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FERC Issues Policy Statement Allowing Storage To Receive Cost-Based, Market-Based Compensation Concurrently

January 19, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The Federal Energy Regulatory Commission (FERC) issued a policy statement providing additional guidance for electric storage resources that seek to concurrently recover their costs through cost-based and market-based rates.

FERC noted that because storage resources can almost instantaneously provide multiple services and switch from providing one service to another, these resources may fit into one or more of the traditional asset functions of generation, transmission and distribution.

FERC's policy statement clarifies that, "electric storage resources may concurrently receive cost- and market-based revenues for providing separate services."

To avoid double recovery of costs, FERC said that crediting any market revenues back to the cost-based ratepayers is one possible solution

Alternatively, a projected market-revenue offset could be used to reduce the amount of the revenue requirement to be used in the development of the cost-based rate

FERC noted there may be other ways to avoid double recovery of costs which address FERC concerns, and FERC did not foreclose on alternatives so long as they address double recovery concerns

FERC provides guidance that, when the circumstances leading to the need for the service compensated through cost-based rates arise, RTO/ISO dispatch of the electric storage resource to address that need should receive priority over the electric storage resource’s provision of market-based rate services. Performance penalties could be imposed on the electric storage resource owner or operator for failure to perform at these times, FERC said

FERC further provided guidance that the provision of market-based rate services should be under the control of the electric storage resource owner or operator, rather than the RTO/ISO, to ensure RTO/ISO independence. In other words, while the RTO/ISO always performs the actual optimization of resources participating in the organized wholesale electric markets, during periods when the electric storage resource is not needed for the separate service compensated at cost-based rates, the RTO/ISO would rely on offer parameters provided by the electric storage resource owner or operator for such operation, just as the RTO/ISO does with other market participants.

Docket No. PL17-2

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