Overview
FERC, not surprisingly, has asserted jurisdiction over the “inbound” wholesale distribution service (WDS) required by distributed storage resources that participate in FERC-jurisdictional energy and ancillary service markets (Wholesale Storage DERs). Although FERC has long asserted jurisdiction over WDS, it addressed charging Wholesale Storage DERs several years ago in a case involving Commonwealth Edison and Energy Vault. There, FERC explained that ComEd may recover the costs of the use of its distribution system by Energy Vault, provided such recovery is just and reasonable. That said, as Wholesale Storage DERs increase their market penetration, issues arise as to how distribution owners (DOs) should set rates for WDS and differentiate between wholesale and retail energy delivered to Wholesale Storage DERs and co-located retail load. There are two primary challenges relating to developing and assessing WDS rates for Wholesale Storage DERs – 1) FERC’s general policy preferring that WDS rates be direct-assignment rates rather than rolled-in rates; and 2) separating energy delivered to co-located retail load (including station power load) from the energy delivered that will be resold into the wholesale market. (“Outbound” WDS is a different issue as several DOs have made the decision not to charge for such service at all, outside of interconnection-related upgrades.)
FERC generally prefers that rates for WDS be customer-specific, reflecting the costs of the actual facilities used by DERs or other wholesale load. That is, rates for WDS are supposed to be determined on a direct assignment basis; the ComEd/Energy Vault case also reflects this policy. At some point, however, Wholesale Storage DERs’ penetration may increase to a level where the ratemaking task becomes overwhelming and non-customer-specific rates for charging Wholesale Storage DERs will be necessary to relieve that ratemaking and regulatory burden. FERC has permitted rolled-in pricing for WDS rates, but the (relatively small) utility in that case, argued that its wholesale distribution facilities operate as a single, integrated system consisting of mostly networked and looped facilities rather than a collection of radial segments off the transmission system, for which the specific costs can not be easily assigned to particular customers. There is some likelihood FERC will allow additional utilities to adopt rolled-in pricing approaches. One option for DOs is to ask FERC to use the state-approved retail distribution rate, but this approach is difficult to implement if a DO is located in a state that has not fully unbundled its retail rates, such that charges for other services are embedded in their retail distribution rates. It does not appear that many DOs have had to deal with a level of Wholesale Storage DERs penetration yet. That said, direct assignment rates likely will become unwieldy for some DOs in the relatively near future.
The second challenge facing DOs is the fact that Wholesale Storage DERs may be located behind the same retail meter as retail load unrelated to the Wholesale Storage DER or a Wholesale Storage DER will likely have (retail) station power load. Options such as mandating dual metering to separate the wholesale and retail load is one solution, but can prove expensive and may not be acceptable to retail regulators seeking to encourage distributed storage. FERC recognized this issue in Order No. 841 and has indicated dual meters may be required for transmission-connected storage facilities, but it did not indicate whether this dual-meter solution could be mandated for Wholesale Storage DERs, where it may lack jurisdiction over the metering requirements, i.e., particularly where the interconnection of the Wholesale Storage DER is state-jurisdictional under the “first-use” test.
In submitting Order No. 841 compliance filings, most RTOs/ISOs advocated dual metering for transmission-connected storage facilities, but they did not clarify whether distribution-connected storage would likewise be subject to the dual metering requirement. For example, ISO-NE is requiring storage facilities to be directly metered. Presumably, this applies to all storage, whether connected to transmission or distribution. The NYISO explains that “Energy Storage Resources will need to have adequate metering in place to separately account for Energy withdrawals for Station Power.” Again, there is no discussion as to whether this applies to both transmission- and distribution-connected storage. The CAISO has largely left the issue to the future, in discussing Wholesale Storage DERs co-located with retail load, explaining that a “scheduling coordinator easily can work with the RTO/ISO and the local distribution company to ensure that a storage resource complies with all applicable metering standards.” MISO has explained that it will require Market Participants to separately meter storage energy separately from other injections and withdrawals and that as to storage connected to the distribution system, variances or special arrangements necessary to meet Tariff metering requirements must be documented in a Distribution ESR Agreement.
With comments due on all Order No. 841 compliance filings in mere weeks, and FERC rulings to follow, the issue of whether DOs and or ISOs/RTOs can require two meters on Wholesale Storage DERs should become somewhat clearer in the near future. That said, state commissions may want to weigh in and address this issue directly; the California commission appears to be one of the only state commissions already grappling with the issue, but to date has only addressed certain specific scenarios and has admitted there is more work to be done.
