that any RTO/ISO bidding parameters must 
treat all resources comparably and not favor certain new technologies 
or resources over others.\554\ NRG contends that, for aggregations, 
bidding parameters should generally match the appropriate participation 
model. For example, NRG states generation bidding parameters should 
apply to aggregations composed strictly of distributed generators, and 
demand response bidding parameters should apply to aggregations 
containing only load resources with no ability to net inject into the 
system.\555\ NRG notes that the bidding parameters for bi-directional 
resources should be general enough to encompass requirements of 
distributed energy resource aggregators as well as storage-only 
resources.
---------------------------------------------------------------------------

    \554\ Duke Energy Comments (RM16-23) at 6-7.
    \555\ NRG Comments (RM16-23) at 14.
---------------------------------------------------------------------------

    224. EPRI states that distribution factors are the primary unique 
parameter, noting that they may need to be allowed to vary dynamically 
in order for values to be as accurate as possible.\556\ EPRI also 
suggests that the value of marginal distribution losses on the 
distribution system is unique and may help the RTO/ISO determine 
economically efficient resources.
---------------------------------------------------------------------------

    \556\ EPRI Comments (2018 RM18-9) at 5.
---------------------------------------------------------------------------

c. Commission Determination
    225. In this final rule, we adopt the NOPR proposal, as modified 
below, and add Sec.  35.28(g)(12)(ii)(c) to the Commission's 
regulations to require each RTO/ISO to establish market rules that 
address distribution factors and bidding parameters for distributed 
energy resource aggregations. Specifically, we require each RTO/ISO 
that allows multi-node aggregations to revise its tariff to (1) require 
that distributed energy resource aggregators give to the RTO/ISO the 
total distributed energy resource aggregation response that would be 
provided from each pricing node, where applicable, when they initially 
register their aggregation and to update these distribution factors if 
they change; \557\ and (2) incorporate appropriate bidding parameters 
into its participation models as necessary to account for the physical 
and operational characteristics of distributed energy resource 
aggregations.\558\
---------------------------------------------------------------------------

    \557\ We note that distribution factors are only necessary to 
the extent that distributed energy resources participating in an 
aggregation are located at different nodes. This methodology would 
apply only when distributed energy resources located at different 
nodes participate in the same aggregation to provide a particular 
market service.
    \558\ For example, such bidding parameters could include 
response rates, ramp rates, and upper and lower operating limits. 
See CAISO Tariff, Section 30.5.2.1; NYISO Tariffs, NYISO MST, 
Section 4.2.1.3.3 (18.0.0).
---------------------------------------------------------------------------

    226. As the Commission explained in the NOPR, 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.\559\ As the Commission also explained in the NOPR, 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 
multiple nodes on the grid.
---------------------------------------------------------------------------

    \559\ NOPR, 157 FERC ] 61,121 at P 142.
---------------------------------------------------------------------------

    227. Additionally, we agree with commenters that some bidding 
parameters for existing participation models may not accommodate the

[[Page 67133]]

unique features of certain distributed energy resource aggregations, 
and that different bidding parameters may be needed to recognize 
distributed energy resources' multiple uses. Therefore, we further 
modify the NOPR proposal to require that each RTO/ISO incorporate 
appropriate bidding parameters into its participation models as 
necessary to account for the physical and operational characteristics 
of distributed energy resource aggregations. In meeting this 
requirement, each RTO/ISO must either (1) incorporate appropriate 
bidding parameters that account for the physical and operational 
characteristics of distributed energy resource aggregations into its 
one or more new participation models for such aggregations; and/or (2) 
adjust the bidding parameters of the existing participation models to 
account for the physical and operational characteristics of distributed 
energy resource aggregations.
    228. We find that the revisions directed by this final rule will 
provide distributed energy resource aggregators with the flexibility to 
update their distribution factors and provide RTOs/ISOs with the 
information needed to model aggregations accurately enough to issue 
feasible dispatch instructions and maintain reliability.
    229. However, several commenters contend that requiring the RTOs/
ISOs to account for distribution factors and other bidding parameters 
as described in the NOPR may be technically difficult to implement, or 
of little benefit considering the RTO's/ISO's network configuration. In 
light of this concern, we find that, in meeting this requirement, each 
RTO/ISO may revise its tariff to manage the locational attributes of 
distributed energy resource aggregations in a manner that reflects the 
RTO's/ISO's unique network configuration, infrastructure, and existing 
operational processes. We will evaluate, upon compliance, the RTO's/
ISO's proposal to ensure that it will provide the RTO/ISO with 
sufficient information from resources in a multi-node distributed 
energy resource aggregation that is necessary to reliably operate its 
systems without imposing undue burden on individual distributed energy 
resources or utility distribution companies.\560\ RTOs/ISOs that allow 
multi-node aggregations must, at a minimum, propose clear protocols 
explaining how a distributed energy resource aggregation can provide 
the required information and update that information when needed.
---------------------------------------------------------------------------

    \560\ Id. P 143.
---------------------------------------------------------------------------

F. Information and Data Requirements

a. NOPR Proposal
    230. In the NOPR, the Commission proposed that the distributed 
energy resource aggregator must 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.\561\ The 
Commission also proposed to require each RTO/ISO to revise its tariff 
to require each distributed energy resource aggregator 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 operating limits. In 
addition, the Commission proposed 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.\562\ Lastly, the Commission proposed 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. The 
Commission sought comment on these proposed data requirements and 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 RTO/ISO 
markets through a distributed energy resource aggregation.\563\
---------------------------------------------------------------------------

    \561\ Id. P 145.
    \562\ Id. P 147.
    \563\ Id. PP 146, 147.
---------------------------------------------------------------------------

b. Comments
    231. Some commenters support the NOPR proposal to require 
information and data requirements for individual distributed energy 
resources. CAISO, EEI, and Organization of MISO States support 
requiring distributed energy resource aggregators to provide a list of 
individual resources and their location and technical 
capabilities.\564\ The New York Commission asserts that local 
distribution utilities must have information on the activities of 
distributed energy resources, even when they are only providing 
wholesale services.\565\ However, Mosaic Power requests that electric 
distribution companies address their operational need for information 
in the least restrictive manner possible, given that account owner 
registration requirements would create prohibitive costs under its 
business model.\566\ ISO-NE and NYISO request that the Commission give 
them flexibility to develop their own information and data requirements 
and urge the Commission to provide only high-level guidance.\567\
---------------------------------------------------------------------------

    \564\ CAISO Comments (RM16-23) at 32; EEI Comments (RM16-23) at 
31; Organization of MISO States Comments (RM16-23) at 8.
    \565\ New York Commission Comments (RM16-23) at 14.
    \566\ Mosaic Power Comments (RM16-23) at 6.
    \567\ ISO-NE Comments (RM16-23) at 46-47; NYISO Comments (RM16-
23) at 17.
---------------------------------------------------------------------------

    232. In contrast, many developers argue that information and data 
requirements should only apply to the distributed energy resource 
aggregation as a whole because (1) it is the single interface with the 
RTO/ISO; and (2) it is not necessary for the RTO/ISO to model each and 
every resource included in an aggregation to effectively model and 
dispatch the aggregation.\568\ Efficient Holdings claims that failure 
to account for the dynamic nature of a distributed energy resource 
aggregation asset's performance capabilities and the likely turnover of 
individual resources within a distributed energy resource aggregation 
will place undue burden on these assets.\569\
---------------------------------------------------------------------------

    \568\ See, e.g., Advanced Microgrid Solutions Comments (RM16-23) 
at 8; AES Companies Comments (RM16-23) at 41, 45-46; DER/Storage 
Developer Comments (RM16-23) at 3-4; MISO Transmission Owners 
Comments (RM16-23) at 22; Stem Comments (RM16-23) at 13-14.
    \569\ Efficient Holdings Comments (RM16-23) at 20.
---------------------------------------------------------------------------

    233. Several commenters believe RTOs/ISOs currently have 
information and data requirements for other market participants that 
should not apply to individual distributed energy resources 
participating in RTO/ISO markets through an aggregation.\570\ For 
example, CAISO explains that it has certain requirements that do not 
apply to distributed energy resources in an aggregation (e.g., its 
meteorological data requirements that apply to eligible intermittent 
resources do not extend to a distributed energy resource aggregation) 
and urges the Commission to maintain a degree of flexibility on this 
issue.\571\ R Street Institute similarly

[[Page 67134]]

argues that requiring the same meteorological data for distributed 
energy resource aggregators as stand-alone variable energy resources 
could impose undue burdens on individual distributed energy 
resources.\572\ MISO argues that current data communication methods 
between MISO, the local balancing authority, and the generation 
operator may be cost prohibitive for distributed energy resource 
aggregators.\573\ However, several distribution utilities argue that 
information and data requirements should be comparable for all 
wholesale market participants.\574\
---------------------------------------------------------------------------

    \570\ CAISO Comments (RM16-23) at 33; Efficient Holdings 
Comments (RM16-23) at 11, 19-20; R Street Institute Comments (RM16-
23) at 10.
    \571\ CAISO Comments (RM16-23) at 32-34.
    \572\ R Street Institute Comments (RM16-23) at 10.
    \573\ MISO Comments (2018 RM18-9) at 19.
    \574\ EEI Comments (RM16-23) at 31; Duke Energy Comments (RM16-
23) at 6; Xcel Energy Services Comments (RM16-23) at 26.
---------------------------------------------------------------------------

    234. Some commenters generally support the requirements for 
distributed energy resource aggregators to maintain aggregate 
settlement data \575\ and maintain data for a defined length of time, 
consistent with the RTO's/ISO's auditing requirements, for each 
individual resource in the aggregation so that each resource can verify 
its performance if audited.\576\ However, Sunrun requests that RTOs/
ISOs only apply these requirements to the aggregation and not to 
individual resources within the aggregation.\577\
---------------------------------------------------------------------------

    \575\ CAISO Comments (RM16-23) at 34; MISO Comments (RM16-23) at 
25; Xcel Energy Services at 26.
    \576\ CAISO Comments (RM16-23) at 34; IRC Comments (RM16-23) at 
10; SoCal Edison Comments (RM16-23) at 12-13.
    \577\ Sunrun Comments (RM16-23) at 5.
---------------------------------------------------------------------------

    235. Advanced Energy Buyers state that RTOs/ISOs should facilitate 
streamlined data collection and sharing, including from the RTO/ISO to 
the distribution utility, to enable data-driven planning and operation 
to maximize efficiency, as well as to send good investment signals to 
enable customers to prioritize delivery of distributed energy resources 
where they will add maximum value.\578\
---------------------------------------------------------------------------

    \578\ Advanced Energy Buyers Comments (2018 RM18-9) at 7.
---------------------------------------------------------------------------

c. Commission Determination
    236. Upon consideration of the comments, we adopt the NOPR 
proposal, with modifications, and add Sec.  35.28(g)(12)(ii)(d) to the 
Commission's regulations to require each RTO/ISO to establish market 
rules that address information requirements and data requirements for 
distributed energy resource aggregations. Specifically, we require each 
RTO/ISO to revise its tariff to (1) include any requirements for 
distributed energy resource aggregators that establish the information 
and data that a distributed energy resource aggregator must provide 
about the physical and operational characteristics of its aggregation; 
(2) require distributed energy resource aggregators to provide a list 
of the individual resources in its aggregation; and (3) establish any 
necessary information that must be submitted for the individual 
distributed energy resources. We also require each RTO/ISO to revise 
its tariff to require distributed energy resource aggregators to 
provide aggregate settlement data for the distributed energy resource 
aggregation and to retain performance data for individual distributed 
energy resources in a distributed energy resource aggregation for 
auditing purposes.
    237. With respect to the NOPR proposal that the distributed energy 
resource aggregator initially provide to the RTO/ISO ``a description of 
the physical parameters of the distributed energy resource 
aggregation,'' \579\ we believe that the physical attributes of the 
distributed energy resource aggregation as a whole may already be 
captured by an RTO's/ISO's registration requirements for all market 
participants or may otherwise be inapplicable to distributed energy 
resource aggregations. Therefore, to avoid creating unnecessary or 
redundant requirements for distributed energy resource aggregations and 
to provide flexibility to the RTOs/ISOs, we do not adopt that proposal. 
Rather, we require the RTOs/ISOs to revise their tariffs to establish 
any necessary physical parameters that distributed energy resource 
aggregators must submit as part of their registration process only to 
the extent these parameters are not already represented in general 
registration requirements or bidding parameters applicable to 
distributed energy resource aggregations.
---------------------------------------------------------------------------

    \579\ NOPR, 157 FERC ] 61,121 at P 145.
---------------------------------------------------------------------------

    238. With respect to information requirements for individual 
distributed energy resources, we do not adopt the NOPR proposal to 
require each RTO/ISO to revise its tariff to require distributed energy 
resource aggregators to provide the RTO/ISO with specific information 
about each of the distributed energy resources in an aggregation, 
including each resource's capacity, location on the distribution 
system, and operating limits. Instead, we direct each RTO/ISO to revise 
its tariff to require distributed energy resource aggregators to 
provide a list of the individual distributed energy resources 
participating in their aggregations to the RTO/ISO. If an RTO/ISO needs 
additional information beyond this list, the RTO/ISO should identify 
and explain in its compliance filing what additional specific 
information about the individual distributed energy resources within an 
aggregation that the RTO/ISO needs. The RTO/ISO should also propose how 
the information requested must be shared with the RTO/ISO and affected 
distribution utilities. As part of these tariff revisions, and as 
further discussed in Section IV.I. below, each RTO/ISO must also 
require that the distributed energy resource aggregator update that 
list of individual resources and associated information as it changes. 
We find that this approach provides greater flexibility to RTOs/ISOs 
and imposes potentially less onerous requirements upon distributed 
energy resource aggregators, while ensuring that necessary information 
is conveyed to RTOs/ISOs.
    239. We also clarify that the distributed energy resource 
aggregator, not an individual distributed energy resource in the 
aggregation, is the single point of contact with the RTO/ISO, and the 
aggregator would be responsible for managing, dispatching, metering, 
and settling the individual distributed energy resources in its 
aggregation. As such, the RTO/ISO may only need the information 
necessary to model and dispatch the distributed energy resource 
aggregation as a whole, and thus we agree with commenters that sharing 
detailed information about the individual distributed energy resources 
may be an unnecessary and unduly burdensome requirement. We believe 
that the modified approach described above strikes a reasonable balance 
between the information needs of RTOs/ISOs and the burden that 
providing such information can place on distributed energy resource 
aggregators seeking to participate in RTO/ISO markets.
    240. With respect to the aggregate settlement data for a 
distributed energy resource aggregation, as well as performance data 
for individual distributed energy resources in a distributed energy 
resource aggregation, we find that these sets of information are 
necessary for the participation of any type of resource in RTO/ISO 
markets and to enable RTOs/ISOs to perform necessary audit functions. 
Therefore, we adopt the NOPR proposal to require each RTO/ISO to revise 
its tariff to require each distributed energy resource aggregator to 
maintain and submit 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,

[[Page 67135]]

and to provide, upon request from the RTO/ISO, performance data for 
individual resources in a distributed energy resource aggregation for 
auditing purposes.\580\ However, we clarify that the requirements for 
settlement and performance data should be consistent with the 
settlement and auditing data requirements for other market 
participants. Additionally, while we believe that performance data for 
individual distributed energy resources will be necessary for 
distributed energy resource aggregations to comply with the data 
retention and auditing procedures of the RTOs/ISOs, we are also 
sympathetic to the concerns that data requirements for individual 
distributed energy resources in a distributed energy resource 
aggregation can be unduly burdensome. To reduce the burden on 
distributed energy resource aggregators and the RTOs/ISOs, we find that 
distributed energy resource aggregators should only be required to 
retain that performance data for individual distributed energy 
resources in an aggregation that the RTO/ISO deems necessary for 
auditing purposes. Therefore, to the extent that an RTO/ISO does not 
need certain performance data from individual distributed energy 
resources in a distributed energy resource aggregation for auditing 
purposes, it should not require a distributed energy resource 
aggregator to retain that information for individual distributed energy 
resources participating in a distributed energy resource aggregation. 
With respect to Advanced Energy Buyers' assertion that RTOs/ISOs should 
facilitate streamlined data collection and sharing, we decline to 
prescribe the specific manner in which information and data should be 
collected and shared with distribution utilities.
---------------------------------------------------------------------------

    \580\ See id. P 147.
---------------------------------------------------------------------------

G. Metering and Telemetry System Requirements

a. NOPR Proposal
    241. In the NOPR, the Commission stated that, 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 RTO/ISO markets.\581\ The Commission recognized 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. The Commission found, however, 
that metering and telemetry systems are often expensive, potentially 
creating a burden for small distributed energy resources. The 
Commission stated that, while telemetry data about a distributed energy 
resource aggregation is necessary for the RTO/ISO to efficiently 
dispatch the aggregation, telemetry data for each individual resource 
in the aggregation may not be.
---------------------------------------------------------------------------

    \581\ NOPR, 157 FERC ] 61,121 at P 150.
---------------------------------------------------------------------------

    242. The Commission stated that, while it did not propose to 
require specific metering and telemetry systems for distributed energy 
resource aggregators, it proposed 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.\582\ The Commission stated that these requirements must 
ensure that the distributed energy resource aggregator can provide 
necessary information and data to the RTO/ISO,\583\ but must not impose 
unnecessarily burdensome costs on the distributed energy resource 
aggregators or individual resources in a distributed energy resource 
aggregation that may create a barrier to their participation in the 
RTO/ISO markets.
---------------------------------------------------------------------------

    \582\ Id. P 151.
    \583\ Id. (citing the Commission's proposal pertaining to 
information and data requirements).
---------------------------------------------------------------------------

    243. The Commission noted 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.\584\ The Commission therefore sought 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 RTO/ISO markets through distributed 
energy resource aggregations as well as whether the Commission should 
establish specific metering and telemetry system requirements and, if 
so, what requirements would be appropriate.
---------------------------------------------------------------------------

    \584\ Id. P 151.
---------------------------------------------------------------------------

    244. With respect to telemetry, the Commission stated that the 
distributed energy resource aggregator should be able to provide to the 
RTO/ISO the real-time capability of its aggregated resource in a manner 
similar to the requirements for generators, including 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.\585\ The Commission further noted that 
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 information.
---------------------------------------------------------------------------

    \585\ Id. P 152.
---------------------------------------------------------------------------

    245. With respect to metering, the Commission recognized that 
distributed energy resources may be subject to metering system 
requirements established by the distribution utility or local 
regulatory authority.\586\ Therefore, the Commission proposed that each 
RTO/ISO 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 requirements for distributed energy 
resource aggregations when this data is insufficient.
---------------------------------------------------------------------------

    \586\ Id.
---------------------------------------------------------------------------

b. Comments
    246. In their comments, the various RTOs/ISOs describe slightly 
different approaches to metering and telemetry requirements for 
distributed energy resource aggregations. CAISO states that, under its 
Distributed Energy Resource Provider model, the aggregator must follow 
the same metering and telemetry standards as other resources.\587\ 
NYISO states that it will propose to require distributed energy 
resource aggregators to have six-second real-time metering and 
telemetry that will be sent either directly to NYISO or through the 
utility and to provide after-the-fact meter data uploads for settlement 
purposes.\588\ ISO-NE states that individual distributed energy 
resources in an aggregation should meet

[[Page 67136]]

the same product-based metering and telemetry requirements as all other 
resources, whether the distributed energy resource is behind the meter 
or in front and whether or not it can inject power into the grid.\589\ 
PJM states that, generally, it is reasonable for behind-the-meter 
distributed energy resources that seek to inject power onto the grid 
(either individually or as part of a distributed energy resource 
aggregation) to follow existing telemetry and metering rules from the 
generation framework for similarly sized resources, noting that 
metering and telemetry rules for generation may vary by resource 
size.\590\
---------------------------------------------------------------------------

    \587\ CAISO Comments (RM16-23) at 38.
    \588\ NYISO Comments (RM16-23) at 18-19. NYISO's Aggregation 
Participation Model, accepted by the Commission on January 23, 2020, 
requires that (1) aggregations provide real-time telemetry every six 
seconds; (2) NYISO send real-time base point signals to, receive 
revenue-quality meter data for settlement purposes from, and receive 
real-time telemetry from an aggregation, not the individual 
facilities within an aggregation; (3) aggregations of like resource 
types are subject to the existing metering and telemetry rules for 
that resource type; and (4) metering and telemetry of the individual 
facilities in an aggregation derive from either directly measured or 
calculated values, or a combination thereof, in accordance with the 
requirements set forth in NYISO's procedures. See NYISO Aggregation 
Order, 170 FERC ] 61,033 at PP 57-74.
    \589\ ISO-NE Comments (RM16-23) at 48-50.
    \590\ PJM Comments (RM16-23) at 22 (citing PJM Manual 14D: 
Generation Operational Requirements, rev. 40, section 4.2.2 (Jan. 1, 
2017)).
---------------------------------------------------------------------------

