In Electric Storage Order, FERC Orders PJM To Ensure Separation And Proper Accounting Of Wholesale And Retail Uses Of Storage

Directs PJM To Address Price Paid By Storage For Charging Energy When Customer Is Charged At Retail For Power

October 18, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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FERC issued an order addressing a compliance filing by PJM to implement FERC's prior order which directed RTOs to remove barriers to the participation of electricity storage in the RTO markets, and which held that storage shall be paid the LMP for energy sold into the RTO market.

When a storage resource purchases energy for charging purposes from the PJM market, FERC found that PJM’s compliance filing complies with the requirements of Order No. 841 regarding the price paid for an electric storage resource’s charging energy. Specifically, PJM’s Tariff provides that the price paid for energy bought and sold in the PJM Interchange Energy Market and for demand reductions will reflect the hourly LMP at each load and generation bus. PJM’s Tariff revisions also limit the right of Energy Storage Resources to make purchases from PJM to only those purchases that are stored for later resale to PJM markets.

"We also find that PJM complies with the requirement to settle charging energy lost to conversion inefficiencies at the wholesale LMP. Specifically, PJM’s proposed definition of Direct Charging Energy includes energy purchased from PJM markets, stored, and returned to PJM’s markets or lost to conversion inefficiencies. Therefore, we find that the Tariff provides that sales of electric energy from PJM’s markets to an Energy Storage Resource that the resource then resells back to those markets will be at the applicable nodal LMP, as required by Order No. 841," FERC said

As discussed further below, FERC ordered PJM to address situations in which a customer is being charged at retail for the power being used to charge the storage resource.

Concerning metering and accounting practices for charging energy, FERC previously rejected the suggestion that electric storage resources must choose to participate in either wholesale or retail markets due to the complexity of the metering and accounting practices

Order No. 841 also required RTOs/ISOs to prevent electric storage resources from paying twice for the same charging energy (i.e., they should not have to pay both the wholesale and retail price for the same charging energy). To the extent that the host distribution utility is unable -- due to a lack of the necessary metering infrastructure and accounting practices -- or unwilling to net out any energy purchases associated with an electric storage resource’s wholesale charging activities from the host customer’s retail bill, the Commission found that RTOs/ISOs would be prevented from charging that resource wholesale rates for the charging energy for which it is already paying retail rates.

In the order on PJM's compliance filing, FERC said, "We find that PJM’s proposed tariff revisions partially comply with the requirements of Order No. 841 pertaining to metering and accounting practices for electric storage resources and require PJM to file, within 60 days of the date of issuance of this order, a further compliance filing as more fully described below."

While PJM has demonstrated that its Tariff provides that Energy Storage Resources will be charged wholesale LMP for their charging energy that is purchased from PJM markets to be resold back to those markets, FERC said that, "PJM explains that it is still in the process of developing the necessary metering and accounting practices to implement that Tariff requirement."

"Thus, as commenters point out, PJM’s proposal leaves numerous metering and accounting issues unaddressed. We encourage PJM to continue working with stakeholders to draft and implement those practices before implementation of the Storage Participation Model," FERC said

"We are concerned that PJM’s compliance filing does not include any information about its metering and accounting practices in its Tariff and that PJM does not intend to make a filing with the Commission regarding such practices. Decisions regarding whether an item should be placed in a tariff or in a business practice manual are guided by the Commission's rule of reason policy, under which provisions that 'significantly affect rates, terms, and conditions' of service, are readily susceptible of specification, and are not generally understood in a contractual agreement must be included in a tariff, while items better classified as implementation details may be included only in the business practice manual," FERC said

FERC further said that, "PJM states that analogous accounting methods are not documented in the Tariff and it, therefore, does not propose to include its accounting methods related to Energy Storage Resources in its Tariff. Given that these metering and accounting practices will enable Energy Storage Resources located on the transmission system, the distribution system, and behind the meter to pay the wholesale LMP for charging energy as required by Order No. 841, we find that these practices significantly affect rates, terms, and conditions and a general description of them should be included in the Tariff."

