Month: June 2019

FERC Modernizes the Commission Forms Filing Process

FERC Modernizes the Commission Forms Filing Process

On June 20, the Federal Energy Regulatory Commission (FERC) announced that it is “revising its electronic filing format for certain data collections to make it easier for filers to submit and data users to analyze information.” They are hoping that modernizing the “data collections and making them more accessible,” will help to increase efficiency for both business information processing and regulatory filings. This is also intended to help further FERC’s goal to increase transparency and decrease the costs that come with preparing data for submission.

FERC is also planning to put together a database to make it easier to search through the forms and find the information they need.

The new filing format will be “eXtensible Business Reporting Language (XBRL), a nonproprietary, open technology standard.” Using XBRL will enhance both the system’s security and compatibility, and it should “allow efficient sharing of data across different information systems.” FERC said that this move has been supported by many groups in the industry.

The new standard forms will be “Form Nos. 1, 1-F, 2, 2-A, 3-Q electric, 3-Q natural gas, 6, 6-Q, 60 and 714.” FERC plans to “develop a draft XBRL taxonomy that will be discussed at a future technical conference.” They will also be accepting further comments on this subject before they issue an “order to adopt the final standard and establish an implementation schedule.”

FERC Bolsters the Cyber Security for the Nation’s Power Grid

FERC Bolsters the Cyber Security for the Nation’s Power Grid

The Federal Energy Regulatory Commission (FERC) has been working to upgrade the cyber security for the power grid, and on June 20 they announced that they had boosted the cyber security for the nation’s bulk electric system. They did this “by expanding the reporting requirements for incidents involving attempts to compromise operation of the grid.” FERC reports that this helps to close “a gap in the prior Critical Infrastructure Protection Reliability Standards,” which had previously only required groups to report if an incident disrupted or compromised reliability tasks.

The North American Electric Reliability Corp. (NERC) had already been tasked by FERC to make changes to the “reporting of cyber security incidents out of concern that the existing standards may understate the true scope of threats by excluding from reporting incidents that could facilitate subsequent efforts to harm the reliable operation of the grid.”

FERC Chairman Neil Chatterjee said that “Defending our nation’s electric grid against cyber security threats is one of the Commission’s most pressing challenges. It is vital that we ensure that NERC and the Department of Homeland Security have all the information needed to understand the evolving threat landscape for industrial control systems.”

This new Critical Infrastructure Protection Reliability Standard will require reporting for incidents that “either compromise or attempt to compromise Electronic Security Perimeters, Electronic Access Control or Monitoring Systems, and Physical Security Perimeters associated cyber systems.” The new standard also covers “disruptions or attempts to disrupt the operation of a bulk electric system cyber system.”

The individual entities in charge of parts of the bulk power system will have to develop their own criteria for how they will identify attempts to “compromise a cyber asset and then apply those criteria during its cyber security incident identification process.” This is intended to give the entities some flexibility in the development of their criteria as it applies to their systems.

The new standards will also address “the information to be included in Cyber Security Incident reports, their dissemination, and deadlines for filing. Reports and updates will be sent to the Electricity Information Sharing and Analysis Center and the Department of Homeland Security’s National Cybersecurity and Communications Integration Center.”

FERC said in their presentation of the changes that they believe the new standards will give them an “accurate picture of the rapidly changing cyber threat landscape.”

FERC Testifies before the House Committee on Energy and Commerce, Subcommittee on Energy, on Oversight of FERC: Ensuring Its Actions Benefit Consumers and the Environment, Part II: Commissioners Richard Glick and Bernard L. McNamee

FERC Testifies before the House Committee on Energy and Commerce, Subcommittee on Energy, on Oversight of FERC: Ensuring Its Actions Benefit Consumers and the Environment, Part II: Commissioners Richard Glick and Bernard L. McNamee

On June 12, the Chairman and Commissioners of the Federal Energy Regulatory Commission (FERC) testified before the Subcommittee on Energy Committee on Energy and Commerce on the oversight of FERC. The full hearing can be watched here. This is the testimony of Commissioners Richard Glick and Bernard L. McNamee.

Glick’s Testimony

In his testimony, Glick points out the dramatic changes happening in the electric industry as the country goes toward a “less carbon-intensive, more distributed electric generation fleet that is increasingly customer-centric.” Prices for renewable energy have been falling over the last few years and are predicted to keep falling. This is also true for distributed energy sources and battery storage. All of this has led to an increase in the use of those sources.