    247. A number of commenters support the Commission's proposal to 
provide the RTOs/ISOs with flexibility to establish and implement 
metering and telemetry rules to suit their individual needs.\591\ CAISO 
states that local regulatory authorities already impose metering and 
telemetry standards and that RTOs/ISOs need flexibility to incorporate 
those local requirements without imposing additional costs or barriers 
to entry on prospective distributed energy resource aggregations.\592\ 
A number of other commenters make similar points.\593\ ISO-NE 
recommends that the Commission avoid being overly prescriptive so that 
ISO-NE can apply existing metering and telemetry requirements to 
distributed energy resources.\594\ SoCal Edison asks that the 
Commission not issue a standard directive but rather encourage the 
distribution utilities in an RTO/ISO to work together with the RTO/ISO 
to continue the development of appropriate metering and telemetry 
technologies.\595\ IRC asserts that RTOs/ISOs should be given the 
flexibility to define metering and telemetry requirements outside of 
their tariffs.\596\ Tesla argues that RTOs/ISOs should allow 
alternatives to metering and telemetry requirements that could provide 
the needed information, such as sampling, end-use metering devices, or 
verifiable behavioral actions.\597\
---------------------------------------------------------------------------

    \591\ See, e.g., CAISO Comments (RM16-23) at 38; IRC Comments 
(RM16-23) at 10; ISO-NE Comments (RM16-23) at 48; New York State 
Entities Comments (RM16-23) at 21; SoCal Edison Comments (RM16-23) 
at 14-15.
    \592\ CAISO Comments (RM16-23) at 38.
    \593\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9) 
at 9; Advanced Energy Management Comments (2018 RM18-9) at 22-23; 
Microsoft Comments (2018 RM18-9) at 18 (citing Justin Gundlach & 
Romany Webb, Distributed Energy Res. Participation in Wholesale 
Markets: Lessons from the California ISO, 39 ENERGY L. REV. 47, 68-
69 (2018)); NRG Comments (2018 RM18-9) at 3; Tesla Comments (2018 
RM18-9) at 10-11 (citing NOPR, 157 FERC ] 61,121 at P 150).
    \594\ ISO-NE Comments (RM16-23) at 48.
    \595\ SoCal Edison Comments (RM16-23) at 14-15.
    \596\ IRC Comments (RM16-23) at 10.
    \597\ Tesla Comments (2018 RM18-9) at 10-11.
---------------------------------------------------------------------------

    248. Other commenters contend that the Commission should take a 
more active role in establishing specific metering and telemetry 
requirements for distributed energy resource aggregations. MISO 
believes that it is appropriate for the Commission to define the 
telemetry and metering requirements,\598\ while others suggest that the 
Commission establish a set of standards or generally applicable 
criteria but allow RTOs/ISOs flexibility on how those standards are 
implemented or to exceed the Commission's requirements.\599\
---------------------------------------------------------------------------

    \598\ MISO Comments (RM16-23) at 25.
    \599\ Fresh Energy/Sierra Club/Union of Concerned Scientists 
Comments (RM16-23) at 3; Independent Energy Producers Association 
Comments (RM16-23) at 5; PJM Comments (RM16-23) at 22.
---------------------------------------------------------------------------

    249. Several commenters acknowledge that metering and telemetry 
requirements for distributed energy resource aggregators and individual 
resources participating in distributed energy resource aggregations can 
pose a barrier to the participation of these resources in RTO/ISO 
markets.\600\ Advanced Energy Management and R Street Institute note 
that the costs of metering, telemetry, and communication equipment pose 
a disproportionately high burden for small distributed energy resources 
because they cannot spread the cost across as many MWs as large 
generators.\601\ Advanced Energy Economy requests that the Commission 
clarify that real-time and short interval telemetry is not required for 
distributed energy resource aggregations and individual distributed 
energy resources.\602\
---------------------------------------------------------------------------

    \600\ See, e.g., Advanced Energy Management Comments (RM16-23) 
at 17-18; New York State Entities Comments (RM16-23) at 21; NextEra 
Comments (RM16-23) at 15-16; Public Interest Organizations Comments 
(RM16-23) at 14; R Street Institute Comments (RM16-23) at 10.
    \601\ Advanced Energy Management Comments (RM16-23) at 18; R 
Street Institute Comments (RM16-23) at 10.
    \602\ Advanced Energy Economy Comments (RM16-23) at 47.
---------------------------------------------------------------------------

    250. Several commenters argue that telemetry requirements 
comparable to those of traditional generators would be too burdensome, 
even if imposed only at the aggregation level.\603\ Advanced Energy 
Economy asserts that such requirements would be prohibitively expensive 
and unnecessary to ensure reliability because equipment would need to 
be installed at every distributed energy resource site to obtain 
accurate readings.\604\ These commenters and others instead suggest 
that telemetry requirements, particularly with respect to timing 
granularity, should be commensurate to the need of the system and 
service provided.\605\ Advanced Energy Management recommends that 
virtual telemetry with after-the-fact meter data be allowed for 
aggregators of small resources.\606\ Further, Advanced Energy 
Management recommends that the Commission not require that distributed 
energy resource aggregators that participate only in capacity markets 
implement new telemetry requirements.\607\
---------------------------------------------------------------------------

    \603\ Id. at 48; Advanced Energy Management Comments (RM16-23) 
at 17; City of New York Comments (RM16-23) at 9.
    \604\ Advanced Energy Economy Comments (RM16-23) at 48.
    \605\ Id.; Advanced Energy Management Comments (RM16-23) at 18; 
City of New York Comments (RM16-23) at 9; Energy Storage Association 
Comments (RM16-23) at 25; Public Interest Organizations Comments 
(RM16-23) at 24.
    \606\ Advanced Energy Management Comments (RM16-23) at 18-19. 
Advanced Energy Management describes virtual telemetry as 
statistical forecasting of an aggregated resource's performance, 
generally monitored by some form of communications to confirm 
aggregated resource performance, which provides the aggregator or 
scheduling coordinator a signal to send to the RTO/ISO.
    \607\ Id.
---------------------------------------------------------------------------

    251. Several commenters assert that metering and/or telemetry 
requirements are necessary only at the aggregation level, and that 
telemetry requirements on individual distributed energy resources would 
be cost prohibitive and unnecessarily burdensome.\608\ Public Interest 
Organizations, New York State Entities, and Advanced Energy Economy 
state that grid operators do not need telemetry information about each 
distributed energy resource in an aggregation because the loss of one 
would not interfere with system reliability or with the operation of 
the aggregation, and these parties request clarification that such 
telemetry is not required.\609\ NRG and Advanced Energy Economy contend 
that the aggregator should be responsible for providing metering and 
telemetry that meets the RTO/ISO requirements to ensure that the 
aggregated performance of the distributed energy resources meets the

[[Page 67137]]

claimed and offered performance.\610\ Stem asks that each RTO/ISO be 
required to justify any metering and telemetry rules regarding 
individual resources in an aggregation.\611\
---------------------------------------------------------------------------

    \608\ See, e.g., AES Companies Comments (RM16-23) at 36; Energy 
Storage Association Comments (RM16-23) at 25; New York State 
Entities Comments (RM16-23) at 20; Public Interest Organizations 
Comments (RM16-23) at 14-15; R Street Institute Comments (RM16-23) 
at 10.
    \609\ Advanced Energy Economy Comments (RM16-23) at 49; New York 
State Entities Comments (RM16-23) at 20; Public Interest 
Organizations Comments (RM16-23) at 14-15.
    \610\ Advanced Energy Economy Comments (RM16-23) at 49-50; NRG 
Comments (RM16-23) at 10.
    \611\ Stem Comments (RM16-23) at 14.
---------------------------------------------------------------------------

    252. Other commenters argue that metering and telemetry 
requirements are important for reliability and should be the same for 
distributed energy resource aggregations as for any other resource 
type.\612\ EEI argues that this is important 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.\613\ Energy Storage 
Association agrees, as long as the telemetry allows distributed energy 
resource aggregations to provide the same products and services as 
traditional generators.\614\ PJM also agrees, but notes that smaller 
resources have lower-cost telemetry requirements in its market.\615\ 
EPSA asserts that estimation, sampling, and other inexact methods 
provide insufficient precision and, therefore argues that distributed 
energy resources should be subject to the same metering requirements as 
traditional supply resources.\616\ NYISO Indicated Transmission Owners 
contend that the cost of new or additional communications requirements 
should be considered a prerequisite to maintain the reliability of the 
system rather than a barrier to entry.\617\
---------------------------------------------------------------------------

    \612\ See, e.g., EEI Comments (RM16-23) at 34; Energy Storage 
Association Comments (RM16-23) at 25; ISO-NE Comments (RM16-23) at 
48-50; New York Utility Intervention Unit Comments (RM16-23) at 3-5; 
TAPS Comments (RM16-23) at 23.
    \613\ EEI Comments (RM16-23) at 34.
    \614\ Energy Storage Association Comments (RM16-23) at 25.
    \615\ PJM Comments (RM16-23) at 22.
    \616\ EPSA Comments (2018 RM18-9) at 10, 13.
    \617\ NYISO Indicated Transmission Owners Comments (RM16-23) at 
19.
---------------------------------------------------------------------------

    253. Some commenters argue that metering and telemetry requirements 
should be placed on individual distributed energy resources within an 
aggregation.\618\ Multiple commenters argue that distributed energy 
resources need to be directly metered to distinguish between wholesale 
and retail actions.\619\ MISO believes that it is appropriate for the 
Commission to identify the criteria and process for differentiating 
retail versus wholesale transactions of distributed energy 
resources.\620\ TAPS states that RTOs/ISOs should require telemetry on 
individual distributed energy resources for situational awareness and 
so that facilities are not inadvertently directed to operate beyond 
physical capabilities.\621\ Moreover, ISO-NE argues that statistical 
estimation of an aggregation's output rather than direct metering and 
telemetry of individual distributed energy resources introduces error 
and that the impact of using estimation to determine distribution 
factors is not clear.\622\ PJM and the IRC request that the Commission 
establish that RTOs/ISOs have the right to require metering and 
telemetry for individual distributed energy resources comparable to 
traditional resources in order to avoid seams issues and inconsistent 
industry roll-out.\623\ Avangrid cautions that even with separate 
metering, ownership and reconciliation of the data for retail billing 
and wholesale settlement may be impractically complex.\624\ NYISO 
Indicated Transmission Owners assert that resources above a certain 
size and within an aggregation may require additional metering to 
mitigate issues on a utility's distribution system.\625\
---------------------------------------------------------------------------

    \618\ See, e.g., DER/Storage Developers Comments (RM16-23) at 4; 
Independent Energy Producers Association Comments (RM16-23) at 8; 
ISO-NE Comments (RM16-23) at 48-50; NYISO Indicated Transmission 
Owners Comments (RM16-23) at 19; Organization of MISO States 
Comments (RM16-23) at 9.
    \619\ Avangrid Comments (RM16-23) at 15; Independent Energy 
Producers Association Comments (RM16-23) at 8; ISO-NE Comments 
(RM16-23) at 48-50; Organization of MISO States Comments (RM16-23) 
at 9.
    \620\ MISO Comments (RM16-23) at 25.
    \621\ TAPS Comments (RM16-23) at 23.
    \622\ ISO-NE Comments (RM16-23) at 51.
    \623\ PJM Comments (RM16-23) at 22.
    \624\ Avangrid Comments (RM16-23) at 15.
    \625\ NYISO Indicated Transmission Owners Comments (RM16-23) at 
7.
---------------------------------------------------------------------------

    254. Several commenters agree with the Commission that telemetry 
system requirements may need to be in place at different locations for 
geographically dispersed distributed energy resource aggregations that 
have to provide distribution factors.\626\ PJM Market Monitor argues 
that meter and telemetry information should be disaggregated at each 
node and that the RTO/ISO should provide nodal settlement.\627\ MISO 
Transmission Owners argue that it is not clear how multi-node 
aggregations would be settled.\628\ AES Companies contend that the 
Commission should permit the aggregation to include more than one 
metering point where the system characteristics indicate more are 
needed.\629\ Duke Energy maintains that RTOs/ISOs should have access to 
telemetry information at individual points of interconnection and that 
the distribution utility may need to access similar data.\630\
---------------------------------------------------------------------------

    \626\ AES Comments (RM16-23) at 36; Duke Energy Comments (RM16-
23) at 5; EEI Comments (RM16-23) at 34; MISO Transmission Owners 
Comments (RM16-23) at 24.
    \627\ PJM Market Monitor Comments (RM16-23) at 15.
    \628\ MISO Transmission Owners Comments (RM16-23) at 24.
    \629\ AES Companies Comments (RM16-23) at 37.
    \630\ Duke Energy Comments (RM16-23) at 5.
---------------------------------------------------------------------------

    255. Most commenters support the proposal in the NOPR that, when 
existing distribution utility metering requirements for distributed 
energy resources are sufficient, RTOs/ISOs should rely on that 
technology rather than impose new requirements.\631\ Avangrid argues 
that the distribution utility might be able to provide the necessary 
data to the RTO/ISO on behalf of the distributed energy resource 
aggregator via a third-party agreement.\632\
---------------------------------------------------------------------------

    \631\ See, e.g., Advanced Energy Management Comments (RM16-23) 
at 18-19; EEI Comments (RM16-23) at 33; Mosaic Power Comments (RM16-
23) at 5-6; SoCal Edison Comments (RM16-23) at 14-15; TAPS Comments 
(RM16-23) at 24.
    \632\ Avangrid Comments (RM16-23) at 15. Avangrid adds that the 
electric distribution companies should be allowed to charge for this 
service.
---------------------------------------------------------------------------

    256. APPA/NRECA express concern that the proposal to rely on meter 
data from the distribution utility would place significant burdens on 
distribution utilities and introduce new cybersecurity and privacy 
implications, issues which will require significant time and resources 
for utilities to address.\633\ APPA asserts that such costs could 
undermine the benefits of distribution utilities' existing retail 
distributed energy resource programs, effectively imposing costs on 
retail customers to subsidize wholesale market participation.\634\ 
Advanced Energy Management asserts that telemetry requirements to 
participate in a wholesale program should be driven by the RTO/ISO 
system needs, which are less granular than at the distribution 
level.\635\ Advanced Energy Management adds that a distributed energy 
resource that only seeks participation in the wholesale market should 
only be required to fulfill the RTO's/ISO's metering requirements. 
Advanced Energy Economy states that RTOs/ISOs should adopt procedures 
that provide for regular information and communications flows to occur 
from the aggregator, to the RTO/ISO, and then to distribution 
utilities.\636\
---------------------------------------------------------------------------

    \633\ APPA Comments (2018 RM18-9) at 9-10; NRECA Comments (2018 
RM18-9) at 11-12, 30.
    \634\ APPA Comments (2018 RM18-9) at 10.
    \635\ Advanced Energy Management Comments (2018 RM18-9) at 22-
23.
    \636\ Advanced Energy Economy Comments (2018 RM18-9) at 9 n.11.
---------------------------------------------------------------------------

    257. Several commenters generally agree with the Commission that 
individual distributed energy resources in an aggregation will need to 
be

[[Page 67138]]

directly metered. These commenters argue that behind-the-meter 
distributed energy resources should be metered separately from the host 
site's load due to the need to distinguish between wholesale and retail 
actions.\637\ DER/Storage Developers ask the Commission to direct all 
RTOs/ISOs to allow direct metering of resources as an optional 
alternative to traditional baselines to determine performance.\638\ 
Independent Energy Producers Association notes that dual-metering can 
serve other Commission goals such as minimizing cost shifts, ensuring 
reliability, and ensuring market integrity.\639\ MISO states that 
visibility at the point of injection is needed to mitigate transmission 
risks and ensure that a distributed energy resource is following 
dispatch instructions, particularly as the volume of distributed energy 
resources grows.\640\ EPSA argues that netting retail and wholesale 
services reduces RTO/ISO visibility which makes it difficult for RTOs/
ISOs to efficiently dispatch resources, measure and verify resource 
performance, calculate baseline load levels, and support the 
reliability, planning, and modeling of system capabilities.\641\ 
Avangrid cautions that even with separate metering, ownership and 
reconciliation of the data for retail billing and wholesale settlement 
may be impractically complex.\642\
---------------------------------------------------------------------------

    \637\ Avangrid Comments (RM16-23) at 15; Independent Energy 
Producers Association Comments (RM16-23) at 8; Microsoft Comments 
(2018 RM18-9) at 17; Organization of MISO States Comments (RM16-23) 
at 9; Stem Comments (2018 RM18-9) at 3, 19.
    \638\ DER/Storage Developers Comments (RM16-23) at 4.
    \639\ Independent Energy Producers Association Comments (RM16-
23) at 8.
    \640\ MISO Comments (2018 RM18-9) at 19.
    \641\ EPSA Comments (2018 RM18-9) at 10-13 (citing Distributed 
Energy Resources Roadmap at 29-30).
    \642\ Avangrid Comments (RM16-23) at 15.
---------------------------------------------------------------------------

    258. Some commenters question the authority of the Commission or 
the RTOs/ISOs to impose specific metering and telemetry requirements on 
distributed energy resources. AES Companies argue that the only 
metering and telemetry requirements that the Commission or the RTOs/
ISOs can dictate are for the aggregator's node or point of 
interconnection to the transmission system under RTO/ISO control.\643\ 
IRC asks the Commission to acknowledge in any final rule that the RTOs/
ISOs have no jurisdiction to require state-regulated utilities to 
install specific retail metering technology, but that wholesale 
metering rules for distributed energy resources must be met.\644\ 
California Energy Storage Alliance recommends that local regulatory 
authorities develop and implement metering and telemetry requirements 
to avoid the Commission imposing any requirements outside the 
Commission's jurisdiction.\645\ The Delaware Commission recommends that 
the Commission require distributed energy resources to employ separate 
metering and telemetry capability if they are providing both wholesale 
and retail services.\646\
---------------------------------------------------------------------------

    \643\ AES Companies Comments (RM16-23) at 47.
    \644\ IRC Comments (RM16-23) at 6.
    \645\ California Energy Storage Alliance Comments (RM16-23) at 
9.
    \646\ Delaware Commission Comments (RM16-23) at 5-7 (citing FPC 
v. Fla. Power & Light Co., 404 US 461, 463 (1972)), 8.
---------------------------------------------------------------------------

    259. Some state regulators, distribution utilities, and their 
representatives note that upgrades may be needed to current metering 
technology and associated networking and cyber security in order to 
support RTO/ISO needs \647\ and argue that associated costs must be 
borne by the distributed energy resources or their aggregators or 
through wholesale level cost allocation, and not by distribution 
utilities.\648\
---------------------------------------------------------------------------

    \647\ See, e.g., Avangrid Comments (RM16-23) at 15; Dominion 
Comments (RM16-23) at 12; EEI Comments (RM16-23) at 13; NARUC 
Comments (RM16-23) at 6; SoCal Edison Comments (RM16-23) at 14.
    \648\ See, e.g., Delaware Commission Comments (RM16-23) at 7; 
EEI Comments (RM16-23) at 33-34; IRC Comments (RM16-23) at 6; 
Massachusetts Municipal Electric Comments (RM16-23) at 4; Six Cities 
Comments (RM16-23) at 3; TAPS Comments (RM16-23) at 24.
---------------------------------------------------------------------------

    260. Several commenters discuss the relationship between RTOs/ISOs 
and distribution utilities and their respective metering and telemetry 
requirements. Fresh Energy/Sierra Club/Union of Concerned Scientists 
encourage the development of a framework to share metering data between 
the RTO/ISO, distribution utility, and distributed energy resource 
aggregator.\649\ Duke Energy recommends that the final rule not 
preclude the transfer of telemetry data between the RTO/ISO and the 
electric distribution utility.\650\ Similarly, EEI asserts that both 
the RTO/ISO and the distribution utility should be provided telemetry 
information,\651\ while IRC states that wholesale and retail metering 
requirements need to be harmonized to prevent undue barriers to 
participation.\652\ Xcel Energy Services recommends that the RTOs/ISOs 
and distribution utilities should define the role of a meter data 
management agent to provide needed meter data.\653\
---------------------------------------------------------------------------

    \649\ Fresh Energy/Sierra Club/Union of Concerned Scientists 
Comments (RM16-23) at 3.
    \650\ Duke Energy Comments (RM16-23) at 5.
    \651\ EEI Comments (RM16-23) at 34.
    \652\ IRC Comments (RM16-23) at 6.
    \653\ Xcel Energy Services Comments (RM16-23) at 27.
---------------------------------------------------------------------------

