The First Order No. 2222 Compliance Orders (CAISO and NYISO):

Overview

On June 17, 2022, FERC issued its first two orders on Order No. 2222 compliance filings, the “CAISO 2222 Order” and the “NYISO 2222 Order.” Both ISOs had FERC-approved, pre-existing DER Aggregation programs (i.e., aggregation programs beyond Order No. 719’s demand response aggregation) in place prior to making their July 2021 compliance filings. Given the length of the orders, blog postings in coming days will only cover several topics each; twelve overarching topics were identified and discussed in the NYISO 2222 Order, and seven of these same topics were discussed in the CAISO 2222 Order. The twelve topics, some of which have many several subtopics, as well as the section of Order No. 2222 in which they were addressed, are as follows: 1) Stakeholder Process (N/A); 2) Small Utility Opt-In (Order No. 2222 § IV.A.2); 3) Interconnection (§ IV.A.3); 4) Definitions of Distributed Energy Resource and Distributed Energy Resource Aggregator (§ IV.B); 5) Eligibility to Participate in RTO/ISO Markets through a Distributed Energy Resource Aggregator (§ IV.C); 6) Locational Requirements (§ IV.D); 7) Information and Data Requirements (§ IV.F); 8) Metering and Telemetry System Requirements (§ IV.G); 9) Coordination between the RTO/ISO, Aggregator, and Distribution Utility (§ IV.H); 10) Modifications to List of Resources in Aggregation (§ IV.I); 11) Market Participation Agreements (§ IV.J); and 12) Effective Date (N/A).

Overview

Despite the fact that the two orders were addressing ISOs with pre-existing DER Aggregation programs, FERC found a fair amount of deficiencies in each compliance filing. That said, the vast majority of each of their proposals was accepted, i.e., the Applicants did far better than the protesters. Largely, most DER/DER Aggregator industry requests to do more, go further, add more optionality, and apply fewer tariff obligations/rules than are applied to other resources, were rejected. Requests for more explanation or detail, however, were often granted.

Likely due to the pre-existing aggregation programs, the investor-owned distribution utilities (DUs), who have no opt-out options due to state policies, largely only sought clarifications, which often were granted. The NYPSC and CPUC played little role in shaping these orders, a situation that may differ in some other regions, as the CPUC and NYPSC are highly supportive of Order No. 2222’s goals. In California, the large public power utilities are not part of CAISO, such that most public power entities can opt out and they remained fairly silent. In New York, NYPA and LIPA will be subject to Order No. 2222, and aligned with the investor-owned DUs. In contrast to California, NYAPP (i.e., small public power) was active in the compliance proceeding.

Both orders reflect that there is significant more work to do (particularly as to new business practices and manual updates) even for these entities who had existing DER Aggregation programs; the coordination and work required for a fully-compliant DER Aggregation program will take some time.

The most surprising impression was the degree to which FERC recognized, conceded even, that it had, in several cases, assigned tasks to RTOs/ISOs that they simply could not fulfill given their knowledge of distribution systems. The orders also reflect the clear jurisdictional tensions in Order No. 2222 and the problem with implementing the entire DER Aggregation program through only an ISO Tariff. There were a few issues here and there ripe for successful clarifications or rehearings (i.e., FERC not recognizing that the CPUC’s NEM program participants are compensated for ancillary services). Generally, FERC did not overstep its jurisdictional bounds and where it may have arguably overstepped them in Order No. 2222, FERC actually stepped back a bit (by relieving the ISOs of certain tasks). FERC still failed to solve the riddle of why Order No. 2222 does not explain FERC’s regulatory approach to DERs selling energy for resale in interstate commerce to DER Aggregators, particularly where the DER is not a QF eligible for an FPA regulatory exemption.

A discussion of the first four topics addressed in the orders follows:

Topic 1: Stakeholder Process

FERC did not require stakeholder processes for Order No. 2222 compliance and thus complaints about the CAISO’s and NYISO’s failure to have such a process were simply dismissed. (Other RTOs/ISOs generally did have such processes; NYISO and CAISO had stakeholder processes as to their pre-existing DER Aggregation programs.)

Topic 2: Small Utility Opt-In

As a reminder, in Order No. 2222, FERC provided RERRAs an option not to permit DER Aggregation participation where the DER is connected to a small utility (that distributed 4 million MWh of less in the previous fiscal year). Small utilities have to opt-in to Order No. 2222. In Order No. 2222-B, FERC also decided to set aside its prior decision not to extend the Order No. 719 opt-out to demand response resources that participate in heterogeneous distributed energy resource aggregations and leave that issue to an NOI docket which will explore whether there should be any Order No. 719 or Order No. 2222 opt-out at all for large utilities. That is, the pending NOI will resolve whether RERRAs for large utilities can opt out of both homogeneous demand response DER aggregations and heterogenous DER Aggregations that include demand response DERs. Neither the NYPSC nor the CPUC opted out of demand response aggregation, simplifying their compliance filings.

