FERC Orders Changes In ISO-NE Storage Rules To Ensure Resource Does Not Pay Both The Wholesale And Retail Price For The Same Charging Energy

November 25, 2019

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In ruling on an ISO New England compliance filing relating to electric storage participation in the wholesale market, FERC directed changes to ensure that electric storage resources will not pay both the wholesale and retail price for the same charging energy

FERC directed that ISO-NE shall not charge distribution-connected electric storage resources for charging energy if the distribution utility is unwilling or unable to net out any energy purchases associated with an electric storage resource’s wholesale charging activities from the host customer’s retail bill.

More specifically, FERC stated, "We find that ISO-NE’s proposal partially complies with the requirements of Order No. 841 pertaining to metering and accounting practices for electric storage resources and require ISO-NE to file, within 60 days of the date of issuance of this order, a further compliance filing as more fully described below."

FERC said that, "Regarding metering, we find that ISO-NE complies with the Order No. 841 requirement that each RTO/ISO directly meter electric storage resources so that all the energy entering and exiting the resources is measured by that meter.558 Specifically, ISO-NE Tariff Section I.2.2 -- which defines a 'Directly Metered Asset' -- requires that Generator Assets, and therefore the associated Electric Storage Facilities, be directly metered assets measured by OP-18 compliant metering.559 Further, the DARDs [Dispatchable Asset Related Demand] of Electric Storage Facilities must be directly metered because an Electric Storage Facility must 'be registered as, and subject to all rules applicable to, a DARD that represents the same equipment as the Generator Asset.' As ISO-NE explains, its existing metering requirements will apply to electric storage resources declining to participate as Electric Storage Facilities (i.e., participating instead as Generator Assets or DARDs) and therefore will retain the same metering and participation options as other resources. As ISO-NE contends, the accuracy standards and requirements for metering can be found in OP-14 and OP-18 (i.e., within the operating procedures and not the Tariff). This direct metering requirement is applicable to all Electric Storage Facilities regardless of their location on the transmission system, distribution system, or behind the meter."

FERC said that, "Nevertheless, we find that the ISO-NE Tariff should include a basic description of ISO-NE’s proposed metering methodology and accounting practices for electric storage resources as well as references to specific documents containing further details. 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. The unique physical and operational characteristics of electric storage resources require unique metering and accounting practices to ensure that these resources are charged the LMP for charging energy and are not double charged, as required by Order No. 841. We find that these practices significantly affect rates, terms, and conditions and should be included in the Tariff. Further, we find that the Tariff should reference the specific documents that contain the implementation details for ISO-NE’s metering methodology and accounting practices, so that market participants may plan and manage their participation accordingly. For example, while ISO-NE’s Tariff includes a reference to OP-18, which contains metering details for electric storage resources, the Tariff does not clearly reference all the relevant documents that contain metering details (e.g., relevant sections of OP-14). Therefore, we direct ISO-NE to file, within 60 days of the date of issuance of this order, revisions to its Tariff to include a basic description of ISO-NE’s metering methodology and accounting practices for electric storage resources, as well as references to the specific documents in ISO-NE’s business practice manuals or other documents that contain the implementation details. Further, we direct ISO-NE to file, within 60 days of the date of issuance of this order, a further compliance filing to revise Tariff section III.1.10.6(a)(iv), consistent with its Data Request Response, and submit revised Tariff sheets to explicitly state that an Electric Storage Facility shall 'be directly metered.'"

FERC said that, "Further, we find that ISO-NE’s Compliance Filing and Tariff provide insufficient detail to demonstrate that electric storage resources will not pay both the wholesale and retail price for the same charging energy. Regarding accounting, ISO-NE states that no new accounting practices were needed or introduced for Electric Storage Facilities, but rather that ISO-NE would rely on its long-established accounting practices, including registration practices found in Manuals M-28 and M-RPA. According to these practices, ISO-NE asserts that all energy that is consumed by an Electric Storage Facility is reported to ISO-NE by either the transmission or distribution utility (based on the resource’s point of interconnection) within 1.5 business days following the operating day and settled at the wholesale LMP. Under that structure, the utility will report the electric storage resource’s load to ISO-NE for settlement just as it reports the load of any other directly metered load asset, and in the event of an error, ISO-NE would work with the utility to correct it. However, we agree with Advanced Energy Economy that ISO-NE has not adequately demonstrated that its existing wholesale load asset structure will be sufficient to prevent double payment for charging energy at the retail and wholesale levels. For instance, while ISO-NE states that it bills the Load Asset owner for energy consumption and the utility only bills its host customer for non-energy charges, ISO-NE does not propose a process to identify whether a distribution utility is unable or unwilling to net out from a host customer’s retail bill the wholesale energy purchases associated with charging an electric storage resource that is participating in ISO-NE’s market. While ISO-NE states in its Compliance Filing that it will work with the host utility to correct any errors in settlement, the ISO-NE Tariff also does not contain this requirement. We therefore direct ISO-NE to file, within 60 days of the date of issuance of this order, a further compliance filing revising its Tariff to explicitly state that ISO-NE will not charge distribution-connected electric storage resources for charging energy if the distribution utility is unwilling or unable to net out any energy purchases associated with an electric storage resource’s wholesale charging activities from the host customer’s retail bill.'