    261. NARUC, EEI, and MISO argue that, before metering and telemetry 
requirements can be established, additional information must be 
gathered about the type and purpose of metering and telemetry data 
needed, the access to and provision of this data, and the cost 
allocation involved.\654\ On the other hand, Fresh Energy/Sierra Club/
Union of Concerned Scientists ask the Commission to not let this debate 
hinder progress on establishing necessary distributed energy resource 
requirements.\655\
---------------------------------------------------------------------------

    \654\ EEI Comments (RM16-23) at 33; MISO Comments (RM16-23) at 
25; NARUC Comments (RM16-23) at 7.
    \655\ Fresh Energy/Sierra Club/Union of Concerned Scientists 
Comments (RM16-23) at 3.
---------------------------------------------------------------------------

c. Commission Determination
    262. We adopt the NOPR proposal and add Sec.  35.28(g)(12)(ii)(f) 
to the Commission's regulations to require each RTO/ISO to revise its 
tariff to establish market rules that address metering and telemetry 
hardware and software requirements necessary for distributed energy 
resource aggregations to participate in RTO/ISO markets.
    263. We understand the need to balance, on one hand, the RTO's/
ISO's need for metering and telemetry data for settlement and 
operational purposes, and, on the other hand, not imposing unnecessary 
burdens on distributed energy resource aggregators. Therefore, we will 
not prescribe the specific metering and telemetry requirements that 
each RTO/ISO must adopt; rather, we provide the RTOs/ISOs with 
flexibility to establish the necessary metering and telemetry 
requirements for distributed energy resource aggregations, and require 
that each RTO/ISO explain in its compliance filing why such 
requirements are just and reasonable and do not pose an unnecessary and 
undue barrier to individual distributed energy resources joining a 
distributed energy resource aggregation.
    264. To implement this requirement, we direct each RTO/ISO to 
explain, in its compliance filing, why its proposed metering 
requirements are necessary (e.g., for the distributed energy resource 
aggregator to provide the settlement and performance data to the RTO/
ISO discussed in Section IV.F or to prevent double counting of services 
as discussed in Section IV.C.3) and why its proposed telemetry 
requirements are necessary (e.g., for the RTO/ISO to have sufficient 
situational awareness to dispatch the

[[Page 67139]]

aggregation and the rest of the system efficiently). This explanation 
should also include a discussion about whether, for example, the 
proposed requirements are similar to requirements already in existence 
for other resources and steps contemplated to avoid imposing 
unnecessarily burdensome costs on the distributed energy resource 
aggregators and individual resources in distributed energy resource 
aggregations that may create an undue barrier to their participation in 
RTO/ISO markets. We find that this approach will provide each RTO/ISO 
with the flexibility to develop metering and telemetry requirements 
appropriate for the needs of its systems.
    265. Given the variety of potential aggregation business models, as 
well as the variety of existing distribution utility requirements to 
which the distributed energy resources participating in aggregations 
will be subject, we find that imposing standard requirements is 
unwarranted. Standard metering and telemetry requirements could run the 
risk of imposing unnecessary costs on RTOs/ISOs, distributed energy 
resource aggregators, and the individual distributed energy resources. 
For example, imposing standard requirements could impede RTOs/ISOs from 
adequately incorporating metering and telemetry requirements already 
imposed on distributed energy resources by local regulatory authorities 
and thereby create a barrier to the participation of distributed energy 
resources in RTO/ISO markets. We find that adopting the NOPR proposal 
minimizes these risks and the costs associated with implementing these 
requirements because it allows RTOs/ISOs to propose metering and 
telemetry requirements in addition to those already in place only when 
they determine that such additional requirements are needed.
    266. As clarified in Section IV.F, the distributed energy resource 
aggregator, not the individual distributed energy resources in the 
aggregation, is the single point of contact with the RTO/ISO, 
responsible for managing, dispatching, metering, and settling the 
individual distributed energy resources in its aggregation. We further 
clarify here that the distributed energy resource aggregator is also 
the entity responsible for providing any required metering and 
telemetry information to the RTO/ISO.
    267. We decline the requests of some commenters to explicitly limit 
metering and/or telemetry requirements to the distributed energy 
resource aggregation level, or to require telemetry of individual 
distributed energy resources participating in an aggregation. Rather, 
consistent with the flexibility provided in Section IV.F, we will not 
require uniform metering requirements across all RTOs/ISOs, nor will we 
require each RTO/ISO to impose uniform metering requirements on 
individual distributed energy resources. Rather, we provide flexibility 
to RTOs/ISOs to propose specific metering requirements, including any 
that may apply to individual distributed energy resources that the RTO/
ISO demonstrates are needed to obtain any required performance data for 
auditing purposes and to address double compensation concerns. 
Similarly, we provide flexibility to the RTO/ISO as to whether to 
propose specific telemetry requirements for individual distributed 
energy resources in an aggregation. The need for such requirements may 
depend, for example, on whether the RTO/ISO allows multi-node 
aggregations or how multi-node aggregations are implemented. By 
providing flexibility while also requiring that the RTO/ISO explain why 
any proposed metering and telemetry requirements are necessary, we 
allow the RTO/ISO to obtain the metering and telemetry information it 
needs without burdening the distributed energy resource aggregator to 
provide data that may not be necessary.
    268. We also clarify that, consistent with this flexible approach, 
we are not requiring RTOs/ISOs to establish metering and telemetry 
hardware and software requirements for distributed energy resource 
aggregations that are identical to those placed on existing resources, 
or to establish different or additional metering and telemetry 
requirements for distributed energy resource aggregations. Rather, we 
expect that RTOs/ISOs will base any proposed metering and telemetry 
hardware and software requirements for distributed energy resource 
aggregations on the information needed by the RTO/ISO while avoiding 
unnecessary requirements that may act as a barrier to individual 
distributed energy resources joining distributed energy resource 
aggregations or to distributed energy resource aggregations 
participating in the wholesale markets. However, as explained in 
Section IV.F, we require that metering data for settlement purposes at 
the distributed energy resource aggregation level be consistent with 
settlement data requirements for other resource types. We recognize 
that metering and telemetry requirements may vary depending on the 
types of distributed energy resources participating in an aggregation, 
the size of the individual distributed energy resources or aggregated 
resource, or the particular service provided. For example, more 
granular or precise telemetry may be necessary for a distributed energy 
resource aggregation that is participating in the frequency regulation 
market than one that is exclusively providing energy or capacity. To 
ensure that the flexible approach outlined here provides the RTO/ISO 
with sufficient information to administer the wholesale markets and 
ensure reliability of the transmission system while not unduly 
burdening distributed energy resources and distributed energy resource 
aggregations, we require that each RTO/ISO explain in its compliance 
filing why its proposed metering and telemetry requirements for 
distributed energy resource aggregations are just and reasonable and do 
not pose an unnecessary and undue barrier to individual distributed 
energy resources joining a distributed energy resource aggregation.
    269. We also adopt the NOPR proposal that each RTO's/ISO's proposed 
metering requirements should rely on meter data obtained through 
compliance with distribution utility or local regulatory authority 
metering system requirements whenever possible for settlement and 
auditing purposes. We further clarify that this requirement also 
applies to existing telemetry infrastructure. By using existing 
infrastructure whenever possible, RTOs/ISOs should be able to obtain 
the data they need and avoid proposing new metering and telemetry 
requirements that would be duplicative and could erect unnecessary 
barriers to entry for distributed energy resource aggregators and 
individual distributed energy resources participating in an 
aggregation. With respect to jurisdictional concerns raised by some 
commenters, we note that any additional RTO/ISO metering and telemetry 
requirements would not change those required by state or local 
regulatory authorities and would be required solely to assist with 
settlements and audits of activity in RTO/ISO markets, or to provide 
RTOs/ISOs with the real-time information needed to reliably and 
efficiently dispatch their systems.
    270. In response to concerns about the potential costs and burdens 
that could be imposed on distribution utilities as a result of the 
requirement that RTOs/ISOs rely on metering and telemetry data obtained 
through compliance with distribution utility or local regulatory 
authority metering system requirements whenever possible, we expect 
that in

[[Page 67140]]

general, this information will be provided by individual distributed 
energy resources to distributed energy resource aggregators, and from 
distributed energy resource aggregators to RTOs/ISOs. However, to the 
extent that the RTO/ISO proposes that such information come from or 
flow through distribution utilities, we require that RTOs/ISOs 
coordinate with distribution utilities and relevant electric retail 
regulatory authorities to establish protocols for sharing metering and 
telemetry data, and that such protocols minimize costs and other 
burdens and address concerns raised with respect to privacy and 
cybersecurity.
    271. In response to IRC's request for flexibility to define 
metering and telemetry requirements outside the RTO/ISO tariffs, we 
find that the RTO/ISO tariffs should include a basic description of the 
metering and telemetry practices for distributed energy resource 
aggregations as well as references to specific documents that will 
contain further technical details. Decisions as to whether an item 
should be placed in a tariff or in a business practice manual are 
guided by the Commission's rule of reason policy,\656\ under which 
provisions that ``significantly affect rates, terms, and conditions'' 
of service, are readily susceptible of specification, and are not 
generally understood in a contractual agreement must be included in the 
tariff, while items better classified as implementation details may be 
included only in the business practice manual. We find that metering 
and telemetry requirements significantly affect the terms and 
conditions of the participation of distributed energy resource 
aggregations in RTO/ISO markets and, therefore, must be included in the 
RTO/ISO tariffs.
---------------------------------------------------------------------------

    \656\ See, e.g., Energy Storage Ass'n v. PJM Interconnection, 
L.L.C., 162 FERC ] 61,296, at P 103 (2018) (Energy Storage Ass'n v. 
PJM) (citing Midcontinent Indep. Sys. Operator, Inc., 158 FERC ] 
61,003, at P 69 (2017); PacifiCorp, 127 FERC ] 61,144, at P 11 
(2009); City of Cleveland v. FERC, 773 F.2d 1368, 1376 (D.C. Cir. 
1985) (finding that utilities must file ``only those practices that 
affect rates and service significantly, that are reasonably 
susceptible of specification, and that are not so generally 
understood in any contractual arrangement as to render recitation 
superfluous''); Pub. Serv. Comm'n of N.Y. v. FERC, 813 F.2d 448, 454 
(D.C. Cir. 1987) (holding that the Commission properly excused 
utilities from filing policies or practices that dealt with only 
matters of ``practical insignificance'' to serving customers)).
---------------------------------------------------------------------------

H. Coordination Between the RTO/ISO, Aggregator, and Distribution 
Utility

1. Market Rules on Coordination
a. NOPR Proposal
    272. In the NOPR, the Commission noted that 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 RTO/ISO 
markets does not present reliability or safety concerns for the 
distribution or transmission system.\657\ Thus, the Commission proposed 
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.
---------------------------------------------------------------------------

    \657\ NOPR, 157 FERC ] 61,121 at P 153.
---------------------------------------------------------------------------

    273. After the April 2018 technical conference, the Commission 
sought further information on certain proposals regarding detailed 
aspects of the coordination requirements.\658\
---------------------------------------------------------------------------

    \658\ Notice Inviting Post-Technical Conference Comments at 7-
11.
---------------------------------------------------------------------------

b. Comments
    274. Many commenters support the coordination processes proposed in 
the NOPR because it will ensure that participation of distributed 
energy resource aggregations in RTO/ISO markets does not compromise 
these markets or the reliability or safety of the transmission and 
distribution systems.\659\ For example, based on its experience with 
implementing CAISO's Distributed Energy Resource Provider framework, 
Pacific Gas & Electric states that it is vitally important that RTOs/
ISOs coordinate with distribution utilities with respect to both 
registration of distributed energy resource aggregations and their 
ongoing operation.\660\
---------------------------------------------------------------------------

    \659\ See, e.g., CAISO Comments (RM16-23) at 39; Connecticut 
State Entities Comments (RM16-23) at 6; Dominion Comments (RM16-23) 
at 13; Institute for Policy Integrity Comments (RM16-23) at 9; NYISO 
Comments (RM16-23) at 19.
    \660\ Pacific Gas & Electric Comments (RM16-23) at 21.
---------------------------------------------------------------------------

    275. Advanced Energy Economy states that it recognizes that the 
RTOs/ISOs need visibility into distributed energy resource operations 
and that coordination among the RTO/ISO, the distribution utility, and 
distributed energy resource aggregators is necessary to ensure reliable 
operations.\661\ Advanced Energy Economy asserts that these visibility 
and operational issues are surmountable and that certain RTOs/ISOs 
(particularly CAISO and ISO-NE) have made great progress in developing 
standards and rules to address these issues. Advanced Energy Economy 
states that fully integrating advanced energy technologies that are 
already available and growing rapidly will only enhance the ability to 
quickly address visibility and operational issues.
---------------------------------------------------------------------------

    \661\ Advanced Energy Economy Comments (RM16-23) at 13.
---------------------------------------------------------------------------

    276. Commenters note that coordination would be further enhanced 
with the development of distribution system operators.\662\ PJM 
believes that value may be added if an RTO/ISO were to coordinate with 
a distribution system operator, but states that without a true 
distribution system operator operating in the PJM region (or anywhere 
else in the country) it cannot opine on the specific benefits that such 
coordination could achieve.\663\ SoCal Edison notes that, in 
California, distribution utilities are already performing the initial 
functions of a distribution system operator and that the utility is 
uniquely situated to provide this role in the future.\664\
---------------------------------------------------------------------------

    \662\ De Martini and Kristov define a distribution system 
operator as ``the entity responsible for planning and operational 
functions associated with a distribution system that is modernized 
for high levels of [distributed energy resources].'' Paul De Martini 
and Lorenzo Kristov, ``Distribution Systems in a High DER Future: 
Planning, Market Design, Operation and Oversight,'' Future Electric 
Utility Regulation Series, Lawrence Berkeley National Laboratory, 
October 2015, p. vi.
    \663\ PJM Comments (RM16-23) at 28.
    \664\ SoCal Edison Comments (RM16-23) at 8.
---------------------------------------------------------------------------

    277. While supportive of the coordination requirements in the NOPR, 
Mensah argues that the cost of registering an aggregation as well as 
ongoing operational coordination should not place any unnecessary 
burden on distributed energy resource aggregations.\665\
---------------------------------------------------------------------------

    \665\ Mensah Comments (RM16-23) at 4.
---------------------------------------------------------------------------

c. Commission Determination
    278. We adopt the NOPR proposal, as modified and clarified below, 
and add Sec.  35.28(g)(12)(ii)(g) to the Commission's regulations to 
require each RTO/ISO to revise its tariff to establish market rules 
that address coordination between the RTO/ISO, the distributed energy 
resource aggregator, the distribution utility, and the relevant 
electric retail regulatory authorities.

[[Page 67141]]

    279. We agree with commenters that coordination requirements should 
not create undue barriers to entry for distributed energy resource 
aggregations. However, we must also consider the substantial role of 
distribution utilities and state and local regulators in ensuring the 
safety and reliability of the distribution system. We believe that the 
reforms adopted herein appropriately balance those needs.
    280. Further, as discussed in Section IV.H.4 below,\666\ although 
the NOPR did not discuss the role of state and local regulatory 
authorities in coordination efforts, we recognize that state and local 
regulatory authorities have a key role to play in such coordination 
efforts. Therefore, we have modified the NOPR proposal to ensure that 
the RTO/ISOs also coordinate with these entities.
---------------------------------------------------------------------------

    \666\ See infra Section IV.H.4 (Role of Relevant Electric Retail 
Regulatory Authorities).
---------------------------------------------------------------------------

2. Role of Distribution Utilities
a. NOPR Proposal
    281. In the NOPR, the Commission proposed that the market rules on 
coordination provide the relevant distribution utility or utilities 
with the opportunity to review the list of individual resources that 
are located on their distribution systems and that enroll in a 
distributed energy resource aggregation before those resources may 
participate in RTO/ISO markets through the aggregation.\667\ The 
Commission explained that 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.\668\ The Commission further explained that the opportunity 
for the relevant distribution utility 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. The Commission proposed to give the relevant distribution 
utility or utilities the opportunity to report such concerns or issues 
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.
---------------------------------------------------------------------------

    \667\ NOPR, 157 FERC ] 61,121 at PP 149, 154.
    \668\ Id. P 154.
---------------------------------------------------------------------------

b. Comments
    282. Numerous commenters generally support the NOPR proposal for 
distribution utility review,\669\ but differ about the scope and the 
timing of this review.
---------------------------------------------------------------------------

    \669\ See, e.g., Avangrid Comments (RM16-23) at 16; Pacific Gas 
& Electric Comments (RM16-23) at 21; PJM Comments (2018 RM18-9) at 
19; Robert Borlick Comments (RM16-23) at 5-7; SoCal Edison Comments 
(RM16-23) at 6; TAPS Comments (2018 RM18-9) at 27.
---------------------------------------------------------------------------

    283. While generally supportive of the NOPR proposal, several 
distribution utilities voice a broad range of concerns about their role 
in coordination and the impact of distributed energy resource 
aggregations on their distribution systems. In particular, distribution 
utilities generally argue for an even greater and decision-making role 
in reviewing distributed energy resource registrations.\670\ NRECA 
argues for distribution utility review of individual distributed energy 
resource participation in distributed energy resource aggregations 
before the resources participate in RTO/ISO markets.\671\ Additional 
commenters argue that distribution utilities and RTOs/ISOs must be 
afforded enough time to perform impact studies, preferably using study 
parameters adopted and implemented by state and local regulators, for 
each distributed energy resource and for the aggregation to ensure safe 
and reliable grid operation,\672\ and other commenters specifically 
request that the Commission address the timing of the distribution 
utility review in the final rule.\673\ MISO Transmission Owners request 
that any final rule require distribution utility approval of any 
aggregation arrangement to ensure that all of the appropriate 
distribution utility requirements for interconnection and other 
relevant regulations and processes have been met.\674\ NRECA asserts 
that distribution utilities need detailed information in order to 
assess whether distributed energy resource participation is 
beneficial.\675\
---------------------------------------------------------------------------

    \670\ See, e.g., Dominion Comments (RM16-23) at 10; EEI Comments 
(RM16-23) at 35-36; MISO Transmission Owners Comments (RM16-23) at 
19; SoCal Edison Comments (RM16-23) at 11-12; Xcel Energy Services 
Comments (RM16-23) at 28.
    \671\ NRECA Comments (2018 RM18-9) at 29.
    \672\ See, e.g., Dominion Comments (RM16-23) at 10; EEI Comments 
(RM16-23) at 35-36; PJM Utilities Coalition Comments (2018 RM18-9) 
at 14-15.
    \673\ See, e.g., Advanced Energy Economy Comments (RM16-23) at 
40; Advanced Energy Management Comments (RM16-23) at 21; NextEra 
Comments (RM16-23) at 17.
    \674\ MISO Transmission Owners Comments (RM16-23) at 19.
    \675\ NRECA Comments (2018 RM18-9) at 29.
---------------------------------------------------------------------------

    284. Moreover, several distribution utilities seek more than review 
capability and assert that the distribution utility's consent to the 
participation of a distributed energy resource in an aggregation is a 
necessary prerequisite before the aggregation may operate.\676\ 
According to these commenters, distribution utilities, who have the 
knowledge and understanding of distribution system challenges, should 
have the authority to make decisions regarding the participation of a 
distributed energy resource aggregation.\677\ EEI further argues that 
distribution utilities must be able to restrict participation until the 
reliability and/or safety issue is addressed, and must be notified in 
real-time if a resource that is connected to its distribution system 
joins a distributed energy resource aggregation.\678\
---------------------------------------------------------------------------

    \676\ See, e.g., EEI Comments (2018 RM18-9) at 10, 13; NRECA 
Comments (2018 RM18-9) at 29; PJM Utilities Coalition Comments (2018 
RM18-9) at 14; TAPS Comments (RM16-23) at 25; TAPS Comments (2018 
RM18-9) at 28.
    \677\ See, e.g., EEI Comments (2018 RM18-9) at 13; TAPS Comments 
(2018 RM18-9) at 28.
    \678\ EEI Comments (2018 RM18-9) at 13.
---------------------------------------------------------------------------

    285. Electric storage resource developers and advocates support the 
NOPR proposal, but raise concerns about the proposed distribution 
utility review process.\679\ They are concerned that distribution 
utility review will act as a barrier by providing the distribution 
utility a ``gatekeeper'' role.\680\ Furthermore, some commenters argue 
that distribution utilities do not have the right or the jurisdiction 
to veto what distributed energy resources may join aggregations or what 
aggregations may participate in organized wholesale electric 
markets.\681\ Advanced Energy Management states that giving 
distribution utilities discretionary authority to approve distributed 
energy resources ``could usurp FERC's clear jurisdiction over the 
conditions for wholesale market eligibility.'' \682\ Similarly, SEIA 
suggests that the discretion of distribution utilities should be 
limited to violations of interconnection agreements and that it