The CAISO was ordered to make some clean-up and process modifications to its opt-in wording for small utilities. The CAISO also had included a provision that seemingly gave a RERRA for a large utility the right to certify that participation was not prohibited, a provision that clearly ran afoul of Order No. 2222, as the provision implied that the RERRA could deny the certification or refuse to certify at all. CAISO was ordered to delete the provision. (The CPUC still has full discretion to refuse to allow a participating DER in an Aggregation to remain in, or enter into, a RERRA program.)

NYISO had to clean up an issue to clarify that its small utility opt-in applied to DUs, not to LSEs (which includes retail choice providers), a logical clarification as LSEs in New York do not even necessarily distribute energy at all. Unlike CAISO, which requires the RERRAs themselves to opt in, NYISO places the onus on the DER Aggregator to know and attest to eligibility that the small utility RERRA has authorized participation. Protests that placing this onus of attestation on the DER Aggregator was too burdensome were rejected, but the DER Aggregator was spared the task of telling the DU about its attestation. FERC was concerned with DERs whose DUs might switch between being small utilities and large utilities. A process to deal with this somewhat unlikely event was mandated. FERC also wanted more clarity as how the DER Aggregator would update the NYISO if a small utility RERRA has changed its opt-in designation. FERC also rejected specific penalties for improper attestations. That said, presumably a DER Aggregator could be subject to FPA penalties for providing false information.

All in all, there were few surprises in any of these rulings, but some additional compliance work for the ISOs.

Topic 3: Interconnection

Because Order No. 2222 deferred all interconnections for DERs in Aggregations to the state, NYISO on compliance had to clean up wording in its interconnection documents to account for this change. In contrast, since no DERs currently interconnect under CAISO Tariff procedures, the CAISO did not submit any interconnection-related tariff changes.

The NYISO was assigned some minor clean-up assignments with its implementation of the new jurisdictional approach, but the more controversial issue (at least to potential DER Aggregators) was that FERC accepted the NYISO proposal that DER Aggregators would need to abide by all requirements relating to NYISO “interconnection” studies for resources 2 MW and larger in order to sell capacity (i.e., to sell into the ICAP market). Protesters wanted the cap moved to 5 MW for DER Aggregations. FERC explained that “Order No. 2222 does not require NYISO to reform or otherwise apply different or preferential treatment with respect to [capacity resource interconnection service (“CRIS”)] review.” FERC also pointed out that qualification and performance requirements for DER Aggregations to provide capacity and energy were separate from the interconnection requirements that the state had jurisdiction over. (In effect, deliverability studies and interconnection studies were recognized as different animals.) Moreover, the deliverability review applies to the DER Aggregator and its aggregation, not the DER. One would expect this determination to survive rehearing and/or appeal.

Topic 4: Definitions of Distributed Energy Resource and Distributed Energy Resource Aggregator

Both ISOs got a full passing grade on this topic, but interestingly, it is now clear that FERC has interpreted DER to mean a facility interconnected to a distribution system or behind a retail customer meter (BTM) even if the retail customer is connected directly to transmission, a position that may not have been self-evident from Order No. 2222. The policy that a transmission-interconnected retail customer could have a DER in an aggregation could present interconnection complications because normally an RTO/ISO would expect to be responsible for studies and interconnecting any DER synchronized to the RTO/ISO transmission system. Historically, chances are such an interconnection would have involved a retail customer that owned a QF and FERC jurisdiction would have attached to the QF interconnection because the QF also was selling to the market. Alternatively, many RTO/ISO states have deferred any QF interconnections at transmission level to the RTO/ISO even when the QF is selling 100% of their output to their interconnected host transmission owner. Moreover, the CPUC recently has indicated that, at the behest largely of PG&E and the CAISO, it will stop allowing NEM customers with resources over 1 MW from using state-jurisdictional NEM interconnection procedures to install such resources. The CPUC lifting its size restriction for NEM and fairly large generators flocking to the state interconnection queue had caused issues for the CAISO. In sum, this blog and many in the industry have always used the term DER to mean a distribution-connected resource, whether that resource was directly connected to a distribution system or indirectly connected behind a retail meter of a distribution system-located customer. FERC’s expansive reading of DER may result in RTOs/ISOs being “affected systems” under state-jurisdictional interconnection procedures that do not even address the concept of affected systems.

As to NYISO’s even more expansive DER definition, it will be interesting to see if NYISO really meant that every resource 20 MW or smaller “electrically located in the NYCA” could be a DER, or if it changes the definition in a Section 205 filing. A 20 MW resource being permitted to connect directly to the NYISO Transmission System, by claiming to be an aggregation of one, through state-jurisdictional interconnection service (avoiding the NYISO queue) may not have been what NYISO intended. Evidently, however, that is how FERC is reading NYISO’s definition.

The First Order No. 2222 Compliance Orders (CAISO and NYISO):

Overview and Topics 1-4 (Stakeholder Process; Small Utility Opt-In; Interconnection; Definitions of Distributed Energy Resource and Distributed Energy Resource Aggregator)

Overview

Professionals

Practices