"While we are requiring PJM to include a general description of its metering and accounting practices in its Tariff, we agree with PJM and commenters that more detailed descriptions of these practices, which are not readily susceptible to specification, may be appropriately considered implementation details and can be located in business practice manuals or other documents. However, due to the unique nature of Energy Storage Resources, it may be particularly difficult for Energy Storage Resource market participants to ascertain which sets of procedures apply to them. Because Energy Storage Resource market participants should be aware of which procedures apply to them in order to plan and manage their participation in the markets accordingly, we find that it is imperative that the Tariff cite to the specific agreements, manuals, or other documents where market participants can locate the rules applicable to Energy Storage Resources. Accordingly, we direct PJM to file, within 60 days of the date of issuance of this order, Tariff revisions to include a general description of the metering and accounting practices for Energy Storage Resources as well as references directing market participants to any other PJM documents containing the details of those practices," FERC said

As noted above, Order No. 841 also requires RTOs/ISOs to prevent electric storage resources from paying twice for the same charging energy.

FERC said that PJM has stated that, because Energy Storage Resources located behind a retail meter are potentially subject to retail billing for charging energy, PJM staff will coordinate with the distribution utility to identify whether the distribution utility intends to bill charging energy at retail, and if it does, PJM will not set up metering or accounting that would bill the resource for charging energy at wholesale.

"Accordingly, we also direct PJM to file, within 60 days of the date of issuance of this order, a further compliance filing revising its Tariff to state that PJM will not charge a distribution-connected Energy Storage Resource for charging energy if the distribution utility is unwilling or unable to net out any energy purchases associated with the Energy Storage Resource’s wholesale charging activities from the host customer’s retail bill," FERC said

"As to concerns regarding the ability of Energy Storage Resources located on the distribution system or behind the meter to participate in PJM’s markets, we reiterate that PJM’s definitions of Energy Storage Resource and Capacity Storage Resource are inclusive of those resources located on a distribution system or behind the meter ...[W]e find that PJM has demonstrated that all Energy Storage Resources, including those located on the distribution system or behind the meter, will be eligible to provide all capacity, energy, and ancillary services that they are technically capable of providing," FERC said

"However, we agree with commenters that Order No. 841 requires each RTO/ISO to allow electric storage resources to participate in RTO/ISO markets even if they also provide retail services. In Order No. 841, the Commission was not persuaded by the suggestion that electric storage resources must choose to participate in either wholesale or retail markets and found that excluding resources technically capable of providing both retail and wholesale services would adversely affect competition in the RTO/ISO markets," FERC reiterated

"Because PJM states that its metering and accounting practices are still under development, it is unclear how and to what extent those practices will allow for participation in retail and wholesale markets. Thus, we direct PJM to file, within 60 days of the date of issuance of this order, a further compliance filing to explain how its metering and accounting practices will allow for participation in retail and wholesale markets and to make any necessary Tariff changes to ensure the separation and proper accounting of wholesale and retail uses," FERC said

FERC found that PJM partially complied with the requirement to not assess transmission charges to an Energy Storage Resource that is dispatched to withdraw energy to provide a service. PJM’s proposed Tariff provisions state that, "Network Transmission Service and Point-to-Point Transmission Service are not required for purchases of Dispatched Charging Energy."

PJM defines Dispatched Charging Energy as, "Direct Charging Energy that an [Energy Storage Resource] Model Participant receives from the electric grid pursuant to PJM dispatch while providing a service in PJM’s markets."

However, FERC said that PJM has not defined the services that constitute Dispatched Charging Energy, as PJM has stated that it will do so prior to implementation of the Storage Participation Model.

"Accordingly, we direct PJM to file, within 60 days of the date of issuance of this order, a further compliance filing that provides Tariff provisions describing the services that constitute Dispatched Charging Energy," FERC said

Docket No. ER19-469

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