[[Page 67142]]

would be inappropriate for distribution utilities to have veto rights 
over distributed energy resource participation.\683\ SEIA further draws 
a distinction between existing and new distributed energy resources. 
For existing distributed energy resources that are already operating on 
the grid, so long as the distributed energy resource does not modify 
the generation system outside of what has already been approved, SEIA 
recommends that the Commission ensure that there is a streamlined 
process to ensure that the existing distributed energy resources can 
participate through a distributed energy resource aggregator 
participation model.
---------------------------------------------------------------------------

    \679\ See, e.g., Advanced Energy Economy Comments (RM16-23) at 
39, 40; Advanced Energy Management Comments (RM16-23) at 21, 22; 
Center for Biological Diversity Comments (RM16-23) at 3; Stem 
Comments (RM16-23) at 15.
    \680\ See, e.g., Advanced Energy Economy Comments (RM16-23) at 
39, 40; Advanced Energy Management Comments (RM16-23) at 21, 22; 
Stem Comments (RM16-23) at 14-15.
    \681\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9) 
at 11; Advanced Energy Management Comments (2018 RM18-9) at 18; SEIA 
Comments (2018 RM18-9) at 16; Stem Comments (2018 RM18-9) at 15; 
Sunrun Comments (2018 RM18-9) at 6.
    \682\ Advanced Energy Management Comments (2018 RM18-9) at 18.
    \683\ SEIA Comments (2018 RM18-9) at 16.
---------------------------------------------------------------------------

    286. Commenters in support of the NOPR proposal urge the Commission 
to include limits on the scope of this review or adopt specific 
parameters for this review. Global Cold Chain Alliance and Viking Cold 
Solutions raise concerns about distribution review processes that 
prevent development and adoption of new technologies.\684\ Advanced 
Energy Management and Advanced Energy Economy further argue that 
distribution utilities should (1) be required to identify to RTOs/ISOs 
specific areas of their network where they have limited ability to 
accommodate additional distributed energy resource registrations, with 
a notification requirement only when the local ability has been 
exceeded; (2) allow customers and their distributed energy resource 
aggregators to see information provided by the utility if the RTO/ISO 
uses that information in a decision to prohibit a distributed energy 
resource registration, and provide the ability to appeal such a 
rejection; and (3) be prohibited from registering customers in their 
own distributed energy resource aggregations that they had previously 
disqualified for reliability reasons.\685\ Advanced Energy Management 
also recommends that there should be no requirement for distribution 
utilities to review distributed energy resource registrations unless 
the customers are exporting to the grid.\686\ After a specific timeline 
of review, Advanced Energy Management and Tesla recommend that the 
distribution utility still be given the opportunity to notify the RTO/
ISO if the distributed energy resource does not have the necessary 
interconnection agreements or is participating in a retail tariff that 
did not allow wholesale participation.\687\ In these limited 
``exception only'' models, distribution utilities are not provided the 
ability to approve distributed energy resource participation in 
Commission-jurisdictional markets, but may review and raise 
objections.\688\ Advanced Energy Management and Stem state that 
distribution utilities should exercise their authority prior to a 
distributed energy resource's registration in a RTO/ISO by defining 
non-discriminatory interconnection procedures that ensure the 
distribution grid can accommodate distributed energy resources, whether 
or not a distributed energy resource aggregation participated in a 
wholesale transaction.\689\
---------------------------------------------------------------------------

    \684\ Global Cold Chain Alliance Comments (2018 RM18-9) at 2-3; 
Viking Cold Solutions Comments (2018 RM18-9) at 3.
    \685\ Advanced Energy Economy Comments (RM16-23) at 39, 40; 
Advanced Energy Management Comments (RM16-23) at 21, 22.
    \686\ Advanced Energy Management Comments (RM16-23) at 21.
    \687\ Advanced Energy Management Comments (2018 RM18-9) at 19; 
Tesla Comments (2018 RM18-9) at 10.
    \688\ See, e.g., Advanced Energy Management Comments (2018 RM18-
9) at 17; Icetec Comments (2018 RM18-9) at 17-18; Sunrun Comments 
(2018 RM18-9) at 7; Tesla Comments (2018 RM18-9) at 9-10.
    \689\ Advanced Energy Management Comments (2018 RM18-9) at 18; 
Stem Comments (2018 RM18-9) at 15.
---------------------------------------------------------------------------

    287. Multiple commenters suggest specific review criteria that the 
distribution utilities should adhere to. Several commenters assert that 
any denial of participation in distributed energy resource aggregation 
should only be based on specified operational coordination and 
reliability concerns, such as violation of state-regulated 
interconnection protocols and agreements that address binding 
distribution system constraints and reflect non-discriminatory 
agreements on exporting energy to the grid, or reflect customers who 
already participate in tariffs or other agreements that disallow 
wholesale participation.\690\ NRECA offers the following criteria: That 
the participation of a distributed energy resource in an aggregation 
will not create any safety, reliability or power quality concerns on 
their systems, and that implementation of distributed energy resource 
aggregation will conform to the requirements of the IEEE 
standards.\691\ NYISO Indicated Transmission Owners suggest that any 
interconnection agreement for a distributed energy resource 
participating in an aggregation must demonstrate the ability of an 
individual distributed energy resource to (1) participate in an 
aggregation; (2) communicate essential information to the distribution 
system operator and RTO/ISO using RTO/ISO communication and operating 
protocols, as appropriate; and (3) meet RTO/ISO performance 
standards.\692\ Pacific Gas & Electric recommends that an individual 
distributed energy resource wishing to participate in an aggregation 
(1) will not cause voltage problems or overload existing equipment; (2) 
is able to comply with requirements in its individual interconnection 
agreement when operated in the aggregate; and (3) is not already 
participating in another distributed energy resource aggregation.\693\ 
EEI argues that the criteria to determine distributed energy resource 
participation should be ``good utility practice.'' \694\ In a similar 
vein, several commenters request clear standards or guidelines for 
distribution utility review, while APPA conversely urges the Commission 
to allow for flexibility in the criteria adopted by distribution 
utilities.\695\
---------------------------------------------------------------------------

    \690\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9) 
at 11; Icetec Comments (2018 RM18-9) at 16; SEIA Comments (2018 
RM18-9) at 16; Stem Comments (2018 RM18-9) at 14-15; Tesla Comments 
(2018 RM18-9) at 9.
    \691\ NRECA Comments (2018 RM18-9) at 30.
    \692\ NYISO Indicated Transmission Owners Comments (2018 RM18-9) 
at 15, 17.
    \693\ Pacific Gas & Electric Comments (2018 RM18-9) at 17-18.
    \694\ EEI Comments (2018 RM18-9) at 14.
    \695\ See, e.g., Advanced Energy Economy Comments (RM16-23) at 
39; APPA Comments (2018 RM18-9) at 27; Center for Biological 
Diversity Comments (RM16-23) at 3.
---------------------------------------------------------------------------

    288. Stem and Tesla/SolarCity do not support the NOPR proposal on 
distribution utility review and recommend that limits be placed on this 
review if the Commission chooses to include the requirement in a final 
rule. Stem argues that the Commission should not give local 
distribution utilities carte blanche to deny a distributed energy 
resource eligibility to participate in a distributed energy resource 
aggregation, RTO/ISO markets, or other participation model.\696\ Stem 
recommends an alternative default approach that allows participation 
unless the local utility provides a specific, credible safety or 
reliability risk.\697\ Tesla/SolarCity argue that having an appropriate 
level of communication between the RTO/ISO and distribution utility 
eliminates the need for distribution utility review.\698\
---------------------------------------------------------------------------

    \696\ Stem Comments (RM16-23) at 4, 15.
    \697\ Id. at 4.
    \698\ Tesla/SolarCity Comments (RM16-23) at 30.
---------------------------------------------------------------------------

    289. Commenters also express differing opinions on the length of 
time required to conduct the review of distributed energy resource 
participation. Several distribution utilities recommend that a 
reasonable timetable or no time limits be established for review, and 
argue that sufficient time is needed for review and/

[[Page 67143]]

or consultation between the distributed energy resource aggregator and 
distribution utility to ensure the distribution grid can be operated in 
a safe and reliable manner during the aggregated distributed energy 
resource operating conditions.\699\ Distributed energy resource 
providers, such as Stem, take the opposite view and assert that RTOs 
and ISOs are not obligated to wait for the distribution utility to 
review the registration of a distributed energy resource if the 
distributed energy resource can prove it has completed an applicable 
state-level interconnection process.\700\ Nevertheless, several 
commenters agree that it would be reasonable for an RTO/ISO to pause 
registration of a distributed energy resource to provide time (e.g., 10 
days or CAISO's 30-day timeline) for the distribution utility to ensure 
that sufficient interconnection procedures have been followed and 
approved interconnection agreements are in place, but they do not 
recommend the Commission require a specific timeline.\701\ Icetec 
specifically requests that RTO/ISO rules be developed on the procedures 
and timelines for distribution-level studies if there is no state and 
local regulatory tariff governing these studies.\702\
---------------------------------------------------------------------------

    \699\ See, e.g., NRECA Comments (2018 RM18-9) at 29; Pacific Gas 
& Electric Comments (2018 RM18-9) at 13.
    \700\ Stem Comments (2018 RM18-9) at 15.
    \701\ See, e.g., Icetec Comments (2018 RM18-9) at 17-18; Stem 
Comments (2018 RM18-9) at 15; Sunrun Comments (2018 RM18-9) at 7.
    \702\ Icetec Comments (2018 RM18-9) at 9.
---------------------------------------------------------------------------

    290. RTOs/ISOs support the NOPR proposal but raise questions about 
their role in aggregation approvals and dispute resolution, 
communication system requirements, and the extent of the coordination 
proposed by the Commission.\703\ PJM argues that the registration 
process and timing needed to participate in an RTO/ISO market should be 
straight forward, predictable, and transparent, and that any basis for 
the RTO/ISO to prohibit wholesale market participation should be set 
forth in its tariff.\704\ CAISO, IRC, and PJM would also like the 
Commission to provide guidance on how and where disputes between the 
RTO/ISO and distribution utilities regarding coordination of 
distributed energy resources are to be resolved.\705\ CAISO requests 
additional processes beyond sharing information, arguing that processes 
are needed to resolve or mitigate any problems the distribution utility 
may find during its review, including developing a solution with the 
distributed energy resource provider.\706\
---------------------------------------------------------------------------

    \703\ CAISO Comments (RM16-23) at 39, 41-43, 46; IRC Comments 
(RM16-23) at 9; ISO-NE Comments (RM16-23) at 54-55; PJM Comments 
(RM16-23) at 8, 26; SPP Comments (RM16-23) at 24.
    \704\ PJM Comments (2018 RM18-9) at 19.
    \705\ CAISO Comments (RM16-23) at 41; IRC Comments (RM16-23) at 
9; PJM Comments (RM16-23) at 8.
    \706\ CAISO Comments (RM16-23) at 41.
---------------------------------------------------------------------------

    291. Finally, while most comments focus on initial registration, 
TAPS states that a distribution utility should also be able to reopen 
the approval of an individual distributed energy resource's enrollment 
in a distributed energy resource aggregation if the distribution system 
is reconfigured.\707\
---------------------------------------------------------------------------

    \707\ TAPS Comments (2018 RM18-9) at 28.
---------------------------------------------------------------------------

c. Commission Determination
    292. To implement Sec.  35.28(g)(12)(ii)(g) of the Commission's 
regulations, we adopt the NOPR proposal to require each RTO/ISO to 
modify its tariff to incorporate a comprehensive and non-discriminatory 
process for timely review by a distribution utility of the individual 
distributed energy resources that comprise a distributed energy 
resource aggregation, which is triggered by initial registration of the 
distributed energy resource aggregation or incremental changes to a 
distributed energy resource aggregation already participating in the 
markets. As described below, each RTO/ISO must coordinate with 
distribution utilities to develop a distribution utility review process 
that includes criteria by which the distribution utilities would 
determine whether (1) each proposed distributed energy resource is 
capable of participation in a distributed energy resource aggregation; 
and (2) the participation of each proposed distributed energy resource 
in a distributed energy resource aggregation will not pose significant 
risks to the reliable and safe operation of the distribution system. To 
support this review process, RTOs/ISOs must share with distribution 
utilities any necessary information and data collected under Section 
IV.F of this final rule about the individual distributed energy 
resources participating in a distributed energy resource aggregation. 
In addition, the results of a distribution utility's review must be 
incorporated into the distributed energy resource aggregation 
registration process.
    293. To balance the need for distribution utility review with the 
need to avoid creating potential barriers to distributed energy 
resource aggregation, as noted by commenters, we require each RTO/ISO 
to demonstrate on compliance with this final rule, as discussed further 
below,\708\ that its proposed distribution utility review process is 
transparent, provides specific review criteria that the distribution 
utilities should use, and provides adequate and reasonable time for 
distribution utility review.\709\ A transparent review process with 
specific review criteria will allow distribution utilities to review 
and identify concerns regarding the ability of distributed energy 
resources to participate in a distributed energy resource aggregation 
without posing significant reliability risk to the distribution system. 
We also find that allowing an RTO/ISO to design this new process allows 
regional flexibility in developing review procedures appropriate for 
each particular RTO/ISO.
---------------------------------------------------------------------------

    \708\ See infra PP 295-297.
    \709\ For example, the approach used in the CAISO Distributed 
Energy Resource Provider program.
---------------------------------------------------------------------------

    294. As explained above,\710\ we decline to exercise jurisdiction 
over the interconnection of an individual distributed energy resource 
seeking to participate in RTO/ISO markets exclusively as part of an 
aggregation. We expect that the state and local interconnection 
processes for distributed energy resources will provide the appropriate 
platform to address and study potential distribution system impacts and 
provide the necessary information to inform distribution utility review 
during distributed energy resource aggregation registration. However, 
to the extent that some existing state and local interconnection 
processes do not already capture such information, this final rule in 
no way prevents state and local regulators from amending their 
interconnection processes to address potential distribution system 
impacts that the participation of distributed energy resources through 
distributed energy resource aggregations may cause. In addition, 
coordination between RTOs/ISOs, distributed energy resource 
aggregators, relevant electric retail regulatory authorities, and 
distribution utilities during the registration and distribution utility 
review processes should provide RTOs/ISOs with the information they 
need to study the impact of distributed energy resource aggregations on 
the transmission system.
---------------------------------------------------------------------------

    \710\ See supra Section IV.A.3 (Interconnection).
---------------------------------------------------------------------------

    295. We agree with commenters \711\ that a lengthy review time or 
the lack of a deadline could erect a barrier to distributed energy 
resource

[[Page 67144]]

participation in the RTO/ISO markets and may unduly delay 
participation. In response to these concerns, we clarify that any 
distribution utility review must be completed within a limited, but 
reasonable amount of time.\712\ We expect a reasonable amount of time 
may vary among RTOs/ISOs but should not exceed 60 days. An RTO/ISO, on 
compliance, should propose a timeline that reflects its regional needs. 
In compliance with this final rule, we require each RTO/ISO to revise 
its tariff to specify, as part of its proposed distribution utility 
review process, the time that a distribution utility has to identify 
any concerns regarding a distributed energy resource seeking to 
participate in the RTO/ISO markets through an aggregation.
---------------------------------------------------------------------------

    \711\ See, e.g., Advanced Energy Management Comments (2018 RM18-
9) at 19; Stem Comments (2018 RM18-9) at 15; Tesla Comments (2018 
RM18-9) at 9.
    \712\ For instance, CAISO utilizes a 30-day review period in its 
Distributed Energy Resource Provider program.
---------------------------------------------------------------------------

    296. In addition, we agree with commenters that argue for specific 
standards and criteria to guide and govern the distribution utility 
review process. However, we are not standardizing the criteria that the 
RTOs/ISOs must adopt. We believe there are sufficient differences among 
the regions, such as their rules limiting participation in different 
programs, to warrant flexibility in determining specific standardized 
criteria. On compliance with this final rule, we require that each RTO/
ISO revise its tariff to include, as part of its proposed distribution 
utility review processes, the distribution utility review criteria by 
which distribution utilities can determine that a distributed energy 
resource (1) is capable of participating in an aggregation, e.g., the 
distributed energy resource is not already participating in a retail 
distributed energy resource program in which the relevant electric 
retail regulatory authority conditioned the resource's participation on 
not participating in RTO/ISO markets; and (2) does not pose significant 
risks to the reliable and safe operation of the distribution system.
    297. We agree with multiple commenters, such as EEI and Advanced 
Energy Economy, that the RTOs/ISOs must include potential impacts on 
distribution system reliability as a criterion in the distribution 
utility review process. For example, if a distribution utility 
determines during the distribution utility review process that a 
distributed energy resource operated as part of an aggregation may 
increase voltage above acceptable limits or create potential equipment 
overloads, the distribution utility should have the opportunity to 
alert the RTO/ISO and recommend removal of that distributed energy 
resource from the distributed energy resource aggregation. In addition, 
the distribution utility should have the opportunity to request that 
the RTO/ISO place operational limitations on an aggregation or removal 
of a distributed energy resource from an aggregation based on specific 
significant reliability or safety concerns that it clearly demonstrates 
to the RTO/ISO and distributed energy resource aggregator on a case-by-
case basis. For example, the RTOs/ISOs may consider requiring a signed 
affidavit or other evidence from the distribution utility that a 
distributed energy resource's participation in RTO/ISO markets would 
pose a significant risk to the safe and reliable operation of the 
distribution system, and processes to contest the distribution 
utility's recommendation for removal or for operational limitations to 
be placed on the aggregation.
    298. In response to comments from EEI, TAPS, and multiple 
distribution utilities that argue for a larger and decision-making role 
for the distribution utilities during the review of distributed energy 
resource registrations, we decline to provide such a role. We find that 
requiring or permitting distribution utilities to authorize the 
participation of distributed energy resources in RTO/ISO markets 
directly or as part of an aggregation could create a barrier to 
distributed energy resource aggregation.\713\ The distribution utility 
review processes and interconnection protocols discussed above should 
address and resolve the key distribution reliability concerns raised by 
these commenters. We find that the ability of distribution utilities to 
review and comment on distributed energy resource participation in 
aggregations, as well as the Commission's finding that individual 
distributed energy resources that will participate in aggregations will 
interconnect under state and local interconnection protocols, 
represents a balanced approach to removing barriers to the 
participation of distributed energy resource aggregations in RTO/ISO 
markets, while protecting reliability and the fundamental role of 
distribution utilities in operating their distribution systems.
---------------------------------------------------------------------------

    \713\ See supra Section IV.A.2 (Opt-Out) for further discussion.
---------------------------------------------------------------------------

    299. In response to concerns raised by IRC and PJM regarding 
disputes about distribution utility review,\714\ we find that any 
disputes over the application of coordination and distribution utility 
review processes between the RTO/ISO, the distribution utilities, and 
the distributed energy resource aggregators must be subject to a 
process for resolving disputes in the RTO/ISO tariff. Therefore, we 
require each RTO/ISO to revise its tariff to incorporate dispute 
resolution provisions as part of its proposed distribution utility 
review process. In its compliance filing, each RTO/ISO should describe 
how existing dispute resolution procedures are sufficient or, 
alternatively, propose amendments to its procedures or new dispute 
resolution procedures specific to this subject. Ensuring that disputes 
regarding the distribution utility review process are subject to 
dispute resolution provisions in RTO/ISO tariffs provides a formal 
mechanism for the interested party to attempt to resolve the issue with 
the RTO/ISO. Any parties in conflict over the distribution utility 
review processes may also bring such disputes to the Commission's 
Dispute Resolution Service, or file complaints pursuant to FPA section 
206 at any time.\715\
---------------------------------------------------------------------------

    \714\ See, e.g., IRC Comments (RM16-23) at 9; PJM Comments (2018 
RM18-9) at 8.
    \715\ For example, a dispute over how the RTO/ISO managed and 
implemented the distribution review process during a distributed 
energy resource aggregation registration could be brought to the 
Commission.
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3. Ongoing Operational Coordination
a. NOPR Proposal
    300. In the NOPR, the Commission proposed to require 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.\716\ The Commission explained that the purpose of this ongoing 
coordination would be to ensure that the distributed energy resource 
aggregator disaggregates dispatch signals from the RTO/ISO and 
dispatches individual resources in a distributed energy resource 
aggregation consistent with the limitations 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, the Commission also proposed 
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

