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FERC Release NOI on Ancillary Services and Electric Storage

On June 16, 2011, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) released a Notice of Inquiry (“NOI”) asking for comments on how to develop competition in ancillary markets and how to expand the use of electric storage technology. The NOI arises out of a June 2010 Commission Staff initiated Notice of Request for Comment (“RFC”) on alternatives for categorizing storage devices and whether the so-called “Avista restriction” poses an undue burden to the development of ancillary markets. The Avista restriction prevents third-party market-based sales of ancillary services to transmission providers, without a market study first showing a lack of market power. 

FERC stated, based on the 2010 RFC, it is apparent that there is a growing need for ancillary services to fully support grid functions, and some regions of the country do not show the needed development of their ancillary services markets.  Also, the Commission has recently received a waiver request in order to allow market-based rate sales of ancillary services to utilities seeking to meet tariff obligations.  The Commission specifically seeks comment on whether FERC should revise the Avista restriction, and FERC would like to know how a change in policy would be balanced with the requirement of ensuring just and reasonable rates.  In addition, the Commission wants to know whether various cost-based compensation methods for addressing frequency regulation outside of organized markets could be adjusted to address issues of speed and accuracy listed in the recent Notice of Proposed Rulemaking on frequency regulation in the organized wholesale power markets. 

With regard to electric storage technology, the Commission would like to know whether it is necessary to revise current accounting and reporting requirements.  Currently there is no accounting or reporting requirements specific to storage technologies, but there has been a growing interest in electric storage technologies.  The 2010 RFC said that storage facilities are capable of providing a variety of services, including unbundled transmission service increasing the value of wholesale generation output, and the storage facilities could provide ancillary services.

Comments on the NOI are due sixty days after publication in the Federal Register.

A copy of the NOI is available here.