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On March 18, 2021, the Federal Energy Regulatory Commission (“FERC”) took two actions that affect local control over Distributed Energy Resource (“DER”) aggregations.  First, FERC issued an order on rehearing of its final rule regarding the participation DER aggregations in Regional Transmission Organization (“RTO”) and Independent System Operator (“ISO”) markets (“Order 2222-A”).  In Order 2222-A, FERC sets aside its prior finding in Order 2222 that demand response (“DR”) resources’ participation in DER aggregations could be prohibited by   Relevant Electric Retail Regulatory Authorities’ (“RERRAs”) (e.g., state, municipal, public-power, and cooperative entities).  Instead, Order 2222-A provides the Order 719 “opt-out” will not apply to DR resources participating in DER aggregations comprised of different types of resources (i.e., “heterogeneous” DER aggregations), though Order 719’s” opt-out” will continue to apply to aggregations comprised solely of resources that participate as DR resources.  Further, FERC clarifies that the Order 719 “opt-in” will continue to apply to all DER aggregations, regardless of whether or not they include DR.

Second, FERC issued a Notice of Inquiry (“NOI”) seeking comment on whether to revise the Order 719 opt-out applicable to DR, in light of legal, policy and technological developments since FERC issued Order 719, and subsequent rehearing orders, in 2008 and 2009.  The Order 719 opt-out (codified at 18 CFR § 35.28(g)(1)(iii)) prevents ISOs and RTOs from accepting bids from DR aggregators if the utility distributed over 4 million MWh in the prior fiscal year and the RERRA prohibits the DR to be bid into the markets by a DER aggregator.  FERC is not proposing changes to the small utility opt-in, which prevents ISOs and RTOs from accepting bids from DR aggregators if the utility distributed 4 million MWh or less in the prior fiscal year unless the RERRA affirmatively permits the DR to be bid into the markets by a DER aggregator.

In Order 2222-A, FERC also clarifies it will not exercise its jurisdiction over the interconnections of DERs, including interconnection of Qualifying Facilities, to distribution facilities for the purpose of participating in RTO/ISO markets exclusively as part of a DER aggregation.  FERC clarifies additional aspects of Order 2222 related to double counting of services provided by DERs, as well as to the distribution utility’s review of DER aggregation modifications.

In separate opinions, Commissioners Danly and Christie dissent from Order 2222-A, asserting the RERRAs are better positioned to exercise authority over distribution systems and retail sales and posited Order 2222-A will deter membership in and formation of RTOs.  Commissioner Christie similarly dissents from FERC’s NOI on the Order 719 DR opt-out as an infringement on states’ public policies, including 18 states who already opted out of DR aggregation programs.  Commissioner Danly, while concurring in the NOI’s issuance as a measure within FERC’s discretion, expressed opposition to eliminating the states’ opt-out under Order 719—encouraging commenters to address whether wholesale DR aggregation programs are providing reliability benefits commensurate with their costs and are contributing to reliability during critical events.

FERC’s Order 2222-A (174 ¶ 61,197 (2021)) is available here in Docket No. RM18-9.

FERC’s NOI (174 ¶ 61,198 (2021)) is available here in Docket No. RM21-14.

For further information, please contact: Peter J. Scanlon, Bhaveeta K. Mody, Lauren M. Perkins, and Sylwia Dakowicz