[[Page 67145]]

factors that result from distribution line faults or outages.
---------------------------------------------------------------------------

    \716\ NOPR, 157 FERC ] 61,121 at P 155.
---------------------------------------------------------------------------

    301. In addition, the Commission sought comment on any related 
reliability, safety, and operational concerns and how they may be 
effectively addressed.
b. Comments
    302. Several commenters express their support for ongoing 
coordination and emphasize the importance of real-time coordination to 
ensure safe and reliable operation of the transmission and distribution 
systems.\717\ Many distribution utilities in support of the NOPR 
proposal suggest specific roles or priorities for distribution 
utilities as part of ongoing coordination. Pacific Gas & Electric 
states that services in support of distribution system safety and 
reliability must be prioritized, as determined by the distribution 
company, over wholesale market participation when distributed energy 
resources are providing multiple services.\718\ NYISO Indicated 
Transmission Owners and Xcel Energy Services request that the 
Commission permit distribution utilities to limit the energy injections 
and ancillary services from specific distributed energy resources with 
advanced notice.\719\ Other commenters argue that distribution 
utilities must have the ability to limit distributed energy resource 
generation in order to ensure safety and reliability because RTOs/ISOs 
do not have sufficient information to maintain the safety and 
reliability of the distribution grid.\720\
---------------------------------------------------------------------------

    \717\ See, e.g., APPA/NRECA Comments (RM16-23) at 45; Duke 
Energy Comments (RM16-23) at 7; EEI Comments (RM16-23) at 37; Exelon 
Comments (RM16-23) at 2, 11; Guannan He Comments (RM16-23) at 2; 
NYISO Comments (RM16-23) at 19.
    \718\ Pacific Gas & Electric Comments (RM16-23) at 21.
    \719\ NYISO Indicated Transmission Owners Comments (RM16-23) at 
15-16; Xcel Energy Services Comments (RM16-23) at 28.
    \720\ Organization of MISO States Comments (2018 RM18-9) at 5; 
SoCal Edison Comments (RM16-23) at 7-8.
---------------------------------------------------------------------------

    303. Several commenters provide input on the processes needed to 
alert distributed energy resource aggregators about problems on 
distribution systems. Dominion agrees with the NOPR requirement that a 
distributed energy resource aggregator should be responsible for 
reporting to the RTO/ISO when its offered quantity changes due to 
distribution facilities being out of service.\721\ SPP notes it will 
require significant effort to coordinate with entities with which the 
RTO/ISO has not previously had two-way communications.\722\ CAISO 
recommends that the approach being developed for its Distributed Energy 
Resource Provider program be used as a means to allow distribution 
utilities to identify problems on their distribution systems.\723\ 
CAISO believes that a process is needed for distribution utilities to 
notify a distributed energy resource aggregator of changes to 
distribution system conditions that will affect the aggregated 
resource's ability to perform to its maximum capability, such as a red/
green traffic signal.\724\ The Organization of MISO States argues that 
distribution system operators must have the ability to communicate 
information on topology changes in real-time which may impact the 
ability of aggregations to participate in the wholesale market.\725\ 
Several commenters indicate that the current data acquisition 
technologies are largely manual, but will be adequate initially for 
ongoing coordination.\726\
---------------------------------------------------------------------------

    \721\ Dominion Comments (RM16-23) at 13-14.
    \722\ SPP Comments (RM16-23) at 24.
    \723\ CAISO Comments (RM16-23) at 42-43.
    \724\ Id. at 42-44.
    \725\ Organization of MISO States Comments (2018 RM18-9) at 5.
    \726\ See, e.g., NYISO Indicated Transmission Owners Comments 
(2018 RM18-9) at 22; PJM Comments (2018 RM18-9) at 27.
---------------------------------------------------------------------------

    304. Multiple commenters state that, at higher distributed energy 
resource penetrations, enhanced equipment and information to increase 
coordination and communication between the distribution utility, 
distributed energy resource aggregator, and the RTO/ISO will be 
necessary and are still in the process of being developed.\727\ TAPS 
and EEI argue that distribution utilities will need timely information 
on planned dispatch, and that there must be a realistic timeline for 
preventing a dispatch and notifying the distributed energy resource 
aggregator or the RTO/ISO if a dispatch would adversely affect retail 
service.\728\
---------------------------------------------------------------------------

    \727\ See, e.g., Advanced Energy Management Comments (2018 RM18-
9) at 21-22; NYISO Indicated Transmission Owners Comments (2018 
RM18-9) at 23; Pacific Gas & Electric Comments (2018 RM18-9) at 22-
23; PJM Comments (2018 RM18-9) at 27; TAPS Comments (2018 RM18-9) at 
14.
    \728\ EEI Comments (2018 RM18-9) at 12; TAPS Comments (2018 
RM18-9) at 14.
---------------------------------------------------------------------------

    305. Some commenters address the role of the distribution utility 
in ongoing operational coordination. Advanced Energy Economy and EEI 
state that the distribution utility should be made aware of all 
information collected by the aggregator.\729\ More fundamentally, EEI 
comments that the distribution utility is in the best position to serve 
as the coordinator of distribution operations to ensure the complete 
provision of information is being provided to all parties.\730\
---------------------------------------------------------------------------

    \729\ Advanced Energy Economy Comments (2018 RM18-9) at 11; EEI 
Comments (2018 RM18-9) at 17.
    \730\ EEI Comments (2018 RM18-9) at 17.
---------------------------------------------------------------------------

    306. Several commenters offer suggestions or request guidance on 
aspects of ongoing coordination. Avangrid advocates that all 
communication during ongoing coordination be channeled through 
distributed energy resource aggregators.\731\ Furthermore, Avangrid 
states that distributed energy resource aggregators should assume the 
responsibility for the performance of their aggregated resource and be 
responsible for any costs incurred by distribution utilities to 
mitigate and resolve power quality issues caused by distributed energy 
resources. TeMix states that dispatch of end customer load, distributed 
generation, and storage must be coordinated with the operators of the 
distribution grid circuits, which can be complex.\732\
---------------------------------------------------------------------------

    \731\ Avangrid Comments (RM16-23) at 17.
    \732\ TeMix Comments (RM16-23) at 4.
---------------------------------------------------------------------------

    307. Several commenters claim that the RTO/ISO tariffs should be 
less specific about what is required for ongoing coordination processes 
and rules. ISO-NE states that the Commission should not be overly 
prescriptive regarding the level of detail required in each RTO/ISO 
tariff regarding coordination among these entities on operational 
coordination, and requests that the Commission allow each RTO/ISO to 
develop these requirements in conjunction with stakeholders.\733\ 
Pacific Gas & Electric states that it may be appropriate to include 
high-level requirements for information sharing and operational 
coordination, but more technical issues associated with distributed 
energy resource aggregation implementation are fluid and evolving, and 
thus tariff language may not be flexible or adaptable enough to account 
for needed useful, timely changes.\734\ Advanced Energy Economy and 
Union of Concerned Scientists emphasize that ongoing coordination 
already occurs with other resources, such as remote and dispersed 
hydroelectric generation, and argue that existing protocols are 
sufficient.\735\
---------------------------------------------------------------------------

    \733\ ISO-NE Comments (RM16-23) at 55.
    \734\ Pacific Gas & Electric Comments (RM16-23) at 22.
    \735\ Advanced Energy Economy Comments (RM16-23) at 38; Union of 
Concerned Scientists Comments (RM16-23) at 9.
---------------------------------------------------------------------------

    308. Most commenters agree that distribution utilities should have 
the right to override RTO/ISO dispatch instructions for distributed 
energy resources located on their distribution systems to resolve or 
avoid distribution

[[Page 67146]]

reliability issues.\736\ Lorenzo Kristov indicates that the manner in 
which a distribution utility can override a dispatch instruction should 
be clarified so that distributed energy resource providers will be 
better able to estimate their risk of being curtailed due to 
distribution system conditions.\737\ NYISO Indicated Transmission 
Owners state that the distribution utility should communicate potential 
issues with dispatch schedules to the distributed energy resource 
aggregators to provide them with an opportunity to re-adjust the 
distributed energy resource aggregation dispatch schedule.\738\ 
Conversely, Stem argues that, because a distribution utility does not 
have visibility into the exact distribution level impacts of a 
wholesale market dispatch, the distribution utility should not be able 
to override a dispatch.\739\
---------------------------------------------------------------------------

    \736\ See, e.g., California Commission Comments (2018 RM18-9) at 
18; Duquesne Comments (2018 RM18-9) at 7; NYISO Indicated 
Transmission Owners Comments (2018 RM18-9) at 23; Pacific Gas & 
Electric Comments (2018 RM18-9) at 24; SunRun Comments (2018 RM18-9) 
at 5-6; TAPS Comments (2018 RM18-9) at 29.
    \737\ Lorenzo Kristov Comments (2018 RM18-9) at 17.
    \738\ NYISO Indicated Transmission Owners Comments (2018 RM18-9) 
at 23.
    \739\ Stem Comments (2018 RM18-9) at 17.
---------------------------------------------------------------------------

    309. Commenters disagree about how performance penalties should be 
applied in the event that a distribution utility overrides an RTO/ISO 
dispatch. Several commenters generally argue that distributed energy 
resource aggregators should be subject to performance penalties, like 
all other resources.\740\ PG&E and PJM assert that non-deliverability 
penalties are subject to bilateral and contractual agreement between 
the distributed energy resource aggregator and the RTO/ISO.\741\ 
Developers argue that the aggregator should not be assessed penalties 
due to an outage caused by the distribution system operator's 
controls.\742\ Distribution utilities argue that, in the event of a 
curtailment, they must have protection from liability.\743\
---------------------------------------------------------------------------

    \740\ Monitoring Analytics Comments (2018 RM18-9) at 13; NYISO 
Indicated Transmission Owners Comments (2018 RM18-9) at 23; PJM 
Comments (2018 RM18-9) at 27-28.
    \741\ Pacific Gas & Electric Comments (2018 RM18-9) at 24; PJM 
Comments (2018 RM18-9) at 27-28.
    \742\ Microgrid Resources Coalition Comments (2018 RM18-9) at 
15; Stem Comments (2018 RM18-9) at 17; SunRun Comments (2018 RM18-9) 
at 6.
    \743\ Eversource Comments (2018 RM18-9) at 11; SoCal Edison 
Comments (2018 RM18-9) at 10; TAPS Comments (2018 RM18-9) at 29.
---------------------------------------------------------------------------

c. Commission Determination
    310. We agree with commenters that emphasize the importance of 
real-time coordination to ensure safe and reliable operation of the 
transmission and distribution systems. Consequently, to implement Sec.  
35.28(g)(12)(ii)(g) of the Commission's regulations, we adopt the NOPR 
proposal to require each RTO/ISO to revise its tariff to (1) establish 
a process for ongoing coordination, including operational coordination, 
that addresses data flows and communication among itself, the 
distributed energy resource aggregator, and the distribution utility; 
and (2) 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. Further, we require each RTO/ISO to revise its tariff to 
include coordination protocols and processes for the operating day that 
allow distribution utilities to override RTO/ISO dispatch of a 
distributed energy resource aggregation in circumstances where such 
override is needed to maintain the reliable and safe operation of the 
distribution system. These processes that allow distribution utilities 
to override RTO/ISO dispatch must be contained in the tariff and must 
be non-discriminatory and transparent but still address distribution 
utility reliability and safety concerns. We find these operational 
coordination requirements will maximize the availability of the 
distributed energy resource aggregation consistent with the reliable 
and safe operation of the distribution system.
    311. Commenters disagree over the level of specificity needed in 
RTO/ISO tariffs and describe different approaches to ongoing 
coordination. To account for different regional approaches and to 
provide flexibility, we are not prescribing specific protocols or 
processes for the RTOs/ISOs to adopt as part of the operational 
coordination requirements, but rather we will allow each RTO/ISO to 
develop an approach to ongoing operational coordination in compliance 
with this final rule.
    312. We also require each RTO/ISO to revise its tariff to apply any 
existing resource non-performance penalties to a distributed energy 
resource aggregation when the aggregation does not perform because a 
distribution utility overrides the RTO's/ISO's dispatch. We find that 
this requirement will ensure that distributed energy resource 
aggregations are subject to non-performance penalties similarly to 
other resources participating in RTO/ISO markets. We note that this 
requirement will incent distributed energy resource aggregators to 
register individual distributed energy resources on less-constrained 
portions of distribution networks in order to minimize the likelihood 
of incurring non-performance penalties from the RTO/ISO.
    313. We acknowledge that the timing and location of distribution 
utility overrides of dispatch instructions are outside of the control 
of distributed energy resource aggregators, and that aggregators may 
not have advance notice of overrides during an operating day. In 
response to commenters who state that distribution utilities must have 
protection from liability in the event of a curtailment or an outage 
caused by the distribution system operator's actions to preserve the 
safety and reliability of the distribution system,\744\ we decline to 
impose any specific liability provisions. Given the arguments advanced 
by commenters, we are not persuaded that all distribution providers 
face similar liability concerns and that these concerns should be 
addressed through standardized liability provisions in RTO/ISO tariffs. 
Accordingly, we decline to establish a generic requirement for RTOs/
ISOs with respect to liability provisions.
---------------------------------------------------------------------------

    \744\ See, e.g., Eversource Comments (2018 RM18-9) at 11; SoCal 
Edison Comments (2018 RM18-9) at 10; TAPS Comments (2018 RM18-9) at 
29.
---------------------------------------------------------------------------

4. Role of Relevant Electric Retail Regulatory Authorities
a. NOPR Proposal
    314. The NOPR did not directly address the role of relevant 
electric retail regulatory authorities in coordination with the RTO/
ISO, the distributed energy resource aggregator, and the distribution 
utility when a distributed energy resource aggregation seeks to 
participate in an RTO/ISO market. However, after the April 2018 
technical conference, the Commission sought comment on the role of 
relevant electric retail regulatory authorities in coordination.
b. Comments
    315. Most commenters assert that relevant electric retail 
regulatory authorities have a central and key role in coordination and 
that the responsibilities of such authorities should be focused on 
setting rules and supervising distribution utility review of 
distributed energy resource participation in aggregations.
    316. Some relevant electric retail regulatory authorities argue 
that they must have a central role in coordination to ensure that their 
jurisdiction is preserved as it relates to market activities on the 
distribution system by distributed energy resources participating in 
RTO/ISO markets.\745\

[[Page 67147]]

Vice Chairman Place requests that the Commission require the role of 
relevant electric retail regulatory authorities be reflected in RTO/ISO 
rules, and that, if the Commission sets roles and responsibilities in 
RTO/ISO rules, relevant electric retail regulatory authorities should 
participate in setting these rules.\746\ In addition, the Organization 
of MISO States contends that relevant electric retail regulatory 
authorities will need to be aware of coordination efforts and be able 
to participate in, and in some cases lead, these efforts based on 
jurisdictional scope, prevalence of distributed energy resource 
penetration, and state and local policy.\747\ Vice Chairman Place 
requests that the relevant electric regulatory authority's ability to 
restrict distributed energy resource participation in the wholesale 
market be maintained.\748\
---------------------------------------------------------------------------

    \745\ See, e.g., Vice Chairman Place Comments (2018 RM18-9) at 
8; Organization of MISO States Comments (2018 RM18-9) at 9-10.
    \746\ Vice Chairman Place Comments (2018 RM18-9) at 8.
    \747\ Organization of MISO States Comments (2018 RM18-9) at 9.
    \748\ Vice Chairman Place Comments (2018 RM18-9) at 5.
---------------------------------------------------------------------------

    317. Distribution utilities generally agree with the comments from 
relevant electric retail regulatory authorities and support a central 
and key role for relevant electric retail regulatory authorities in 
coordinating the participation of aggregated distributed energy 
resource in RTO/ISO markets.\749\ Specific roles and responsibilities 
for relevant electric retail regulatory authorities identified by 
distribution utility commenters include: Supervision of distribution 
utility review of distributed energy resource participation in 
aggregations; evaluation of distributed energy resources 
interconnection to distribution facilities; overseeing issues regarding 
distribution system operation and reliability; data sharing; and 
setting of metering requirements and related mechanisms to distinguish 
wholesale and retail transactions.\750\ Moreover, APPA requests that 
the Commission be explicit that nothing in the final rule preempts or 
otherwise limits the ability of relevant electric retail regulatory 
authorities to adopt rules or tariffs, and to set rates to recover and 
allocate the costs associated with facilitating wholesale market 
participation by aggregated distributed energy resources.\751\
---------------------------------------------------------------------------

    \749\ See, e.g., APPA Comments (2018 RM18-9) at 2; New York 
Indicated Transmission Owners Comments (2018 RM18-9) at 17; Pacific 
Gas & Electric Comments (2018 RM18-9) at 16.
    \750\ See, e.g., APPA Comments (2018 RM18-9) at 6; California 
Commission Comments (2018 RM18-9) at 1-3, 12; Organization of MISO 
States Comments (2018 RM18-9) at 9; Pacific Gas & Electric Comments 
(2018 RM18-9) at 16.
    \751\ APPA Comments (2018 RM18-9) at 4.
---------------------------------------------------------------------------

    318. CAISO also comments in support of the role of relevant 
electric retail regulatory authorities in facilitating coordination. 
Based on its experience in California, CAISO identifies several 
possible coordination roles and responsibilities for relevant electric 
retail regulatory authorities, including: Establishing metering 
requirements for distributed energy resources; establishing rules for 
multi-use applications; providing oversight of distribution utility 
review of distributed energy resource participation in an aggregation; 
and resolving distributed energy resource aggregation 
controversies.\752\ As an example of the importance of relevant 
electric retail regulatory authorities in distributed energy resource 
coordination, CAISO references its Commission-approved distributed 
energy resource process that requires that distributed energy resource 
providers comply with applicable utility distribution company tariffs, 
and operating procedures incorporated into those tariffs, as well as 
applicable requirements of the local regulatory authority.\753\
---------------------------------------------------------------------------

    \752\ CAISO Comments (2018 RM18-9) at 13-14.
    \753\ Id. at 14.
---------------------------------------------------------------------------

    319. Conversely, other commenters argue for a somewhat more limited 
role for relevant electric retail regulatory authorities. Advanced 
Energy Management argues that the role of relevant electric retail 
regulatory authorities should be limited to defining non-discriminatory 
interconnection procedures that ensure the distribution grid can 
accommodate distributed energy resources, and ensuring that the 
distributed energy resource can safely deliver energy to the grid.\754\ 
Icetec asserts that the coordination of distributed energy resource 
registrations should not become a vehicle for distribution utilities or 
relevant electric retail regulatory authorities to exercise improper 
authority over eligibility to participate in wholesale markets.\755\ In 
order to forestall this possible intervention, Icetec recommends making 
distribution interconnection and registration for wholesale markets 
entirely separate processes.\756\
---------------------------------------------------------------------------

    \754\ Advanced Energy Management Comments (2018 RM18-9) at 18.
    \755\ Icetec Comments (2018 RM18-9) at 16.
    \756\ Id. at 18-19.
---------------------------------------------------------------------------

    320. Some commenters urge the Commission to respect state and local 
concerns regarding distributed energy resource aggregations. APPA 
states that the Commission should afford distribution utilities and 
their relevant electric retail regulatory authorities a key role in 
coordinating the participation of aggregated distributed energy 
resources in RTO/ISO markets.\757\ The Indiana Commission states that 
distributed energy resource wholesale participation must work in tandem 
with, and not in contravention of, Indiana's utility regulatory 
framework.\758\ PJM Utilities Coalition urges the Commission to defer 
to relevant electric retail regulatory authorities in fashioning 
programs that integrate distributed energy resources into the 
distribution system, asserting that states are uniquely positioned to 
balance the benefits of distributed energy resource participation in 
wholesale markets with costs and other adverse impacts on distribution 
systems and retail load.\759\
---------------------------------------------------------------------------

    \757\ APPA Comments (2018 RM18-9) at 2.
    \758\ Indiana Commission Comments (2018 RM18-9) at 2.
    \759\ PJM Utilities Coalition Comments (2018 RM18-9) at 10.
---------------------------------------------------------------------------

    321. The California Commission recommends that, given the 
complexity of ensuring just compensation for resources, it is most 
appropriate for local regulatory authorities to establish distinctly 
defined services and rules to govern coordination across wholesale and 
retail markets.\760\
---------------------------------------------------------------------------

