D.C. Circuit Upholds FERC’s Rules Encouraging Electric Storage Participation in Wholesale Markets

Brett A. Snyder, Lamiya N. Rahman, and Jane Thomas

On July 10, 2020, the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) denied challenges1 to the Federal Energy Regulatory Commission’s (“FERC” or “Commission”) final rule on electric storage participation in Regional Transmission Organization (“RTO”) and Independent System Operator (“ISO”) markets (“Order No. 841”).2

Order No. 841 aimed to facilitate the participation of electric storage resources (“ESRs”) in RTO/ISO markets, with the goals of removing barriers to participation by ESRs, increasing competition within RTO/ISO markets, and ensuring just and reasonable rates. Specifically, FERC ordered RTOs/ISOs to establish participation models that recognize the physical and operational characteristics of and facilitate participation by ESRs.3

An ESR for these purposes is defined as “a resource capable of receiving electric energy from the grid and storing it for later injection of electric energy back to the grid,”4 and encompasses storage resources located on the interstate transmission system, on a distribution system, or behind the meter.5 Order No. 841 declined to allow states to decide whether ESRs located behind a retail meter or on a distribution system in their state could participate in RTO/ISO markets.6 On rehearing, the FERC reiterated that it would not provide state opt-out rights, arguing among other things that “establishing the criteria for participation in the RTO/ISO markets of [ESRs], including those resources located on the distribution system or behind the meter, is essential to the Commission’s ability to fulfill its statutory responsibility to ensure that wholesale rates are just and reasonable.”7 FERC further concluded that it was not required under the Federal Power Act (“FPA”) or relevant precedent to provide an opt-out from ESR participation.8

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