Docket Nos. ER21-2460-000, ER21-2460-001
Although I was not serving at the Commission for the issuance of Order No. 2222, I am pleased that the Commission took that significant step to remove barriers to entry for the participation of distributed energy resources (DERs). Enabling DER participation in the market is crucial to ensuring that markets remain reliable, efficient, and economic. DERs can often be interconnected much more quickly than traditional resources and can be located on areas on the grid that allow for more system flexibility, in turn providing the opportunity for relatively low-cost and near-term resilience and reliability gains. Issuing this order,[1] as well as the concurrent order on CAISO’s compliance with Order No. 2222,[2] is critical to ensuring that these resources have fair access to regional markets, and I support most of the determinations in each order. I write separately, however, because I am concerned that a subset of the determinations in the Majority Order undercut the goals the Commission sought to achieve in issuing Order No. 2222.
Specifically, I am concerned that the Majority Order’s finding that Order No. 2222 does not require NYISO to accommodate a specific type of DER[3] erodes the rule’s plain requirement that an RTO/ISO’s rules may not “prohibit any particular type of [DER] technology from participating in [DER] aggregations.”[4] It sets precedent that may, in the future, allow RTO/ISOs to prevent the participation of other resource types. In order to accept NYISO’s compliance proposal as technology neutral,[5] it accepts a strained justification by NYISO that results, as a practical matter, in the Commission altering the requirements of Order No. 2222 and preventing a type of DER from being able to provide the services in NYISO’s market that it is technically capable of providing.[6]
NYISO argues that it is necessary to exclude energy efficiency from participating in DER aggregations because energy efficiency does not meet NYISO’s general eligibility rules, which require that most resources[7] seeking to offer capacity in NYISO “be able to participate in the NYISO’s Energy market and be able to respond to and perform in a manner consistent with the directions and control of NYISO.”[8] The Commission accepts this barrier to participation, incorrectly finding that “Order No. 2222 does not require NYISO to change its existing market qualification and performance requirements.”[9] An express purpose of Order No. 2222 was to “remove the barriers that qualification and performance requirements currently pose to the participation of distributed energy resources in the RTO/ISO markets.”[10] Accordingly, the Commission should require NYISO to revise its DER aggregation participation model, or its other requirements, to accommodate the characteristics of energy efficiency, and any future DER technologies in compliance with Order No. 2222, instead of bending the clear requirements of the rule to get to yes.[11] For the same reasons, I would have voted to find that NYISO’s definition of DER is not compliant in its failure to fully accommodate the broad range of resources that Order No. 2222 contemplates.[12]
I have carefully considered other areas in this important order, and the CAISO order, where the Commission has decided to provide flexibility in complying with the letter of the final Order No. 2222 requirements. These areas include the minimum size of aggregation requirements,[13] specific review criteria regarding reliability,[14] the role of the relevant electric retail regulatory authorities (RERRAs),[15] and NYISO’s proposal to require 90-days’ notice to implement certain modifications to a DER aggregation.[16] I recognize that when evaluating compliance with a multi-faceted rule such as Order No. 2222, the Commission must make hard decisions about when to grant flexibility and when to adhere to the letter of the rule. While my preference would have been to err closer to the letter of the rule on those issues, I can concur with the outcomes as they stand in the broader scope of this order.
The success of Order No. 2222 and its subsequent orders depends on the thoughtful implementation of the Commission’s mandates. While I disagree with the Majority Order’s decision to approve a market rule that prevents a DER technology type from offering the services it is capable of providing to the market, I am encouraged by the preponderance of the compliance approach contained in the Majority’s Order here and in CAISO. I remain hopeful that, as the Commission evaluates future compliance filings of Order No. 2222, it will strike the right balance between offering flexibility and upholding its requirements as written.
For these reasons, I respectfully concur in part and dissent in part.
[1] New York Independent System Operator, Inc., 179 FERC ¶ 61,198 (2022) (Majority Order).
[2] California Independent System Operator Corporation, 179 FERC ¶ 61,197 (2022) (CAISO).
[3] Majority Order at PP 112, 64 n.118.
[4] Participation of Distributed Energy Resource Aggregations in Markets Operated by Regional Transmission Organizations and Independent System Operators, Order No. 2222, 172 FERC ¶ 61,247, at P 141 (2020), order on reh’g, Order No. 2222-A, 174 FERC ¶ 61,197 (2021), order on reh’g, Order No. 2222-B, 175 FERC ¶ 61,227 (2021). See also Order No. 2222, 172 FERC ¶ 61,247 at P 114 n.277.
[5] Majority Order at PP 64, 110-112.
[6] Energy efficiency is able to participate as a supply-side resource and is included in the proposed definition of a DER in all of the other RTO/ISOs with a capacity market. In practice, the State of New York has robust retail-level energy efficiency programs, and it is not clear that energy efficiency providers in NYISO would prefer to participate as part of an aggregation providing capacity into NYISO. However, the point of Order No. 2222 is to provide the option— to ensure that any resource that is technically capable of providing wholesale services through aggregation is eligible to do so.
[7] NYISO’s tariff has exceptions for “Responsible Interface Parties.” A Responsible Interface Party is defined as “A Customer that is authorized by the ISO to be the Installed Capacity Supplier for one or more Special Case Resources and that agrees to certain notification and other requirements as set forth in this Services Tariff and in the ISO Procedures.” Services Tariff, Definitions, R (Responsible Interface Party).
[8] NYISO Answer at 47, 48.
[9] Majority Order at P 112. See also id. P 64, n. 118.
