State regulators await FERC’s answer on storage rule

Source: Rod Kuckro, E&E News reporter • Posted: Tuesday, February 12, 2019

State regulators and public power utilities have been waiting almost a year for an answer from federal regulators on a request for rehearing of a 2018 order expanding the use of energy storage in wholesale electricity markets.

The frustration with the Federal Energy Regulatory Commission came to the forefront yesterday at the winter meeting of the National Association of Regulatory Utility Commissioners (NARUC) during a panel discussion of Order 841. The failure of FERC to respond to the industry in this instance also is another example of how the agency has been unable to address a host of important issues under Chairman Neil Chatterjee at a time when the agency has two Republican commissioners and two Democrats.

The March 2018 requests from NARUC, the National Rural Electric Cooperative Association (NRECA) and the American Public Power Association share a long-standing concern about how federal actions can intrude on state jurisdiction.

FERC in February of last year under the leadership of Chairman Kevin McIntyre unanimously approved Order 841, which set rules encouraging the participation of energy storage in the markets (Greenwire, Feb. 15).

When FERC approved the rule, McIntyre said his agency’s job is “not to pick winners and losers” among different types of resources, but to let the market decide.

The rule promoted equal competition from the emerging generation of battery technologies with power generation from coal, nuclear, natural gas, wind and solar. A secondary aim was to help support the resilience of the grid.

A study by the consulting firm Brattle Group last year predicted that the FERC rule could spur development of about 50,000 megawatts of energy storage.

The rule also expressly prohibited states from deciding “whether electric storage resources in their state located behind a retail meter or on the distribution system are permitted to participate” in wholesale power markets.

It was one of the last times the commission on a 5-0 vote moved ahead on a major issue facing the electricity sector. The rule also had broad support from environmental and clean energy interests.

The order “is not the be-all and end-all, because we’re operating without it now,” said Randy Elliott, regulatory counsel for NRECA.

“FERC ought to hit the brakes here and go slow, because there can be some real unintended consequences,” Elliott said, urging the continued model of “cooperative federalism” that has governed previous FERC-state issues.

“The bad outcome would be a federal rule that tramples on state and local authority,” he said.

Operators of the nation’s power markets last week gave FERC their plans on how they will comply with Order 841, which is slated to take effect in December after being proposed in November of 2016.

NARUC, NRECA and APPA still believe there is time this year for FERC to be responsive. FERC officials could not be reached for comment.

Jennifer Murphy, director of energy policy for NARUC, said state regulators support energy storage and related distributed energy resources that may be behind the meter of a customer as long as states “retain the authority for resources on the distribution grid to participate.”

States have jurisdiction over the local intrastate electrical distribution system, while FERC has authority over the larger transmission system lines that can span multiple states.

But a rehearing by FERC could clarify “that states retain the authority over how resources behind the meter or on the distribution system are allowed to participate in the wholesale markets,” Murphy said.

“We’re still waiting to hear from FERC,” Murphy said.

Jeff Dennis, general counsel for Advanced Energy Economy, a business group that supports Order 841, said states have tools that allow them to continue to manage energy storage, although he noted that states are at different stages of action.

He suggested that states “really grab the mantle of storage participation and design retail programs that try and capture all the benefits of storage.”

NRECA’s Elliott said he still favors “a wait-and-see to see what the incremental benefits will be from wholesale participation.”

“The real rub or the risk is behind the meter distribution-level storage,” Elliott said. Electric cooperatives “are natural aggregators” balancing resources and demand to meet consumer needs,” he said. “That’s our basic business model.”

“A federal rule from FERC that allows electric storage resources to participate in the wholesale market independently of the rest of the co-op would be inimical to that model. It would undermine the fundamental purpose of the co-op to aggregate,” Elliott said.