    \760\ California Commission Comments (2018 RM18-9) at 10-11.
---------------------------------------------------------------------------

c. Commission Determination
    322. In consideration of the comments and to implement Sec.  
35.28(g)(12)(ii)(g) of the Commission's regulations, we require each 
RTO/ISO to specify in its tariff, as part of the market rules on 
coordination between the RTO/ISO, the distributed energy resource 
aggregator, and the distribution utility, how each RTO/ISO will 
accommodate and incorporate voluntary relevant electric retail 
regulatory authority involvement in coordinating the participation of 
aggregated distributed energy resources in RTO/ISO markets. We agree 
with commenters that relevant electric retail regulatory authorities 
have a role in coordination, i.e., in setting rules at the distribution 
level and in RTO/ISO stakeholder discussions. Many relevant electric 
retail regulatory authorities indicate strong interest in participating 
in such coordination.
    323. We note that the roles delineated in CAISO's Distributed 
Energy Resource Provider tariff provisions may provide an example of 
how relevant electric retail regulatory authorities could be involved 
in coordinating the participation of distributed energy resource 
aggregations in RTO/ISO

[[Page 67148]]

markets. CAISO's Distributed Energy Resource Provider model requires 
that distributed energy resource providers comply with applicable 
utility distribution company tariffs and operating procedures 
incorporated into those tariffs, as well as applicable requirements of 
the local regulatory authority.\761\
---------------------------------------------------------------------------

    \761\ CAISO Comments (2018 RM18-9) at 14.
---------------------------------------------------------------------------

    324. We further note that possible roles and responsibilities of 
relevant electric retail regulatory authorities in coordinating the 
participation of distributed energy resource aggregations in RTO/ISO 
markets may include, but are not limited to: Developing interconnection 
agreements and rules; developing local rules to ensure distribution 
system safety and reliability, data sharing, and/or metering and 
telemetry requirements; overseeing distribution utility review of 
distributed energy resource participation in aggregations; establishing 
rules for multi-use applications; and resolving disputes between 
distributed energy resource aggregators and distribution utilities over 
issues such as access to individual distributed energy resource data. 
We require that any such role for relevant electric retail regulatory 
authorities in coordinating the participation of distributed energy 
resource aggregations in RTO/ISO markets be included in the RTO/ISO 
tariffs and developed in consultation with the relevant electric retail 
regulatory authorities. Further, as noted in Section IV.G, to the 
extent that metering and telemetry data comes from or flows through 
distribution utilities, we require that RTOs/ISOs coordinate with 
distribution utilities and the relevant electric retail regulatory 
authorities to establish protocols for sharing metering and telemetry 
data that minimize costs and other burdens and address concerns raised 
with respect to customer privacy and cybersecurity.
5. Coordination Frameworks
a. NOPR Proposal
    325. As part of its proposal to require coordination in the NOPR, 
the Commission sought 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.\762\
---------------------------------------------------------------------------

    \762\ NOPR, 157 FERC ] 61,121 at P 155.
---------------------------------------------------------------------------

b. Comments
    326. Several commenters propose that the Commission take a more 
proactive step and require RTOs/ISOs to establish a broader 
coordination structure, or ``coordination framework'' that addresses 
all aspects of coordination (planning, distributed energy resource 
registration, and operational coordination) between distributed energy 
resources, distributed energy resource aggregators, RTOs/ISOs, and 
distribution utilities. At the technical conference, panelist Jeffery 
Taft, Chief Architect at Pacific Northwest National Laboratory, 
described a coordination framework as a way to exchange information and 
control signals between the three levels of the U.S. electric system, 
namely the bulk power level, the distribution level, and the 
distributed energy resource/customer level.\763\ R Street proposes two 
purposes for coordination frameworks, namely, to encourage 
technological innovation, and to coordinate policies between retail and 
wholesale markets.\764\ Stem proposes three coordination frameworks (1) 
an operational framework; (2) a planning framework; and (3) a markets 
framework.\765\ PJM suggests a framework that focuses on two components 
(1) reliability-related items; and (2) administrative items.\766\ CAISO 
proposes an all-encompassing process that addresses each element of 
distributed energy resource aggregation.\767\
---------------------------------------------------------------------------

    \763\ Technical Conference Transcript at 388.
    \764\ R Street Comments (RM16-23) at 10-11.
    \765\ Stem Comments (2018 RM18-9) at 7-8.
    \766\ PJM Comments (2018 RM18-9) at 19-21, 24.
    \767\ CAISO Comments (RM16-23) at 39-51.
---------------------------------------------------------------------------

    327. Several commenters express the belief that the development of 
a coordination framework will ensure that participation of distributed 
energy resource aggregations in RTO/ISO markets does not compromise the 
reliability or safety of the transmission and distribution 
systems.\768\ For example, based on its experience with implementing 
CAISO's Distributed Energy Resource Provider framework, Pacific Gas & 
Electric states that it is important that RTOs/ISOs coordinate with 
distribution utilities.\769\
---------------------------------------------------------------------------

    \768\ See, e.g., id. at 39; Institute for Policy Integrity 
Comments (RM16-23) at 9; NYISO Comments (RM16-23) at 19.
    \769\ Pacific Gas & Electric Comments (RM16-23) at 21.
---------------------------------------------------------------------------

    328. R Street Institute argues for a coordination framework that 
creates incentives for innovation and deployment of advanced active 
network management practices (e.g., real-time operating procedures) and 
technologies (e.g., software-enabled communications among control 
centers).\770\ E4TheFuture notes that data creation, communications, 
and analytics are fundamental to successfully including distributed 
energy resources in the organized wholesale electric markets, and that 
the technologies and services surrounding these fundamentals and the 
standards that will support valuation and aggregation are evolving 
rapidly.\771\ E4TheFuture asks the Commission to support the RTOs/ISOs 
in creating solutions to nimbly address the rapid development of these 
technologies over time.
---------------------------------------------------------------------------

    \770\ R Street Institute Comments (RM16-23) at 10.
    \771\ E4TheFuture Comments (RM16-23) at 2.
---------------------------------------------------------------------------

    329. Several commenters recommend that the Commission not require a 
specific coordination framework at this time. Public Interest Groups 
argue that the Commission should not specify a particular structure for 
coordination frameworks but instead allow the ``laboratories of 
innovation'' of state and distribution utilities to develop new 
practices and procedures.\772\ Lorenzo Kristov emphasizes that these 
coordination efforts are at an early stage, noting that there are no 
best practices and no best coordination framework to adopt.\773\ The 
California Commission asks that the Commission not establish specific 
requirements at this time, but instead to track the development of 
frameworks and architectures around the country and document best 
practices.\774\
---------------------------------------------------------------------------

    \772\ Public Interest Organizations Comments (2018 RM18-9) at 
11-12.
    \773\ Lorenzo Kristov Comments (2018 RM18-9) at 16-17.
    \774\ California Commission Comments (2018 RM18-9) at 12.
---------------------------------------------------------------------------

c. Commission Determination
    330. We believe that, among other benefits, a broader, holistic 
approach to coordination--referred to herein as a coordination 
framework--could help ensure that different elements of distributed 
energy resource aggregations do not work at cross-purposes. Because the 
topic of coordination frameworks is still developing and was not fully 
considered in this record, we encourage, but do not require, each RTO/
ISO to develop a coordination framework that addresses the needs of its 
region.
    331. We note that it may be beneficial for the RTOs/ISOs and their 
stakeholders to take into consideration in developing coordination 
frameworks the interoperability of new information technology and 
communications systems. Such systems will likely need to exchange 
mutually recognizable data, and will become more important as 
distributed energy resource penetration reaches higher levels. Early 
consideration of these issues could help prevent redundancy and 
unnecessary costs later.

[[Page 67149]]

I. Modifications to List of Resources in Aggregation

a. NOPR Proposal
    332. In the NOPR, the Commission proposed 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 re-registering all of the resources if the modification will 
not result in any safety or reliability concerns.\775\ The Commission 
emphasized, however, that, pursuant to other proposed 
requirements,\776\ 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 RTO/ISO 
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.\777\
---------------------------------------------------------------------------

    \775\ Id. P 149.
    \776\ See supra Section IV.H.2 (Role of Distribution Utilities).
    \777\ NOPR, 157 FERC ] 61,121 at P 154.
---------------------------------------------------------------------------

b. Comments
    333. Many commenters support the Commission's proposal to allow a 
distributed energy resource aggregator to modify its list of resources 
without re-registering all of the resources in the distributed energy 
resource aggregation.\778\ In support, University of Delaware's EV R&D 
Group states that within a substantial aggregation, small residential 
electric vehicle interconnection sites might enter and exit the 
aggregation even on a daily basis, as new participants and existing 
participants change vehicles, homes, or preferences.\779\ However, 
NYISO asks the Commission to require the distributed energy resource 
aggregator to advise the RTOs/ISOs of any changes to the list of 
resources and changes in the aggregation's performance output or 
operating characteristics.\780\
---------------------------------------------------------------------------

    \778\ See, e.g., Advanced Microgrid Solutions Comments (RM16-23) 
at 8; Avangrid Comments (RM16-23) at 13; CAISO Comments (RM16-23) at 
35-37; City of New York Comments (RM16-23) at 9-10; EEI Comments 
(RM16-23) at 32-33.
    \779\ University of Delaware's EV R&D Group Comments (2018 RM18-
9) at 2.
    \780\ NYISO Comments (RM16-23) at 18.
---------------------------------------------------------------------------

    334. Many commenters also generally support the proposal to allow 
distribution utilities to review the list of resources when it is 
revised.\781\ Mensah states that any review should be streamlined as 
much as possible.\782\ Stem stresses the importance of transparent 
standards of review and argues that opaque review methodologies create 
an unreasonable barrier to participation of distributed energy 
resources.\783\ Additionally, many commenters emphasize the need to 
determine whether any changes in the list of resources affect safety 
and reliability at both the transmission and distribution levels.\784\ 
Dominion adds that the review process to determine the impacts of a 
change in the list of resources on safety and reliability must be 
established in a final rule.\785\
---------------------------------------------------------------------------

    \781\ See, e.g., APPA/NRECA Comments (RM16-23) at 45; EEI 
Comments (RM16-23) at 32-33; Mensah Comments (RM16-23) at 4; MISO 
Transmission Owners Comments (RM16-23) at 23; NYISO Comments (RM16-
23) at 18.
    \782\ Mensah Comments (RM16-23) at 4.
    \783\ Stem Comments (RM16-23) at 15.
    \784\ Avangrid Comments (RM16-23) at 12-13; CAISO Comments 
(RM16-23) at 34-35; Dominion Comments (RM16-23) at 11; Mensah 
Comments (RM16-23) at 4; Pacific Gas & Electric Comments (RM16-23) 
at 20.
    \785\ Dominion Comments (RM16-23) at 11.
---------------------------------------------------------------------------

c. Commission Determination
    335. We adopt the NOPR proposal, as modified below, and add Sec.  
35.28(g)(12)(ii)(e) to the Commission's regulations to require each 
RTO/ISO to establish market rules that address modification to the list 
of resources in a distributed energy resource aggregation.
    336. We require each RTO/ISO to revise its tariff to specify that 
distributed energy resource aggregators must update their lists of 
distributed energy resources in each aggregation (i.e., reflect 
additions and subtractions from the list) and any associated 
information and data,\786\ but that, when doing so, distributed energy 
resource aggregators will not be required to re-register or re-qualify 
the entire distributed energy resource aggregation. We note that any 
modification triggers the distribution utility review process 
(discussed in Section IV.H.2 above). This requirement is necessary to 
ensure that the RTOs/ISOs have accurate and current information about 
the individual distributed energy resources that make up a distributed 
energy resource aggregation and to allow distribution utilities the 
opportunity to review those modifications.\787\ We find that this 
requirement will ensure minimal administrative burden, while protecting 
safety and reliability at both the transmission and distribution 
levels.
---------------------------------------------------------------------------

    \786\ See supra Section IV.F (Information and Data 
Requirements).
    \787\ See supra Section IV.H.2 (Role of Distribution Utilities).
---------------------------------------------------------------------------

    337. While any modification of a distributed energy resource 
aggregation will trigger distribution utility review, we clarify that 
it may be appropriate for each RTO/ISO to abbreviate the distribution 
utility's review of modifications to the distributed energy resource 
aggregations. As the Commission explained in the NOPR, the requirements 
for modifying the list of resources in a distributed energy resource 
aggregation can present a barrier to the participation of distributed 
energy resource aggregations in RTO/ISO markets.\788\ We find that the 
incremental impacts on RTO/ISO markets and operations that would result 
from the addition or removal of individual distributed energy resources 
from a distributed energy resource aggregation, after the initial 
registration, are likely to be minimal and thus individual distributed 
energy resources should generally be able to enter and exit distributed 
energy resource aggregations participating in RTO/ISO markets without 
impairing safety and reliability. Because the impacts of modifications 
may often be minimal, an abbreviated review process should be 
sufficient for the distribution utility to identify the cases where an 
addition to the list of resources might pose a safety or reliability 
concern. As stated in Section IV.A.3, modifications to the list of 
resources in a distributed energy resource aggregation, and the 
resulting distribution utility and RTO/ISO review of those changes, 
could occasionally indicate changes to the electrical characteristics 
of the distributed energy resource aggregation that are significant 
enough to potentially adversely impact the reliability of the 
distribution or transmission systems and justify restudy of the full 
distributed energy resource aggregation.\789\ However, even in such 
circumstances, we do not believe that participation of the distributed 
energy resource aggregation will need to be paused during the review of 
modifications or restudy. Aggregators should be able to continue to bid 
the unmodified portion of their aggregation into RTO/ISO markets. For 
example, in the event that a resource withdraws from an aggregation, 
the aggregator could continue to participate in the market by modifying 
its bidding parameters to reflect the aggregation's changed capability 
to perform.
---------------------------------------------------------------------------

    \788\ NOPR, 157 FERC ] 61,121 at P 148.
    \789\ See supra P 99.
---------------------------------------------------------------------------

    338. Finally, to the extent that an RTO/ISO requires distributed 
energy resource aggregators to provide information on the physical or 
operational characteristics of its distributed energy resource 
aggregation (pursuant to Section IV.F), we require

[[Page 67150]]

each RTO/ISO to revise its tariff to ensure that distributed energy 
resource aggregators must update such information if any modification 
to the list of resources participating in the aggregation results in a 
change to the aggregation's performance. We find that this requirement 
will ensure that the RTOs/ISOs have accurate and current information 
about the physical and operational characteristics of the distributed 
energy resource aggregations that are participating in their markets, 
with minimal administrative burden.

J. Market Participation Agreements

1. NOPR Proposal
    339. In the NOPR, the Commission stated that, in order 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 RTO/
ISO markets.\790\ The Commission explained that, because 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 attest 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.\791\ The Commission 
therefore proposed that each RTO/ISO revise its tariff to include a 
market participation agreement for distributed energy resource 
aggregators. The Commission did not propose specific requirements for 
such agreements in the NOPR; instead, the Commission sought comment on 
the information these agreements should contain.
---------------------------------------------------------------------------

    \790\ NOPR, 157 FERC ] 61,121 at P 157.
    \791\ The Commission explained that this may include any laws or 
regulations of the relevant retail regulatory authority that do not 
permit demand response resources to participate in RTO/ISO markets 
as the Commission considered in Order No. 719. Id. n.238 (citing 
Order No. 719, 125 FERC ] 61,071 at P 154).
---------------------------------------------------------------------------

    340. The Commission also explained that, 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.\792\ 
Therefore, the Commission proposed that the market participation 
agreement for distributed energy resource aggregators that each RTO/ISO 
must include in its tariff may not restrict the business models that 
distributed energy resource aggregators may adopt. The Commission 
stated that market participation agreements 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 
RTO/ISO markets as a distributed energy resource aggregation.
---------------------------------------------------------------------------

    \792\ Id. P 158.
---------------------------------------------------------------------------

    341. After the April 2018 technical conference, the Commission 
sought comment on whether the proposed use of market participation 
agreements addresses state and local regulator concerns about the role 
of distribution utilities in the coordination and registration of 
distributed energy resources in aggregations. The Commission further 
asked whether the proposed provisions in the market participation 
agreements that require that distributed energy resource aggregators 
attest that they are compliant with the tariffs and operation 
procedures of distribution utilities and state and local regulators are 
sufficient to address such concerns.\793\
---------------------------------------------------------------------------

    \793\ See Notice Inviting Post-Technical Conference Comments at 
6.
---------------------------------------------------------------------------

2. Comments
    342. All commenters that address this topic agree that market 
participation agreements between RTOs/ISOs and distributed energy 
resource aggregators are necessary. However, commenters disagree on the 
structure of these agreements.
    343. Many commenters support the NOPR proposal to require a market 
participation agreement for distributed energy resource 
aggregators.\794\ ISO-NE, however, urges the Commission to exclude from 
a final rule any specific directives regarding market participation 
agreements for aggregations of distributed energy resources, including 
requiring attestation from the aggregator.\795\ ISO-NE states that such 
directives are not needed because its current generic market 
participant agreement is sufficient as a ``simple and proven'' approach 
to accommodate distributed energy resource aggregations and because 
other coordination processes, including the asset registration process, 
may be preferable mechanisms for gathering and verifying information 
related to a participant's assets.
---------------------------------------------------------------------------

    \794\ See, e.g., APPA/NRECA Comments (RM16-23) at 46; California 
Commission Comments (2018 RM18-9) at 7; Mensah Comments (RM16-23) at 
4; NYISO Comments (RM16-23) at 20; PJM Comments (RM16-23) at 28-29; 
SoCal Edison Comments (2018 RM18-9) at 2, 10-11.
    \795\ ISO-NE Comments (RM16-23) at 56-57.
---------------------------------------------------------------------------

    344. Some commenters express concerns about the sufficiency of 
market participation agreements to address state and local regulatory 
concerns. The New York Commission, for example, cautions that a rule 
addressing the nature and use of market participation agreements should 
not create barriers that hinder a state regulator's ability to guide 
the ways that distributed energy resource aggregations can be formed, 
registered, managed, and operated, including the role of a distribution 
utility in the coordination and registration of distributed energy 
resource aggregations.\796\ Organization of MISO States asserts that 
concerns remain about the ability to effectively police compliance with 
participation agreements, and that in order to comply, new lines of 
communication between distribution utilities, distributed energy 
resource aggregators, and the RTO/ISO will need to be developed.\797\
---------------------------------------------------------------------------

    \796\ New York Commission Comments (2018 RM18-9) at 13.
    \797\ Organization of MISO States Comments (2018 RM18-9) at 4.
---------------------------------------------------------------------------

    345. Organization of MISO States asserts that further participation 
agreements will need to be crafted to accommodate ever-evolving 
technology changes and to avoid such initial agreements becoming 
barriers to innovation. It asserts that the RTO/ISO stakeholder process 
is the appropriate place for these modifications to participation 
agreements to occur.\798\
---------------------------------------------------------------------------

    \798\ Id. at 4-5.
---------------------------------------------------------------------------

    346. Commenters express varying recommendations for the structure 
of an agreement or agreements and the parties required to enter them. 
AES Companies suggest a three-party agreement between the aggregator, 
distribution utility, and RTO/ISO is appropriate,\799\ while Pacific 
Gas & Electric suggests two two-party agreements (one agreement between 
aggregator and RTO/ISO, and another between aggregator and distribution 
utility).\800\ APPA/NRECA and MISO Transmission Owners favor the 
utilities being party to the agreements and argue that the agreement 
should demonstrate that the aggregation has been authorized by the 
utility or its relevant regulatory authority.\801\ CAISO also suggests 
that

[[Page 67151]]

the Commission consider whether a separate Commission-jurisdictional 
agreement should apply between a distribution utility and a distributed 
energy resource aggregator.\802\
---------------------------------------------------------------------------

    \799\ AES Companies Comments (RM16-23) at 12-13, 49.
    \800\ Pacific Gas & Electric Comments (RM16-23) at 24-26.
    \801\ APPA/NRECA Comments (RM16-23) at 46-47; MISO Transmission 
Owner Comments (RM16-23) at 26-27.
    \802\ CAISO Comments (RM16-23) at 51-52.
---------------------------------------------------------------------------

    347. Some commenters request flexibility, further guidance from the 
Commission, and/or the participation of other parties in crafting 
market participation agreements. Most RTOs/ISOs suggest that some of 
their existing agreements may be applicable but argue for flexibility 
in establishing appropriate agreements.\803\ Pacific Gas & Electric 
also argues that each RTO/ISO should be allowed to craft agreements 
appropriate for its markets.\804\ NARUC requests that, for states that 
do allow third party aggregations, the Commission only provide broad 
policy direction in a final rule and allow the RTOs/ISOs to develop 
with state input the necessary details for implementation.\805\ EEI 
similarly argues that RTOs/ISOs and distribution utilities should 
develop market participation agreements in conjunction with their 
stakeholders.\806\ Xcel Energy Services goes further, stating that the 
details of market participation agreements will need to be addressed by 
states.\807\ PJM asserts that further clarification as to the role of 
electric distribution companies and other relevant regulatory 
authorities is needed for PJM to finalize the appropriate market 
participant agreement design.\808\ Massachusetts Municipal Electric 
requests sufficient flexibility for the agreement to accommodate 
different conditions at different distribution utilities.\809\ Mensah, 
however, states that the participation agreement, and any necessary 
amendments, should be standardized, streamlined, and automated as much 
as possible to avoid unnecessary costs.\810\
---------------------------------------------------------------------------