“In three of the last four years, wind and solar have accounted for the majority of new electric generation capacity in the United State and that growth is expected to further accelerate in the years ahead,” Glick said. “The growth in zero-marginal cost generation and low natural gas prices are playing a significant role in the changing resource mix by putting downward pressure on wholesale electric rates and displacing aging, uneconomic facilities.”

He pointed out that these changes are helping the country’s economy in a variety of ways, including the employ of almost 3.3 million people who are currently working in the clean energy field. The lasting impact on the environment and climate change is the most important part of this clean energy implementation. “The Intergovernmental Panel on Climate Change recently concluded that global temperatures are on track to rise by 1.5°C by as early as 2030, a result that could present ‘irreversible’ consequences.” Glick also mentioned that the “most recent National Climate Assessment points out that we are already experiencing the impacts of climate change and indicates that, absent a dramatic reduction in greenhouse gas emissions, annual economic losses caused by climate change will reach into the hundreds of billions of dollars by the end of the century.”

Glick shared that he thinks that FERC “is ignoring its statutory mandates under the Natural Gas Act by refusing to analyze reasonably foreseeable greenhouse gas emissions associated with new interstate natural gas pipelines and facilities used to import or export liquefied natural gas.” He explained that even though FERC “is not a climate regulator, the potential climate consequences of the Commission’s actions make it all the more important that the Commission faithfully execute its statutory mandates.”

He said the current “market rules can pose unintended barriers to those technologies’ full participation in wholesale markets. The Commission must be vigilant in breaking down barriers created by those antiquated market rules and ensuring that all resources can compete on a level playing field.”

As part of breaking down these barriers, last year FERC ” issued a final rule that requires RTOs/ISOs to facilitate the participation of electric storage resources in the wholesale electricity markets. The Commission required each RTO/ISO to establish a participation model for electric storage resources that recognizes the physical and operational characteristics of those resources. The model must: (1) ensure that electric storage resources are eligible to provide all capacity, energy, and ancillary services that they are technically capable of providing; (2) ensure that such resources can be dispatched and can set the wholesale market clearing price as both a seller and a buyer; (3) account for the physical and operational characteristics of such resources through bidding parameters or other means; and (4) set a minimum size requirement for electric storage resource participation that does not exceed 100 kilowatts.”

FERC also made the requirement that every “RTO/ISO specify that the sale of electric energy from their markets to an electric storage resource that the resource then resells back to those markets must be at the wholesale locational marginal price.”

“Beyond the electricity sector,” Glick said, “the Commission’s energy infrastructure permitting responsibilities can also impact emissions. The Commission has authority over the licensing of certain hydroelectric facilities as well as the siting of interstate natural gas pipelines and facilities used to import or export liquefied natural gas.”

FERC “is responsible for licensing and overseeing non-federally owned hydroelectric facilities in the navigable waters of the United States or on federally owned lands. Before issuing a license, the Commission must determine whether a hydroelectric facility is in the public interest.” Glick shared his belief that “the ability of hydroelectric facilities to generate zero-emissions electricity and to integrate other sources of zero-emissions electricity, thereby reducing greenhouse gas emissions from the electricity sector, should be an important aspect of the Commission’s public interest determination under the FPA.” FERC has to make the same determination before it approves any LNG pipelines or facilities.

McNamee’s Testimony

McNamee discussed the increase in LNG projects in recent months, “After two years in which no new LNG project was approved, the Commission has now approved — in a three-month period — four LNG export projects.”

“Since 2009, the [United] States has been the world’s top producer of natural gas. This natural gas is transported across the United States using over 300,000 miles of interstate natural gas pipeline.” McNamee explained that in 2018 FERC approved 44 new natural gas projects and 689 miles of pipeline came into service last year as well.

Last year, as a result of the Tax Cuts and Jobs Act of 2017 being passed, FERC issued Order No. 849 so they could “determine whether natural gas pipelines rates should be adjusted to reflect the corporate tax reduction in order for the rates to remain just and reasonable. Order No. 849 required jurisdictional natural gas companies to file abbreviated cost and revenue studies and provided those companies the opportunity to voluntarily reduce their pipeline rates or explain why no rate reductions are necessary. The Commission then uses the cost and revenue studies and the additional filings to determine whether to initiate an NGA section 5 investigation into the justness and reasonableness of a natural gas company’s rates and to potentially bring rate relief to its customers.” FERC has looked at about 91 percent of its review since then and has filed 21 rate settlements between shippers and pipelines and has filed of 11 rate reductions.

