Commissioner James Danly Statement
August 10, 2020
Docket No. ER20-588-000
I oppose the order in this case as impermissibly blurring the line between generation and transmission. No matter how our order characterizes the function of energy storage facilities, the service contemplated by Midcontinent Independent System Operator, Inc.’s (MISO) filing is accomplished through the discharge of energy from storage units into the MISO transmission system. That, in my view, is a generation function, not a transmission function.
Section 201(a) of the Federal Power Act distinguishes between “Federal regulation of matters relating to generation” and “that part of such [utility] business which consists of the transmission of electric energy in interstate commerce.”[1] This statutory provision recognizes that generation and transmission are two wholly distinguishable categories of functions carried out by utilities, and it reflects the real differences between the two categories. The output of generation is amenable to being sold in a competitive market construct in a way that building long-term, capital-intensive transmission infrastructure is not.
MISO’s filing would eliminate the distinction between generation and transmission facilities based on function, and instead define transmission facilities based on the service provided. However, at least since the issuance of Order No. 888,[2] the Commission has resisted such definitions, and instead required that services provided by generation facilities that support transmission be supplied as ancillary services. I agree with the Commission’s determination in Order No. 888 and subsequent decisions that ancillary services are deemed to be transmission services. More importantly for this proceeding, I also agree with the Commission’s determination in Order No. 888 that the cost of ancillary services, which are provided by generation facilities, be unbundled from the cost of transmission service provided by transmission facilities.[3]
What, at root, is the problem with MISO’s proposal? Without regard for the real, functional differences between transmission and generation, MISO’s filing assigns transmission status to storage facilities performing a generation function. In so doing, MISO grants such facilities, by virtue of that assignment, the benefit of guaranteed recovery of costs and profit. MISO justifies this treatment on the grounds that storage facilities are providing a transmission service. In response to protestors’ claims of undue discrimination, MISO responds—somewhat blithely—that there is no undue discrimination because the proposal “merely extends to SATOA the same project framework as applies for similar wires solutions in the same project category.”[4] This response ignores the Commission’s established practice of unbundling from transmission rates the cost of transmission services provided by generation facilities. It is as unsatisfying as it is legally insufficient. More of an explanation is required for why discrimination between similarly situated parties is not undue.
I recognize that MISO has made a good faith effort to carefully design its proposal so as to confer eligibility upon those energy storage units that only provide support for transmission reliability in limited, specified situations. But I am concerned that, once the door is opened, it can swing in only one direction, and we soon will be faced with proposals seeking to widen the opening ever further. Indeed, the order in this case providing for a generic definition of storage as a transmission only asset already represents a significant expansion of the Commission’s Western Grid decision, in which the Commission stated that it would evaluate such requests on a case-by-case basis.[5]
The further we expand the definition of transmission by including facilities that inject energy into the system, the more difficult it will be to prevent yet further expansion. And the Commission will find it challenging to justify its actions in the face of the discrimination claims that inevitably will be raised by generators seeking the same full cost of service treatment afforded to transmission assets. All of which is to say that it would be preferable to maintain the bright line between generation and transmission previously established by the Commission based on function and hold that facilities injecting energy into a transmission system are not transmission facilities.
Of course, storage facilities can provide the transmission-related services that MISO contemplates when they offer the best solution to a transmission constraint. However, provision of such services should be through the sale of an ancillary service in competition with other generation facilities, as is done today for ancillary services such as reactive power and frequency control.
As I noted, in Western Grid, the Commission granted a petition for declaratory order finding that certain energy storage projects were eligible for inclusion in transmission rates based on the way in which the projects were to be operated. I believe that we now should reject MISO’s filing and explicitly find that our holding in Western Grid was in error.
For these reasons, I respectfully dissent.
[1] 16 U.S.C. § 824(a) (2018).
[2] Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888, FERC Stats. & Regs. ¶ 31,036 (1996) (cross-referenced at 75 FERC ¶ 61,080), order on reh’g, Order No. 888-A, FERC Stats. & Regs. ¶ 31,048 (cross-referenced at 78 FERC ¶ 61,220), order on reh’g, Order No. 888-B,
81 FERC ¶ 61,248 (1997), order on reh’g, Order No. 888-C, 82 FERC ¶ 61,046 (1998), aff’d in relevant part sub nom. Transmission Access Policy Study Group v. FERC,
225 F.3d 667 (D.C. Cir. 2000), aff’d sub nom. New York v. FERC, 535 U.S. 1 (2002).
[3] Order No. 888, FERC Stats. & Regs. ¶ 31,036, at 31,706. The Commission also distinguished between capacitors as a transmission resource and generators providing reactive power as falling in different categories: “A poor power factor at a customer’s delivery point creates a need for either transmission reactive facilities (i.e., capacitors) or local generator-supplied voltage support.” Id. at 31,707.
[4] MISO February 5, 2020 Answer at 8.
[5] Western Grid Dev., LLC, 130 FERC ¶ 61,056, reh’g denied, 133 FERC ¶ 61,029 (2010) (Western Grid).