    \803\ Id.; ISO-NE Comments (RM16-23) at 56-57; MISO Comments 
(RM16-23) at 26-27; NYISO Comments (RM16-23) at 20; PJM Comments 
(RM16-23) at 28-29.
    \804\ See Pacific Gas & Electric Comments (RM16-23) at 24.
    \805\ NARUC Comments (RM16-23) at 5.
    \806\ EEI Comments (RM16-23) at 39.
    \807\ Xcel Energy Services Comments (RM16-23) at 29.
    \808\ PJM Comments (RM16-23) at 29.
    \809\ Massachusetts Municipal Electric Comments (RM16-23) at 5.
    \810\ Mensah Comments (RM16-23) at 4.
---------------------------------------------------------------------------

    348. Some commenters advocate for specific requirements in market 
participation agreements. EEI argues that the agreements should ensure 
that distributed energy resource aggregators are subject to comparable 
requirements as other resources.\811\ AES Companies assert that an 
agreement should only obligate the aggregator to conform to the 
appropriate tariff rules and a proportionate share of essential 
reliability services as determined by each RTO/ISO and its 
stakeholders.\812\ Pacific Gas & Electric states that an agreement 
between the aggregator and the distribution utility should include 
detailed requirements regarding operational coordination, mitigation of 
system impacts, cost allocation, and notification of changes to the 
aggregation.\813\
---------------------------------------------------------------------------

    \811\ EEI Comments (RM16-23) at 39.
    \812\ AES Companies Comments (RM16-23) at 12-13.
    \813\ Pacific Gas & Electric Comments (RM16-23) at 24-25.
---------------------------------------------------------------------------

    349. Avangrid emphasizes that the market participation agreement 
should be explicit that the aggregator is a wholesale market 
participant required to comply with the provisions in the tariff, 
including operational requirements.\814\ MISO Transmission Owners and 
TAPS support requiring the distributed energy resource aggregator to 
attest to compliance with distribution utility tariffs and operating 
procedures and with the rules and regulations of any other relevant 
regulatory authority.\815\ APPA/NRECA support requiring aggregators to 
demonstrate, rather than simply attest, that the relevant electric 
retail regulatory authority has authorized wholesale market 
participation by the resources in the aggregation, and to include in 
the market participation agreement requirements for notice to 
distribution utilities of any changes in resources and for compliance 
by the aggregator and its resources with the tariffs and operating 
procedures of the relevant distribution utilities.\816\ MISO 
Transmission Owners make similar arguments in their comments.\817\
---------------------------------------------------------------------------

    \814\ Avangrid Comments (RM16-23) at 18.
    \815\ MISO Transmission Owners Comments (RM16-23) at 19 (citing 
NOPR, 157 FERC ] 61,121 at P 157); TAPS Comments (RM16-23) at 13-14.
    \816\ APPA/NRECA Comments (RM16-23) at 47.
    \817\ MISO Transmission Owners Comments (RM16-23) at 19, 26-27.
---------------------------------------------------------------------------

    350. On the other hand, Tesla/SolarCity contend that, because many 
individual distributed energy resources may not be new nor installed by 
the aggregator, any attestation requirement should only require 
aggregators to state that, ``to the best of their knowledge,'' the 
distributed energy resources in the aggregation are compliant with 
distribution company tariffs and operating procedures and relevant 
regulatory authority rules and regulations.\818\
---------------------------------------------------------------------------

    \818\ Tesla/SolarCity Comments (RM16-23) at 31.
---------------------------------------------------------------------------

    351. APPA/NRECA, Open Access Technology, MISO Transmission Owners, 
and NARUC support the NOPR proposal that market participation 
agreements should not restrict the business models for distributed 
energy resource aggregators, though the latter two commenters condition 
their support on the distributed energy resource aggregation having 
been permitted by the state regulatory body and, if applicable, the 
distribution utility.\819\ NARUC supports the NOPR language that allows 
a scenario in which distribution utilities can act as aggregators so 
that the states can provide oversight of the terms and conditions of 
their relationship with distributed energy resources and customers, 
while allowing participation of the aggregator in RTO/ISO markets.\820\ 
On the other hand, Xcel Energy Services asserts that the NOPR language 
may be too vague to protect yet-to-be-designed aggregator business 
models and also could inappropriately limit the ability of RTOs/ISOs to 
prevent business models that could threaten grid reliability.\821\
---------------------------------------------------------------------------

    \819\ APPA/NRECA Comments (RM16-23) at 47-48; MISO Transmission 
Owners Comments (RM16-23) at 26 (citing NOPR, 157 FERC ] 61,121 at P 
158); NARUC Comments (RM16-23) at 5 (citing NOPR, 157 FERC ] 61,121 
at P 158); Open Access Technology Comments (RM16-23) at 4.
    \820\ NARUC Comments (RM16-23) at 5 (citing NOPR at P158).
    \821\ Xcel Energy Services Comments (RM16-23) at 29.
---------------------------------------------------------------------------

3. Commission Determination
    352. We add Sec.  35.28(g)(12)(ii)(h) to the Commission's 
regulations and adopt the NOPR proposal to require each RTO/ISO to 
establish market rules that address market participation agreements for 
distributed energy resource aggregators. Specifically, we require each 
RTO/ISO to revise its tariff to include a standard market participation 
agreement that defines the distributed energy resource aggregator's 
role and responsibilities and its relationship with the RTO/ISO and 
that an aggregator is required to execute before it can participate in 
the RTO/ISO markets. We also adopt the NOPR proposal that this market 
participation agreement must include an attestation that the 
distributed energy resource aggregator's aggregation is compliant with 
the tariffs and operating procedures of the distribution utilities and 
the rules and regulations of any relevant electric retail regulatory 
authority. As the Commission explained in the NOPR, these requirements 
are necessary to ensure that a distributed energy resource aggregator 
complies with all relevant

[[Page 67152]]

provisions of the RTO/ISO tariffs, the tariffs and operating procedures 
of the distribution utilities, and the rules and regulations of any 
other relevant electric retail regulatory authority.\822\ These 
requirements are also supported by a general consensus among commenters 
that market participation agreements are necessary and, as expressed by 
some commenters, that the use of market participation agreements could 
help address state and local regulatory concerns.
---------------------------------------------------------------------------

    \822\ See NOPR, 157 FERC ] 61,121 at P 157.
---------------------------------------------------------------------------

    353. Also, as proposed in the NOPR, we require that the market 
participation agreements that the RTOs/ISOs include in their tariffs 
not limit the business models under which distributed energy resource 
aggregators can operate. Allowing distributed energy resource 
aggregators with varying business models to be included in such 
agreements should increase the ability of the distributed energy 
resource aggregators, and resources within such aggregations, to 
participate in the RTO/ISO markets.
    354. With the exception of the attestation requirement and 
prohibition of business model limitations described above, we will not 
specify the exact terms and conditions of the market participation 
agreements. This approach will give the RTOs/ISOs and stakeholders 
flexibility to develop appropriate agreements, and increase the ability 
of the distributed energy resource aggregators, and resources within 
such aggregations, to participate in RTO/ISO markets by better 
tailoring agreements to the operating conditions and needs of those 
markets, and thereby help to enhance competition in the markets. 
Commenters, including the RTOs/ISOs, express a variety of views about 
the specific requirements that should be included in such agreements 
and the potential need for additional agreements, and most commenters 
request flexibility in ability to design these agreements. We believe 
that this flexibility will provide RTOs/ISOs working with their 
stakeholders the ability to design the appropriate agreements for their 
regions and the reasonableness of such proposals will be evaluated in 
each RTO/ISO-specific compliance proceeding.
    355. We also are not persuaded by the suggestion of some commenters 
that we require additional agreements to help facilitate participation 
by distributed energy resource aggregations in RTO/ISO markets, or that 
we require additional entities, such as distribution utilities, 
distribution system operators, or relevant regulatory authorities, to 
be parties to the market participation agreements that we are 
requiring. We believe that the attestation requirement that we adopt in 
this final rule will help ensure distributed energy resource aggregator 
compliance with the tariffs and operating procedures of distribution 
utilities and the rules and regulations of other relevant regulatory 
authorities. RTOs/ISOs and their stakeholders are best equipped to 
determine the nature and composition of, and counterparties to, 
additional agreements. We note that RTOs/ISOs and stakeholders may 
choose to include additional parties or incorporate related agreements 
in the proposed market participation agreements. Moreover, as discussed 
above in Sections IV.H.2 and IV.I, our directive to RTOs/ISOs to 
establish market rules on coordination will address coordination among 
any parties not included as parties to the market participation 
agreements (i.e., the distribution utility and the relevant state and 
local regulators), including the ability of distribution utilities to 
review modifications.\823\
---------------------------------------------------------------------------

    \823\ See supra Section IV.H.1 (Market Rules on Coordination).
---------------------------------------------------------------------------

    356. In response to Xcel Energy Services' assertion that the NOPR 
proposal to prohibit RTOs/ISOs from limiting the business models under 
which distributed energy resource aggregators can operate does not 
protect future business models and may allow other business models that 
threaten grid reliability, we disagree. Instead, it is responsive to 
many commenters' requests to avoid undue Commission specificity with 
respect to the required contents of market participation agreements to 
allow RTOs/ISOs sufficient regional flexibility in developing these 
agreements, including to address any business model challenges and any 
implications for grid reliability. Further, we note that Xcel Energy 
Services does not provide examples or support for its concerns that 
certain business models could threaten grid reliability or future 
business models. We think permitting RTO/ISO prohibitions against 
certain business models in their market participation agreements is not 
necessary given a distributed energy resource aggregator's duty to 
adhere to RTO/ISO market rules, the attestation requirement that we 
require to be included in the market participation agreements, as well 
as the ability of RTOs/ISO to craft any necessary safeguards short of 
business model prohibitions within these agreements. In response to 
PJM's assertion that further clarification about the role of 
distribution utilities and other relevant regulatory authorities is 
needed for PJM to finalize the appropriate market participant agreement 
design, we believe that we have provided such clarification to the 
extent possible, elsewhere within this final rule.\824\
---------------------------------------------------------------------------

    \824\ See supra Section IV.C.3 (Double Counting of Services).
---------------------------------------------------------------------------

K. Compliance

    357. In the NOPR, the Commission proposed to require each RTO/ISO 
to submit a compliance filing within six months of the date the final 
rule in this proceeding is published in the Federal Register. The 
Commission stated that it believed that six months is sufficient for 
each RTO/ISO to develop and submit its compliance filing, but 
recognized that implementation of the reforms proposed in the NOPR 
could take more time due to the changes that may be necessary to each 
RTO's/ISO's modeling and dispatch software. Therefore, the Commission 
proposed to allow 12 months from the date of the compliance filing for 
implementation of the proposed reforms to become effective.
1. Comments
    358. Most RTO/ISO commenters, with the exception of PJM, indicate 
that they would need to modify their existing rules to appropriately 
integrate distributed energy resource aggregations.\825\ PJM states 
that it does not require significant modifications to dispatch 
software, communication platforms, or automation tools, as PJM already 
has developed many tools that can be adapted for distributed energy 
resource aggregations, but that improved coordination with electric 
distribution providers may be a challenge.\826\
---------------------------------------------------------------------------

    \825\ See CAISO Comments (2018 RM18-9) at 4; PJM Comments (2018 
RM18-9) at 8-9.
    \826\ PJM Comments (2018 RM18-9) at 8-9.
---------------------------------------------------------------------------

    359. Eversource recommends that the Commission provide sufficient 
time for proposals to be developed through the stakeholder process on 
this complex issue.\827\ Dominion suggests a pilot project should be 
undertaken first.\828\ Duquesne Light notes that distributed energy 
resource integration should proceed in a ``measured'' way to assess 
operational, reliability, safety and cost implications, noting that 
some new technologies may require observation and testing before being 
deemed capable of providing expanded services such as being deemed a 
capacity resource.\829\ Distributed energy resource developers and 
their advocates, as well as some

[[Page 67153]]

state commissions, believe that the proposal is timely and should not 
be delayed, especially given the rapid pace of technological 
advancement.\830\
---------------------------------------------------------------------------

    \827\ Eversource Comments (2018 RM18-9) at 11.
    \828\ Dominion Comments (RM16-23) at 9.
    \829\ Duquesne Light Company Comments (2018 RM18-9) at 3-4.
    \830\ See, e.g., AWEA Comments (RM16-23) at 4; Delaware 
Commission Comments (RM16-23) at 4; Fresh Energy/Sierra Club/Union 
of Concerned Scientists Comments (RM16-23) at 1.
---------------------------------------------------------------------------

2. Commission Determination
    360. After consideration of the comments submitted, we find that it 
is reasonable to provide RTOs/ISOs with additional time to submit their 
proposed tariff revisions in response to the final rule, given that the 
changes could require significant work on the part of RTOs/ISOs. 
Consequently, after consideration of the comments submitted, we will 
require each RTO/ISO to file the tariff changes needed to implement the 
requirements of this final rule within 270 days of the publication date 
of this final rule in the Federal Register. To the extent that an RTO/
ISO proposes to comply with any or all of the requirements in this 
final rule using its currently effective requirements for distributed 
energy resources, it must demonstrate on compliance that its existing 
approach meets the requirements in this final rule.
    361. Based on comments submitted about the complexity of changes to 
RTO/ISO market rules and systems, we will not require the 
implementation of the tariff provisions within 12 months from the date 
of the compliance filing, as proposed in the NOPR. Instead, we will 
require each RTO/ISO to propose a reasonable implementation date, 
together with adequate support explaining how the proposal is 
appropriately tailored for its region and implements this final rule in 
a timely manner. The Commission will establish on compliance the 
effective date for each RTO's/ISO's compliance filing.

L. Issues Beyond the Scope of This Rulemaking

1. Comments
    362. Some commenters raise issues that were not addressed in the 
NOPR. For instance, commenters raise issues regarding how the deduction 
of behind-the-meter resources from reserve margin requirements affects 
price formation; \831\ impacts of subsidizing resources on functioning 
of RTO/ISO markets; \832\ capacity market mitigation policies for 
distributed energy resources; \833\ impacts on system variability and 
unpredictable operation due to RTO/ISO market participation of 
distributed energy resources; \834\ impacts of distributed energy 
resource aggregations on distribution system operations and 
reliability, and necessary distribution system adjustments; \835\ 
reflecting distribution system benefits associated with distributed 
energy resource aggregations into RTO/ISO market operation; \836\ 
distribution system configuration issues; \837\ need for modernizing 
distribution system equipment, such as the deployment of distributed 
energy resource management systems (DERMS); \838\ privacy and 
cybersecurity concerns; \839\ data collection practices during 
distributed energy resource registration focused on attributes 
available for essential grid services, but not necessarily in support 
of a market product; \840\ differing compensation for short-duration 
resources to account for reduced run times in the capacity market; 
\841\ and clarification that the term electric storage resource as 
defined in Order No. 841 may include an aggregation of distributed 
electric storage resources.\842\
---------------------------------------------------------------------------

    \831\ See, e.g., NRG Comments (RM16-23) at 6.
    \832\ See, e.g., PJM Market Monitor Comments (RM16-23) at 10.
    \833\ See, e.g., NRG Comments (RM16-23) at 6.
    \834\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9) 
at 24; NYISO Indicated Transmission Owners Comments (2018 RM18-9) at 
20; Organization of MISO States Comments (2018 RM18-9) at 10.
    \835\ See, e.g., Advanced Energy Management Comments (2018 RM18-
9) at 24; Vice Chairman Place Comments (2018 RM18-9) at 2-3; EEI 
Comments (2018 RM18-9) at 8-9, 19-21; Pacific Gas & Electric 
Comments (2018 RM18-9) at 20-21, 24-25; PJM Comments (2018 RM18-9) 
at 28; TAPS Comments (2018 RM18-9) at 7-11.
    \836\ See, e.g., Stem Comments (2018 RM18-9) at 11.
    \837\ See, e.g., NRECA Comments (2018 RM18-9) at 8.
    \838\ See, e.g., CAISO Comments (2018 RM18-9) at 7; EPSA 
Comments (2018 RM18-9) at 9-13; Eversource Comments (2018 RM18-9) at 
10-11.
    \839\ See, e.g., California Commission Comments (2018 RM18-9) at 
18; NRECA Comments (2018 RM18-9) at 11.
    \840\ See, e.g., Union of Concerned Scientists Comments (RM16-
23) at 10-11 (citing J. Nelson, Ph.D. and L.M. Wisland, Achieving 50 
Percent Renewable Electricity in California--The Role of Non-Fossil 
Flexibility in a Cleaner Electricity Grid (2015), http://www.ucsusa.org/sites/default/files/attach/2015/08/Achieving-50-Percent-Renewable-Electricity-In-California.pdf).
    \841\ See, e.g., Advanced Energy Economy Comments (RM16-23) at 
42-43.
    \842\ See, e.g., University of Delaware's EV R&D Group Comments 
(2018 RM18-9) at 1.
---------------------------------------------------------------------------

2. Commission Determination
    363. The NOPR did not propose reforms related to these issues 
raised by commenters. Therefore, these issues are outside the scope of 
this proceeding and will not be addressed here.

V. Information Collection Statement

    364. The information collection (IC) contained in this final rule 
is being submitted to the Office of Management and Budget (OMB) for 
review under section 3507(d) of the Paperwork Reduction Act of 
1995.\843\ OMB's regulations,\844\ in turn, require approval of certain 
information collection requirements imposed by agency rules. 
Respondents subject to the filing requirements of a rule will not be 
penalized for failing to respond to the collection of information 
unless the collection of information displays a valid OMB control 
number.
---------------------------------------------------------------------------

    \843\ See 44 U.S.C. 3507(d).
    \844\ 5 CFR pt. 1320 (2020).
---------------------------------------------------------------------------

    365. The Commission has submitted this IC to OMB as a revision of 
FERC-516H. OMB has assigned control number 1902-0303 to FERC-516H. The 
Commission is not asking OMB to change the expiration date of control 
number 1902-0303 (May 31, 2021).

A. Summary of This IC

    Title: FERC-516H (Electric Rate Schedules and Tariff Filings, in 
Docket No. RM18-9-000).
    OMB Control No. 1902-0303.
    Type of Request: Revision of FERC-516H.
    Abstract: This final rule, at 18 CFR 35.28(g)(12), includes two IC 
activities. Each RTO and ISO must have tariff provisions that allow DER 
aggregations to participate directly in the organized wholesale 
electric markets. In addition, each RTO and ISO must update the 
economic dispatch software accordingly.
    Types of Respondent: RTOs and ISOs.
    Frequency of Collection: One time.
    Estimate of Annual Burden \845\: The Commission estimates the total 
annual burden and cost \846\ for this IC in the following table:
---------------------------------------------------------------------------

    \845\ ``Burden'' is the total time, effort, or financial 
resources expended by persons to generate, maintain, retain, or 
disclose or provide information to or for a Federal agency. For 
further explanation of what is included in the information 
collection burden, refer to Title 5 Code of Federal Regulations 
1320.3.
    \846\ Commission staff believes that industry is similarly 
situated in terms of cost for wages and benefits. Therefore, we are 
using the FERC 2020 average cost (for wages plus benefits) for one 
FERC full-time equivalent (FTE) of $172,329 ($83.00 per hour).
---------------------------------------------------------------------------

    In response to comments on the NOPR, we have increased the 
estimated burden and cost for the requirements of the final rule from 
those originally proposed in the NOPR. The estimated burden and cost 
for the requirements contained in this final rule follow.