FERC Testifies before the House Committee on Energy and Commerce, Subcommittee on Energy, on Oversight of FERC: Ensuring Its Actions Benefit Consumers and the Environment, Part I: Chairman Neil Chatterjee and Commissioner Cheryl A. LaFleur

FERC Testifies before the House Committee on Energy and Commerce, Subcommittee on Energy, on Oversight of FERC: Ensuring Its Actions Benefit Consumers and the Environment, Part I: Chairman Neil Chatterjee and Commissioner Cheryl A. LaFleur

On June 12, the Chairman and Commissioners of the Federal Energy Regulatory Commission (FERC) testified before the Subcommittee on Energy Committee on Energy and Commerce on the oversight of FERC. The full hearing can be watched here. This is the testimony of Chairman Neil Chatterjee and Commissioner Cheryl A. LaFleur.

Chairman Chatterjee’s Testimony

Chatterjee pointed out that there have been some major changes in the energy industry over the last decade, and that FERC has worked to “remain vigilant about these changes and respond to them in ways that enhance competition in electricity markets, support the resilience of the bulk-power system, and lower costs to consumers.” He said one of the more recent changes was “the improvement in electric storage technologies.” He highlighted some of FERC’s work “regarding the participation of electric storage resources in wholesale electricity markets as an example of how FERC is responding to our evolving energy landscape.”

“Traditionally, a variety of factors have created challenges to storage resources’ participation in the wholesale electric markets,” Chatterjee said. This led FERC to issue Order No. 841 in 2018, “to remove barriers to the participation of electric storage resources in the capacity, energy, and ancillary services markets operated by regional transmission organizations (RTOs) and independent system operators (ISOs).” He said that the result of this order should lead to “an increase in the deployment of storage resources, which should result in greater reliability and lower prices for customers by enhancing competition.”

He explained that FERC has also been “evaluating barriers to the participation of distributed energy resource aggregations in the markets operated by RTOs and ISOs.” In 2018 a technical conference held by FERC staff, they worked to “gather more information regarding the participation of distributed energy resource aggregations in wholesale electricity markets, as well as to discuss more broadly the potential effects of distributed energy resources on the bulk-power system.”

Chatterjee also discussed the cyber and physical security issues affecting the energy infrastructure. “America’s critical infrastructure is increasingly under attack by foreign adversaries. The Department of Homeland Security (DHS) and Federal Bureau of Investigation have issued multiple public reports describing cyber-intrusion campaigns by foreign government actors against our critical infrastructure, including the electric grid.”

“Physical and cyber-attacks on our critical infrastructure systems have the potential to create significant, widespread, and potentially devastating effects” an attack could have. He explained that FERC has been working “to address cyber and physical security risks as consistent with section 215 of the Federal Power Act, which grants us the authority to approve and enforce mandatory Reliability Standards developed by the North American Electric Reliability Corporation (NERC).”

Chatterjee said FERC issued two orders in 2018 to help improve security. “First, at our October 2018 Commission Meeting, we approved NERC’s proposed Reliability Standards to address supply chain threats… Second, at our July 2018 Commission Meeting, we approved a final rule directing NERC to expand reporting requirements for critical systems. That final rule directed NERC to develop a standard that requires registered entities to report successful and attempted intrusions into critical systems to NERC’s Electricity Information Sharing and Analysis Center, as well as to DHS.”

He said FERC’s Office of Energy Infrastructure Security has been working “with partners in industry, states, and other federal agencies to address both cyber and physical security issues for critical energy infrastructure. These initiatives include, among other things, voluntary architecture assessments of interested entities, classified briefings for state and industry officials, and joint security programs with other government agencies and industry.”

LaFleur’s Testimony

LaFleur said that since the wholesale electric power markets were created 20 years ago, they have grown to the point that they now serve over two-thirds of the country. “These markets save customers money by driving the efficient dispatch of resources over a large footprint, facilitate the introduction of innovative technologies and greater customer-side participation in the power supply, and, depending on the underlying state regulatory construct, shift investment risk from electricity customers to company shareholders.”

She said there are some challenges the markets face, but even with those concerns, “participation in organized markets continues to expand, with utilities and states in the West and Southeast exploring integration into existing organized markets or the creation of new regional markets.”