FERC said that, "As to concerns regarding the ability of electric storage resources located on the distribution system or behind the meter to participate in ISO-NE’s markets, we reiterate that ISO-NE’s definition of an Electric Storage Facility is inclusive of those resources located on a distribution system or behind the meter. As ISO-NE indicates, neither the registration rules, offer rules, dispatch rules, nor the settlement rules depend on an electric storage resource’s point of interconnection. Therefore, we find that ISO-NE has demonstrated that its proposed market rules provide a means for all electric storage resources, including those located on the distribution system or behind the meter, to provide services under the Tariff."

FERC said that, "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 stated that it was not persuaded by commenters’ 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 that would be necessary to distinguish between retail and wholesale activity. The Commission found that electric storage resources that provide retail services may also be technically capable of providing wholesale services, and that excluding these resources from wholesale market participation would adversely affect competition in RTO/ISO markets. On rehearing, the Commission stated that, while it agreed with petitioners that appropriate metering and accounting practices will be necessary to distinguish between wholesale and retail activity, it disagreed that these practices would be prohibitively complex or costly to develop and implement given the flexibility provided to the RTOs/ISOs to propose reasonable approaches."

FERC said that, "While ISO-NE states that Electric Storage Facilities can provide telemetry and/or offers to ISO-NE that allow them to take on distribution level obligations while still following ISO-NE dispatch, ISO-NE also states that some business cases that could be described as 'retail services' would render an electric storage resource technically incapable of providing wholesale services. Moreover, it is unclear whether an electric storage resource could register only a portion of its capacity with ISO-NE and reserve the remaining capacity for retail services. Accordingly, we direct ISO-NE to file, within 60 days of the date of issuance of this order, a further compliance filing to explain how its Tariff allows for electric storage resources to participate in both wholesale and retail markets, or alternatively, revise its Tariff to allow electric storage resources that provide retail services to also participate in ISO-NE’s markets, as required by Order No. 841. For instance, ISO-NE can propose Tariff changes to ensure that, or further specify how, an electric storage resource can engage in dual participation in retail and wholesale markets, including details that clearly define the separation and proper accounting of wholesale and retail uses for electric storage resources. Alternatively, ISO-NE could identify Tariff language that clarifies that, by registering as an asset in ISO-NE, an electric storage resource is not precluded from providing retail services, so long as the resource meets its wholesale market obligations (e.g., Forward Capacity Market obligations), as applicable."

FERC also directed ISO-NE to revise the transmission charges assigned to storage, stating that ISO-NE's filing inappropriately exempts all electric storage resources that are charging for later resale from transmission charges that are applicable to other load.

FERC said that, "We find that ISO-NE partially complies with the requirements of Order No. 841 with respect to energy used to charge electric storage resources. In particular, ISO-NE complies with Order No. 841 regarding the price electric storage resources pay for withdrawing energy from the grid, i.e., charging, because ISO-NE proposes that sales of electric energy from the ISO-NE markets to an electric storage resource that the resource then resells back to those markets will be at the wholesale LMP. Also, ISO-NE’s proposal that electric storage resources’ wholesale energy purchases be priced at the applicable nodal LMP, and not the zonal price, complies with Order No. 841. Additionally, ISO-NE’s proposal that efficiency losses constitute charging energy and are settled at the LMP complies with Order No. 841."

"However, we find that ISO-NE does not comply with the requirements of Order No. 841 and the clarifications set forth in Order No. 841-A with respect to the application of transmission charges to electric storage resources. ISO-NE proposes to exempt electric storage resources from all applicable transmission service charges, (i.e., charges for Regional Network Service and Local Service) when they are dispatched to charge," FERC said

FERC said that, "In Order No. 841-A, the Commission clarified that its use of the phrase 'applicable transmission charges' was intended to convey that: (1) an RTO/ISO may propose to apply its existing rate structure for transmission charges to an electric storage resource that is charging at wholesale but is not being dispatched by the RTO/ISO to provide a service in the RTO/ISO markets; (2) any electric storage resource that is charging for the purpose of participating in an RTO/ISO market but is not being dispatched by the RTO/ISO to provide a service should be assessed charges consistent with how the RTO/ISO assesses transmission charges to wholesale load under its existing rate structure; and (3) if an RTO/ISO proposes not to apply transmission charges to an electric storage resource that is charging at wholesale but is not being dispatched by the RTO/ISO to provide a tariff-defined service, then the RTO/ISO must demonstrate that exempting such a resource from these charges is reasonable given its existing rate structure for transmission charges."

FERC said that, "ISO-NE does not meet these requirements because its proposal exempts all electric storage resources that are charging for later resale from transmission charges that are applicable to other load. Therefore, we direct ISO-NE to submit on compliance within 60 days of the date of this filing, Tariff revisions that comply with this aspect of Order Nos. 841 and 841-A by applying transmission charges to an electric storage resource when that resource is charging for later resale in wholesale markets and is not providing a service. Consistent with the Commission’s clarification in Order No. 841-A,480 we reiterate that to the extent that ISO-NE seeks to create a new service that constitutes charging pursuant to economic dispatch under certain system conditions, ISO-NE may propose such revisions to its Tariff through a separate FPA section 205 filing."

Docket No. ER19-470

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