[[Page 67154]]



                                    Additions to FERC-516H, as Implemented in the Final Rule in Docket No. RM18-9-000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                    A                           B            C            D                     E                            F                    G
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Avg. number
                                                             of         Total
            Types of response               Number of    responses    number of    Average burden (hours) and    Total annual burden hours     Cost per
                                           respondents      per       responses         cost per response          and total annual cost      respondent
                                                         respondent
                                                                       (col. B x                                (col. D x..................    (col. F /
                                                                         col. C)                                col. E)....................      col. B)
--------------------------------------------------------------------------------------------------------------------------------------------------------
One-Time Tariff Filing Due to RM18-9                 6            1            6  1,529 hrs; $126,907.........  9,174 hrs; $761,442........     $126,907
 Final Rule.
Software Update..........................            6            1            6  1,500 hrs; $124,500.........  9,000 hrs; $747,000........      124,500
                                          --------------------------------------------------------------------------------------------------------------
    Total Burden.........................  ...........  ...........  ...........  3029 hrs; $251,407..........  18,174 hrs; $1,508,442.....      251,407
--------------------------------------------------------------------------------------------------------------------------------------------------------

B. Discussion

    366. The Commission implements this final rule and FERC-516H to 
remove barriers to the participation of distributed energy resource 
aggregations in the capacity, energy, and ancillary service markets 
operated by RTOs and ISOs. This IC in this final rule conforms to the 
Commission's need for efficient information collection, communication, 
and management within the energy industry.
    367. In this final rule, we are requiring each RTO/ISO to propose 
revisions to its tariff that (1) allow distributed energy resource 
aggregations to participate directly in RTO/ISO markets and establish 
distributed energy resource aggregators as a type of market 
participant; (2) allow distributed energy resource aggregators to 
register distributed energy resource aggregations under one or more 
participation models that accommodate the physical and operational 
characteristics of the distributed energy resource aggregations; (3) 
establish a minimum size requirement for distributed energy resource 
aggregations that does not exceed 100 kW; (4) address locational 
requirements for distributed energy resource aggregations; (5) address 
distribution factors and bidding parameters for distributed energy 
resource aggregations; (6) address information and data requirements 
for distributed energy resource aggregations; (7) address metering and 
telemetry requirements for distributed energy resource aggregations; 
(8) address coordination between the RTO/ISO, the distributed energy 
resource aggregator, the distribution utility, and the relevant 
electric retail regulatory authorities; (9) address modification to the 
list of resources in a distributed energy resource aggregation; and 
(10) address market participation agreements for distributed energy 
resource aggregators.
    368. Interested persons may obtain information on the reporting 
requirements by contacting Ellen Brown, Office of the Executive 
Director, Email: [email protected]; Phone: (202) 502-8663.

VI. Environmental Analysis

    369. 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.\847\ We 
conclude that neither an Environmental Assessment nor an Environmental 
Impact Statement is required for this final rule under Sec.  
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.\848\
---------------------------------------------------------------------------

    \847\ Regulations Implementing the Nat'l Envt'l Policy Act of 
1969, Order No. 486, 52 FR 47,897 (Dec. 17, 1987), FERC Stats. & 
Regs., ] 30,783 (1987) (cross-referenced at 41 FERC ] 61,284).
    \848\ 18 CFR 380.4(a)(15) (2020).
---------------------------------------------------------------------------

VII. Regulatory Flexibility Act Certification

    370. The Regulatory Flexibility Act of 1980 (RFA) \849\ generally 
requires a description and analysis of rules that will have a 
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 SBA Office of Size Standards develops the numerical definition of a 
small business.\850\ The small business size standards are provided in 
13 CFR 121.201.
---------------------------------------------------------------------------

    \849\ 5 U.S.C. 601-12.
    \850\ 13 CFR 121.101 (2020).
---------------------------------------------------------------------------

    371. Under the SBA classification, the six RTOs/ISOs would be 
considered electric bulk power transmission and control, for which the 
small business size threshold is 500 or fewer employees.\851\ Because 
each RTO/ISO has more than 500 employees, none are considered small 
entities.
---------------------------------------------------------------------------

    \851\ 13 CFR 121.201 (Sector 22, Utilities).
---------------------------------------------------------------------------

    372. 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.'' \852\
---------------------------------------------------------------------------

    \852\ 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 
SBA'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).
---------------------------------------------------------------------------

    373. The estimated cost related to this final rule includes: (a) 
Preparing and making a one-time tariff filing ($126,907 per entity, as 
detailed in the Information Collection section above), and (b) updating 
the economic dispatch software. We estimate the one-time software work 
will take 1,500 hours with an approximate cost of $124,500 per entity. 
Therefore, the total estimated one-time cost for the tariff filing and 
software work is $251,407 per entity (or $126,907 + $124,500); the 
total estimated one-time industry cost is $1,508,442.
    374. As a result, we certify that the reforms required by this 
final rule would not have a significant economic impact on a 
substantial number of small entities, and therefore no regulatory 
flexibility analysis is required.

VIII. Document Availability

    375. In addition to publishing the full text of this document in 
the Federal

[[Page 67155]]

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). At this time, 
the Commission has suspended access to the Commission's Public 
Reference Room due to the President's March 13, 2020 proclamation 
declaring a National Emergency concerning the Novel Coronavirus Disease 
(COVID-19).
    376. From FERC's Home Page on the internet, this information is 
available on eLibrary. The full text of this document is available on 
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or 
downloading. To access this document in eLibrary, type the docket 
number excluding the last three digits of this document in the docket 
number field.
    377. User assistance is available for eLibrary and the FERC's 
website during normal business hours from FERC 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].

IX. Effective Date and Congressional Notification

    378. These regulations are effective December 21, 2020. The 
Commission has determined, with the concurrence of the Administrator of 
the Office of Information and Regulatory Affairs of OMB, that this rule 
is not a ``major rule'' as defined in section 351 of the Small Business 
Regulatory Enforcement Fairness Act of 1996.

List of Subjects in 18 CFR Part 35

    Electric power rates, Electric utilities.

    By the Commission. Commissioner Danly is dissenting with a 
separate statement attached.

    Issued: September 17, 2020.
Nathaniel J. Davis, Sr.,
Deputy Secretary.

    In consideration of the foregoing, the Commission amends part 35, 
chapter I, title 18, Code of Federal Regulations, as follows:

PART 35--FILING OF RATE SCHEDULES AND TARIFFS

0
1. The authority citation for part 35 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 paragraphs (b)(10) and (11) and (g)(12) 
as follows.


Sec.  35.28   Non-discriminatory open access transmission tariff.

* * * * *
    (b) * * *
    (10) Distributed energy resource as used in this section means any 
resource 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/or 
ancillary service markets of the regional transmission organizations 
and/or independent system operators.
* * * * *
    (g) * * *
    (12) 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. Additionally, each regional transmission organization and 
independent system operator must allow distributed energy resource 
aggregators to register distributed energy resource aggregations under 
one or more participation models in the regional transmission 
operator's or the independent system operator's tariff that accommodate 
the physical and operational characteristics of the distributed energy 
resource aggregation.
    (ii) Each regional transmission organization and independent system 
operator, to accommodate the participation of distributed energy 
resource aggregations, must establish market rules that address:
    (A) Eligibility to participate in the independent system operator 
or regional transmission organization 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, the distribution utility, and the relevant electric retail 
regulatory authorities; and
    (H) Market participation agreements for distributed energy resource 
aggregators.
    (iii) Each regional transmission organization and independent 
system operator must establish a minimum size requirement for 
distributed energy resource aggregations that does not exceed 100 kW.
    (iv) Each regional transmission organization and independent system 
operator must accept bids from a distributed energy resource aggregator 
if its aggregation includes distributed energy resources that are 
customers of utilities that distributed more than 4 million megawatt-
hours in the previous fiscal year. An independent system operator or 
regional transmission organization must not accept bids from a 
distributed energy resource aggregator if its aggregation includes 
distributed energy resources that are customers of utilities that 
distributed 4 million megawatt-hours or less in the previous fiscal 
year, unless the relevant electric retail regulatory authority permits 
such customers to be bid into RTO/ISO markets by a distributed energy 
resource aggregator.

    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 all 
commenters in this docket.

------------------------------------------------------------------------
         Abbreviation                    Commenter (full name)
------------------------------------------------------------------------
Advanced Energy Buyers.......  Advanced Energy Buyers.
Advanced Energy Economy......  Advanced Energy Economy.

[[Page 67156]]

 
Advanced Energy Management...  Advanced Energy Management Alliance.
Advanced Microgrid Solutions.  Advanced Microgrid Solutions, Inc.
Advanced Rail Energy Storage.  Advanced Rail Energy Storage, LLC.
AES Companies................  AES Companies.
Alevo........................  Alevo USA Inc.
Altametric...................  Altametric LLC.
Amanda Drabek................  Amanda Drabek, Pantsuit Nation of East
                                Texas.
American Petroleum Institute.  American Petroleum Institute.
Vice Chairman Place..........  Vice Chairman Andrew Place of the
                                Pennsylvania Public Utilities
                                Commission.
APPA.........................  American Public Power Association.
APPA/NRECA...................  American Public Power Association and
                                National Rural Electric Cooperative
                                Association.
Arkansas Commission..........  Arkansas Public Service Commission.
Avangrid.....................  AVANGRID, Inc.
AWEA.........................  American Wind Energy Association.
Beacon Power.................  Beacon Power, LLC.
Benjamin Kingston............  Benjamin D. Kingston.
Bonneville...................  Bonneville Power Administration.
Brookfield Renewable.........  Brookfield Renewable.
CAISO........................  California Independent System Operator
                                Corporation.
California Commission........  Public Utilities Commission of the State
                                of California.
California Energy Storage      California Energy Storage Alliance.
 Alliance.
California Municipals........  California Municipal Utilities
                                Association.
Calpine......................  Calpine.
Center for Biological          Center for Biological Diversity.
 Diversity.
City of New York.............  City of New York.
Connecticut Department of      Connecticut Department of Energy and
 Energy.                        Environmental Protection.
Connecticut State Entities...  Bureau of Energy and Technology Policy of
                                the Connecticut Department of Energy and
                                Environmental Protection and the
                                Connecticut Public Utilities Regulatory
                                Authority.
Delaware Commission..........  Delaware Public Service Commission.
DER/Storage Developers.......  DER and Storage Developers.
Direct Energy................  Direct Energy.
Dominion.....................  Dominion Resources Services, Inc.
DTE Electric/Consumers Energy  DTE Electric Company and Consumers Energy
                                Company.
Duke Energy..................  Duke Energy Corporation.
E4TheFuture..................  E4TheFuture.
Eagle Crest..................  Eagle Crest Energy Company.
EEI..........................  Edison Electric Institute.
Efficient Holdings...........  Efficient Holdings, LLC.
ELCON........................  Electricity Consumers Resource Council.
Energy Storage Association...  Energy Storage Association.
EPRI.........................  Electric Power Research Institute.
EPSA.........................  Electric Power Supply Association.
EPSA/PJM Power Providers.....  Electric Power Supply Association and PJM
                                Power Providers Group.
Eversource...................  Eversource Energy Service Company.
Exelon.......................  Exelon Corporation.
FirstEnergy..................  FirstEnergy.
FirstLight...................  FirstLight Power Resources, Inc.
Fluidic......................  Fluidic Energy.
Fresh Energy/Sierra Club/      Fresh Energy, the Sierra Club, and the
 Union of Concerned             Union of Concerned Scientists.
 Scientists.
Genbright....................  Genbright LLC.
Global Cold Chain Alliance...  Global Cold Chain Alliance.
GridWise.....................  GridWise Alliance.
Guannan He...................  Guannan He.
Harvard Environmental Policy   Harvard Environmental Policy Initiative.
 Initiative.
Icetec.......................  Icetec.
Imperial Irrigation District.  Imperial Irrigation District.
Independent Energy Producers   Independent Energy Producers Association.
 Association.
Indiana Commission...........  Indiana Utility Regulatory Commission.
Institute for Policy           Institute for Policy Integrity.
 Integrity.
IPKeys/Motorola..............  IPKeys Technologies and Motorola
                                Solutions.
IRC..........................  ISO-RTO Council.
ISO-NE.......................  ISO New England Inc.
Kansas Commission............  Kansas Corporation Commission.
Kathy Seal...................  Kathy Seal.
Leadership Group.............  Leadership Group.
Liza White...................  Liza C. White.
Lorenzo Kristov..............  Lorenzo Kristov.
Lyla Fadali..................  Lyla Fadali.
Magnum.......................  Magnum CAES, LLC.
Maryland and New Jersey        Maryland Public Service Commission and
 Commissions.                   New Jersey Board of Public Utilities.
Massachusetts Commission.....  Massachusetts Department of Public
                                Utilities.
Massachusetts State Entities.  Massachusetts Department of Public
                                Utilities and Massachusetts Department
                                of Energy Resources.

[[Page 67157]]

 
Massachusetts Municipal        Massachusetts Municipal Wholesale
 Electric.                      Electric Company.
Matthew d'Alessio............  Matthew d'Alessio.
Mensah.......................  AF Mensah Inc.
Microgrid Resources Coalition  Microgrid Resources Coalition.
Microsoft....................  Microsoft Corporation.
Minnesota Energy Storage       Minnesota Energy Storage Alliance.
 Alliance.
MISO.........................  Midcontinent Independent System Operator,
                                Inc.
MISO Transmission Owners.....  MISO Transmission Owners.
Mosaic Power.................  Mosaic Power, LLC.
NARUC........................  National Association of Regulatory
                                Utility Commissioners.
National Hydropower            National Hydropower Association.
 Association.
NEPOOL.......................  New England Power Pool.
NERC.........................  North American Electric Reliability
                                Corporation.
NESCOE.......................  New England States Committee on
                                Electricity.
New Jersey Board.............  New Jersey Board of Public Utilities.
New York Commission..........  New York Public Service Commission.
New York State Entities......  New York Public Service Commission and
                                New York State Energy Research and
                                Development Authority.
New York Utility Intervention  Utility Intervention Unit of the New York
 Unit.                          State Department of State.
NextEra......................  NextEra Energy Resources, LLC.
NRECA........................  National Rural Electric Cooperative
                                Association.
NRG..........................  NRG Energy, Inc.
NYISO........................  New York Independent System Operator,
                                Inc.
NYISO Indicated Transmission   Central Hudson Gas & Electric
 Owners.                        Corporation, Consolidated Edison Company
                                of New York, Inc., National Grid, New
                                York Power Authority, Orange and
                                Rockland Utilities, Inc., and Power.
NYPA.........................  New York Power Authority.
Ohio Commission..............  Public Utilities Commission of Ohio.
Open Access Technology.......  Open Access Technology International,
                                Inc.
OpenADR......................  OpenADR Alliance.
Organization of MISO States..  Organization of MISO States.
Pacific Gas & Electric.......  Pacific Gas and Electric Company.
PJM..........................  PJM Interconnection, L.L.C.
PJM Market Monitor...........  Monitoring Analytics, LLC.
PJM Utilities Coalition......  American Electric Power Service
                                Corporation, East Kentucky Power
                                Cooperative, Inc., and FirstEnergy
                                Service Company, on behalf of its
                                affiliates.
Power Applications...........  Power Applications and Research Systems,
                                Inc.
Protect Sudbury..............  Protect Sudbury.
Public Interest Organizations  Clean Wisconsin, Environmental Defense
                                Fund, Environmental Law & Policy Center,
                                Fresh Energy, GridLab, Natural Resources
                                Defense Council, Northwest Energy
                                Coalition, Sierra Club, Southern
                                Environmental Law Center, Union of
                                Concerned Scientists, Vote Solar,
                                Western Grid Group.
R Street Institute...........  R Street Institute.
RES Americas.................  Renewable Energy Systems Americas Inc.
Research Scientists..........  Drs. Audun Botterud, Apurba Sakti, and
                                Francis O'Sullivan.
Robert Borlick...............  Robert L. Borlick.
San Diego Gas & Electric.....  San Diego Gas & Electric.
San Diego Water..............  San Diego County Water Authority.
Schulte Associates...........  Schulte Associates LLC.
SEIA.........................  Solar Energy Industries Association.
Silicon Valley Leadership      Silicon Valley Leadership Group.
 Group.
Six Cities...................  Cities of Anaheim, Azusa, Banning,
                                Colton, Pasadena, and Riverside,
                                California.
SoCal Edison.................  Southern California Edison Company.
Southern Companies...........  Southern Company Services, Inc.
SPP..........................  Southwest Power Pool, Inc.
Starwood Energy..............  Starwood Energy Group Global, L.L.C.
Stem.........................  Stem, Inc.
Sunrun.......................  Sunrun Inc.
TAPS.........................  Transmission Access Policy Study Group.
TechNet......................  TechNet.
TeMix........................  TeMix Inc.
Tesla........................  Tesla, Inc.
Tesla/SolarCity..............  Tesla, Inc. and SolarCity Corporation.
Trans Bay....................  Trans Bay Cable LLC.
Union of Concerned Scientists  Union of Concerned Scientists.
University of Delaware's EV    EV R&D Group, University of Delaware.
 R&D Group.
UofD/Mensah..................  EV R&D Group, University of Delaware and
                                AF Mensah Inc.
Viking Cold Solutions........  Viking Cold Solutions.
Xcel Energy Services.........  Xcel Energy Services Inc.
------------------------------------------------------------------------


[[Page 67158]]


     United States of America--Federal Energy Regulatory Commission
------------------------------------------------------------------------
                                                       Docket No.
------------------------------------------------------------------------
Participation of Distributed Energy Resource    RM18-9-000.
 Aggregations in Markets Operated by Regional
 Transmission Organizations and Independent
 System Operators.
------------------------------------------------------------------------

(Issued September 17, 2020)
DANLY, Commissioner, dissenting:

    1. The Commission today approves a rule requiring Regional 
Transmission Organizations (RTO) and Independent System Operators (ISO) 
to revise their tariffs to accommodate distributed energy resource 
(DER) aggregators. I dissent because, regardless of the benefits 
promised by DERs, the Commission goes too far in declaring the extent 
of its own jurisdiction and because the Commission should not encourage 
resource development by fiat.
    2. The Federal Power Act (FPA) delineates the respective roles of 
the Commission and the States, assigning powers in accordance with each 
sovereigns' core interests.\853\ The federal government is tasked with 
ensuring just and reasonable wholesale rates, prohibiting state action 
that would either encumber interstate commerce or harm other states. 
The States retain authority over the most local of concerns: Choice of 
generation, siting of transmission lines, and the entirety of retail 
sales and distribution. Each sovereign has a sphere of authority, and 
in each sphere, the relevant sovereign's powers are supreme.
---------------------------------------------------------------------------

    \853\ See 16 U.S.C. 824 (2018).
---------------------------------------------------------------------------

    3. Respect for the States' role in our federal system and under the 
FPA would counsel against even modest, non-essential declarations of 
our authority, if done at the States' expense. Why, when issuing a 
directive to the RTOs and ISOs (undoubtedly Commission-jurisdictional 
entities), must we also declare that ``retail regulatory authorit[ies] 
cannot broadly prohibit the participation in RTO/ISO markets of all 
distributed energy resources or of all distributed energy resource 
aggregators''? \854\ Perhaps the States should not or cannot prohibit 
such participation.\855\ But it is not for us to make sweeping 
declarations regarding the States' jurisdiction over distributed 
generation. Rather, the Commission's jurisdiction over wholesale rates 
would ideally be vindicated, were it to collide with a state 
prohibition, through a challenge to a specific enactment or regulation 
by making arguments ``armed with principles of federal preemption and 
the Supremacy Clause.'' \856\
---------------------------------------------------------------------------

    \854\ Final Rule, Order No. 2222, 172 FERC ] 61,247, at P 58 
(2020).
    \855\ I acknowledge the legal authority upon which the majority 
bases its exercise of jurisdiction. Compare FERC v. Elec. Power 
Supply Ass'n, 136 S. Ct. 760 (2016), with Nat'l Ass'n of Regulatory 
Util. Comm'rs v. FERC, 964 F.3d 1177 (D.C. Cir. 2020). The concern I 
express is prudential, not legal.
    \856\ Midwest ISO Transmission Owners v. FERC, 373 F.3d 1361, 
1372 (D.C. Cir. 2004).
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    4. Apart from the Commission's injudicious jurisdictional 
declarations, today's order stands as an imprudent exercise of the 
Commission's power. Why promulgate a rule at all? Reluctance to govern 
by fiat is counseled particularly in a case like this in which the 
generation resources the majority seeks to promote, by their very 
nature, inevitably will affect the distribution system, responsibility 
for which is assigned, with no ambiguity, to the States. We should 
allow the RTOs and ISOs (or the States or the utilities) to develop 
their own DER programs in the first instance. If the promises of DERs 
are what they purport to be, the markets will encourage their 
development. And if those programs result in wholesale sales in 
interstate commerce, then the question of the Commission's jurisdiction 
will be ripe. Commission directives are unnecessary to encourage the 
development of economically-viable resources. I have greater faith in 
the power of market forces and in the discernment of the utilities and 
the States.
    For these reasons, I respectfully dissent.

James P. Danly,

Commissioner.

[FR Doc. 2020-20973 Filed 10-20-20; 8:45 am]
BILLING CODE 6717-01-P