She explained that recently ” there has been significant debate over whether power markets are “real” markets. Frankly, this debate concerns me, as I have observed it often occurs in conjunction with arguments favoring intervention on behalf of particular types of resources, at the expense of economic efficiency and therefore customer benefits.” LaFleur said that there needs to be regulation in every market to make sure it stays both fair and effective, but “the real-time nature of electricity, which requires the balancing of load and supply second by second, leads to a more complex market than many others, and requires more comprehensive regulation to ensure its proper function.”

Resource selection, Lafleur says, is a big challenge for both FERC and the electric industry as a whole. She said this is a complex issue, ” particularly in states that restructured their retail electricity supply, given the divided regulatory responsibilities among the states, the organized markets, and the Commission.”

“In recent years … power markets generally have been roiled by low gas prices and by the build-out of renewables that have different cost, operating, and geographic characteristics than traditional fuel-based generation. These lower cost resources have significantly decreased wholesale power prices, to customers’ benefit, but have also threatened the financial viability of certain traditional resources, particularly coal and nuclear plants.” Several states responded to those changes by seeking “either to retain resources that are not thriving in the market, or to accelerate the resource change by supporting new resources that the market would not otherwise procure.”

Another major issue that FERC is facing, according to Lafleur is: “once we have selected the resources we need for the future – whether by market forces, integrated resource planning, or some combination – how do we price and dispatch them?” There is evidence from all over the country that, in both “organized markets and bilateral market regions, indicates that a fundamental shift in how we procure and pay for energy is underway.”

It was only recently that it stopped being “accepted without question that electric power was priced on volume, since a major component of cost was the commodity cost of the fuel burned to generate it. Baseload, intermediate, and peaking resources each played a well-understood role in helping to balance load.” She said that the data from more recent years shows that “cost curves, which traditionally have identified baseload resources as the cheapest and peaking resources as the most expensive, now look differently in many areas. With persistently low natural gas prices, zero marginal cost renewable resources, and distributed energy resources changing the shape of load curves, the traditional cost structures that supported resources may no longer provide appropriate compensation.”

“To help adapt to the new resource mix, regional market operators and others are considering new ways of paying for power, with a focus on services instead of volume. This change is visible in the energy and ancillary services markets, with services such as flexible ramping products, scarcity pricing, new forms of reserves, and a greater attention to essential reliability services. In addition, some regions have revised their capacity markets to better ensure resource performance.”

FERC has been taking “steps to ensure that new resources, including storage, variable resources, demand response, and distributed energy resources, can compete to provide services that customers need.”

Lafleur also addressed the use of gas energy: “The growth in domestic natural gas production and gas-fired electric generation has led to considerable buildout of the nation’s gas pipeline network. I have called for reconsideration of how the Commission determines the need for pipelines to reflect market conditions and assess on a regional basis whether more infrastructure can be supported for these long-lived assets.”

She says that she also thinks FERC “must do a better job of assessing and considering the climate impacts of gas pipelines and liquefied natural gas (LNG) projects. Before determining whether a proposed pipeline project is in the public interest under the Natural Gas Act (NGA), the Commission must disclose and consider the project’s environmental impacts under the National Environmental Policy Act (NEPA).” However, when it comes to LNG projects, FERC “must find that the proposed LNG export facility is not inconsistent with the public interest under the Natural Gas Act, while the Department of Energy (DOE), not FERC, considers the public interest regarding the export of the gas itself.”

“In May of 2018, the Commission elected to remove much of the greenhouse gas (GHG) quantification and consideration from orders going forward. I disagree with this decision and continue to advocate that the Commission undertake robust climate analysis; specifically, quantifying, considering and assessing the significance of the direct, indirect, and cumulative GHG emissions from proposed projects.” Lafleur explained that she will conduct her “own GHG calculation and analysis to weigh against the pipeline benefits and set out my thinking in separate concurring statements.”

Energy Infrastructure Update for April 2019 Issued by FERC

Energy Infrastructure Update for April 2019 Issued by FERC

On June 7, the Federal Energy Regulatory Commission (FERC) released their Energy Infrastructure Update for April, related to natural gas and hydropower, and covering the highlights for electric generation and transmissions.

In April, six new pipeline projects were certified and another one was proposed. Two Liquefied natural gas (LNG) import/export projects were certified.

In the year thus far, a total of four pipeline projects have been placed into service, compared to three in the same period in 2018; 13 more have been certified, compared to 19 at this time last year. One LNG storage facility has been certified, compared to three last year.

