On October 17, 2019, FERC issued two separate orders accepting in part PJM Interconnection L.L.C.’s (“PJM”), and Southwest Power Pool, Inc.’s (“SPP”) proposals to comply with FERC’s orders addressing energy storage resources’ (“ESR”) participation in Regional Transmission Organization (“RTO”)-operated markets, subject to further compliance (see February 20, 2018 edition of the WER; April 10, 2019 edition of the WER; and May 22, 2019 edition of the WER for more background and context on Order No. 841). SPP’s and PJM’s ESR participation proposals are the first to be accepted by FERC, which found that the RTOs generally complied with Order No. 841 by enabling ESRs to provide all services they are technically capable of providing, to be compensated for those services in the same manner as other resources, and by recognizing ESRs’ unique physical and operational characteristics. However, FERC initiated further proceedings to require both RTOs to include the minimum run-time requirements applicable to ESRs and other generation resources in their Tariffs, and initiated an investigation into whether PJM’s application of minimum run-time requirements to ESRs participating in its capacity markets is just and reasonable. FERC also directed SPP and PJM to take further action, requiring both RTOs to submit compliance filings within 60 days that, as one example, address the basic metering and accounting practices applicable to ESRs. Commissioner McNamee issued separate opinions concurring with both orders.
With respect to minimum run-time requirements, FERC accepted SPP’s proposal to permit Load Serving Entities to designate ESRs to satisfy their Resource Adequacy (“RA”) obligations, so long as those ESRs meet the 4-hour minimum run-time requirement applicable to all resources used to satisfy RA obligations. Similarly, FERC accepted PJM’s proposal to require ESRs participating in its capacity markets to adhere to a 10-hour minimum run-time requirement, and to permit ESRs to de-rate their capacity to comply with this requirement. However, FERC noted that the minimum-run time criteria applicable to ESRs and other resources were specified only in SPP’s planning criteria and in PJM’s business practice manuals—not in either RTOs’ Tariff. FERC therefore instituted proceedings under Federal Power Act section 206 to direct both SPP and PJM to include the minimum run-time requirements applicable to ESRs and other resources in their Tariffs.
FERC also established paper hearing procedures to investigate whether PJM’s application of minimum-run time requirements to ESRs participating in its capacity markets are just and reasonable. FERC pointed out that PJM applied a 10-hour minimum run-time requirement to these ESRs, but only a 4-hour minimum-run time requirement to intermittent resources participating in its capacity markets. FERC also referenced concerns that the 10-hour requirement does not reflect ESRs’ physical and operational characteristics, and pointed to other PJM Tariff provisions that differ in the treatment of ESRs and other generation resources participating in the capacity markets.
In addition, FERC directed both SPP and PJM to revise their Tariffs to include: a basic description of the metering and accounting practices each RTO will use to facilitate the sale of energy to an ESR, which will then re-sell that energy back into RTO markets at the wholesale locational marginal price; citations to the specific agreements, manuals and other documents where market participants can locate more details on those metering and accounting practices; and an explanation of how ESRs can participate in both wholesale and retail markets.
FERC rejected other aspects of the RTOs’ compliance proposals, including several of SPP’s proposed Tariff revisions that would have permitted aggregation of ESRs and other resources. FERC explained that these revisions were outside the scope of Order No. 841, which did not address aggregation. As another example, FERC found that PJM’s proposed Tariff revisions failed to fully comply with Order No. 841 by limiting ESRs’ bidding parameters to include only the resource’s State of Charge, Maximum State of Charge, and Minimum State of Charge. In order to properly account for all of an ESR’s physical and operational characteristics, FERC directed PJM to add the Maximum and Minimum Charge Limit, Minimum and Maximum Discharge Limit, and Charge and Discharge Ramp Rate to ESRs’ bidding parameters.
Commissioner McNamee penned a concurring opinion to both orders in which he agreed that SPP and PJM complied in part with Order No. 841, but expressed his concern that FERC exceeded its statutory authority by asserting jurisdiction over ESRs connecting to the distribution system or behind-the-meter. Commissioner McNamee also noted that Order Nos. 841 and 841-A are pending judicial review.
Although FERC declined to provide RTOs additional time for implementation in Order Nos. 841 and 841-A, FERC accepted SPP’s request to delay implementation of its ESR participation model to account for required software updates, setting an effective date nine months from the date of its order (July 17, 2020). PJM’s Tariff revisions will go into effect on December 3, 2019.