[10] Order No. 2222, 172 FERC ¶ 61,247 at P 26.
[11] I recognize the complexity of developing the market design updates and tariff rules necessary to accommodate energy efficiency as a supply-side resource and would have granted NYISO’s request for sufficient time to develop the necessary changes without delaying implementation of the rest of NYISO’s compliance filing.
[12] NYISO defines a Distributed Energy Resource as “(i) a facility comprising two or more Resource types behind a single point of interconnection with an Injection Limit of 20 MW or less; or (ii) a Demand Side Resource; or (iii) a Generator with an Injection Limit of 20 MW or less, that is electrically located in the [New York Control Area].” NYISO Transmittal Letter at 14. A Demand Side Resource, in turn, must be “capable of controlling demand by either curtailing its Load or by operating a Local Generator to reduce Load from the [New York State] Transmission System and/or the distribution system at the direction of the ISO, in a responsive, measurable and verifiable manner within time limits . . . ,” among other requirements. Services Tariff, Definitions, D (Demand Side Resource). This narrower definition significantly limits DER participation compared to the scope of what the Commission envisioned in Order No. 2222 and in its regulations. 18 C.F.R. § 35.28 (2021); Order No. 2222, 172 FERC ¶ 61,247 at P 114 (“any resource located on the distribution system, any subsystem thereof or behind a customer meter”). See also Order No. 2222, 172 FERC ¶ 61,247 at P 114 (“These resources may include, but are not limited to, resources that are in front of and behind the customer meter, electric storage resources, intermittent generation, distributed generation, demand response, energy efficiency, thermal storage, and electric vehicles and their supply equipment – as long as such a resource is ‘located on the distribution system, any subsystem thereof or behind a customer meter.’”); at P 115 (“[W]e clarify that energy efficiency and demand response resources are capable of providing demand reductions at customer sites, and therefore ‘customer sites capable of demand reduction’ may meet the definition of a distributed energy resource.”); and at P 141 (“We find that limiting the types of technologies that are allowed to participate in RTO/ISO markets through a distributed energy resource aggregator would create a barrier to entry for emerging or future technologies, potentially precluding them from being eligible to provide all of the capacity, energy, and ancillary services that they are technically capable of providing.”).
[13] The Majority Order finds, without discussion, that NYISO complies with the requirement that each RTO/ISO implement a minimum size requirement not to exceed 100 kW for all distributed energy resource aggregations. Majority Order at P 18. However, NYISO proposed a 100 kW minimum offer threshold that applies separately to energy injections, energy withdrawals, and demand reductions. NYISO Transmittal at 24. This effectively creates a minimum size requirement of at least 200 kW for heterogenous aggregations that are capable of both injections and demand reductions. While there may be compelling reasons to grant NYISO an exception from the rule, those reasons are not explained in Majority Order.
[14] The Majority Order finds that NYISO may simply defer to distribution utilities and need not specify criteria by which the distribution utilities will determine whether the participation of each proposed distributed energy resource in a distributed energy resource aggregation will not pose significant risks to the reliable and safe operation of the distribution system. Majority Order at P 267. This finding is, at best, a strained interpretation of Order No. 2222, which directs RTOs/ISOs to provide “specific review criteria that the distribution utilities should use.” Order No. 2222, 172 FERC ¶ 61,247 at P 293 (emphasis added). See also CAISO, 179 FERC ¶ 61,197 at PP 206-207 (finding CAISO may defer to distribution utilities regarding reliability criteria to be used).
[15] The Majority Order finds that Order No. 2222’s requirement that RTOs and ISOs specify voluntary roles for RERRA may be met by a mere reference that the DER aggregator has complied with RERRA requirements. Majority Order at P 302; see also CAISO, 179 FERC ¶ 61,197 at PP 237-238. But the purpose of Order No. 2222’s requirement should be understood to ensure that all interested parties would be aware of the bounds of any voluntary RERRA involvement, should any RERRA so volunteer. To the extent that RTOs and ISOs intend RERRAs to have greater involvement than what is specified in the tariff, or the RERRAs wish to have greater involvement on their own accord, parties, including DER aggregators, may be forced to negotiate that involvement after the fact, and to do so without clear boundaries.
[16] The Majority Order accepts NYISO’s proposal for a 60-day distribution utility review period combined with a 30-day period for “administrative tasks.” Majority Order at PP 323, 326; NYISO Transmittal at 36. Yet Order No. 2222 did not provide additional time for RTOs and ISOs to conduct “administrative tasks”, and NYISO has not specifically justified its need for the additional 30-day period otherwise (and indeed, the Majority Order acknowledges NYISO’s admission that it can conduct some of those tasks concurrently with the 60-day period; see Majority Order at P 315). Order No. 2222-A set an expectation that “60 days should be the maximum time needed for most distribution utility reviews” and additional time could be justified for “unusual circumstances.” Order No. 2222-A, 174 FERC ¶ 61,197 at P 72. The Majority Order appears to reason that because NYISO has differentiated this additional 30 days by tasks that it needs to complete rather than what the distribution utilities need to complete, its request does not conflict with Order No. 2222-A’s reasoning that “a lengthy review time . . . could erect a barrier to distributed energy resource participation in the RTO/ISO markets and may unduly delay participation.” Id. at P 72. But whatever is being done in those 90 days, and by whom, it is 50% longer than the 60 days that Order No. 2222 envisioned, and it is 50% longer than the 60 days it takes for NYISO to complete the initial registration. Majority Order at P 260. In other words, the extra flexibility afforded to NYISO may ultimately result in less flexibility for DERs.