For LNG imports and exports, two exports have been placed in service this year, compared to one in 2018; four import/exports have been certified this year, compared to none at this point in 2018.

For hydropower, one license was filed in April, and that is the only activity in April. Another two facilities have filed capacity amendments in this year so far.

In April there were no new coal facilities, as there have been for all of 2019 to that point; there were four at this time in 2018.

There was one new natural gas unit, making 22 for the year to date; there were 26 at this time in 2018. There has been nothing new for nuclear power this year; there were three at this point last year. One new oil facility was added in April, making it a total of three for the year; compared to 10 from this time last year. There were no hydropower units added, but there have been four this year; compared to six last year. There was one wind power unit added, making it a total of 18 this year; compared to 17 last year. There have been no new biomass units added this year, compared to five last year. There have been no new geothermal steam units added this year either, and only two were added in this period last year. Four new solar powered units were added in April, making a total of 102 this year; compared to 213 at this time last year.

There were many proposed additions and retirements in April, to be done by May 2022. There were two proposed additions for coal, both are considered highly probable, and 50 proposed retirements. There were 226 proposed additions for natural gas, 110 are highly probable, and 109 units were proposed retired. Nuclear power had 11 additions proposed, three are highly probable, and eight proposed retirements. There were 11 additions for oil, 11 are highly probable, and there were 26 retirements. Hydropower had 224 additions, 82 highly probable, and 19 retirements. There were 543 additions for wind, 140 highly probable, and one retirement. There were 64 biomass additions, 29 highly probable, and 30 retirements. There were 18 geothermal steam additions, six highly probable, and no proposed retirements. Solar power had 2,510 additions proposed, 527 highly probable, and one retirement.

For electric transmissions, in the ≤230 range, 71 miles of line was laid in April, making a total of 91 this year; compared to April 2018 with 11 miles of line and a total of 392.3 in all of 2018. There were 1,748 miles of line proposed to be put in service by May 2021, and 532.1 were highly probable. In the 345 voltage, four miles of line were completed, making a total of 169 this year; there were 70 in April 2018, and 819.3 in all of 2018. There were 2,712 miles proposed, 1,067 considered highly probable. In the 500-voltage range, there were none laid in April, of this year or last, and only a total of 7.4 miles in 2019 this year total, and 69.4 in 2018; 1,662 miles were proposed additions, 738 of which are highly probable. A total of 75 miles were laid in April, close to the 81 in 2018; there have been 267.4 miles this year so far, compared to 1,281 in 2018. A total of 6,122 miles have been proposed, and 2,337.1 are considered highly probable.

FERC Has Approved Freeport LNG’s Request

FERC Has Approved Freeport LNG’s Request

The Federal Energy Regulatory Commission (FERC) on May 16, approved the Freeport LNG terminal in Texas’ request for construction of the Train 4 expansion. This is the fourth liquefied natural gas (LNG) export project that FERC has approved this year. Freeport LNG filed an application for the expansion in June 2017.

“I’m proud of the efforts by the Commission and its staff to process today’s and our previous LNG orders,” FERC Chairman Neil Chatterjee said. “Exporting LNG from the United States can help increase the availability of inexpensive, clean-burning fuel to our global allies who are looking for an efficient, affordable and environmentally friendly source of generation.”

This expansion “involves construction of a liquefaction unit similar to Freeport’s other three units at the site, as well as associated pipelines, storage vessels and related facilities.” It should allow 0.74 billion cubic feet of natural gas per day when it’s finished.

Two of FERC’s Commissioners released individual statements about this ruling, Cheryl A. LaFleur and Richard Glick. LaFleur wrote that she concurs with the approval, while Glick dissents. Glick wrote that he dissents for a few reasons, including that in his opinion, “it violates both the Natural Gas Act (NGA) and the National Environmental Policy Act (NEPA).”

To read the entire approval, click here.

Statement of Commissioner McNamee

Statement of Commissioner McNamee

On May 16, the Federal Energy Regulatory Commission (FERC) released an order for rehearing and clarification on Order No. 841, “amending its regulations under the Federal Power Act to remove barriers to the participation of electric storage resources in the capacity, energy, and ancillary service markets operated by Regional Transmission Organizations and Independent System Operators.” FERC Commissioner Bernard L. McNamee released a statement to argue his positions on some of the issues in the rehearing order. McNamee decided to issue a separate statement “because I am concerned that, like Order No. 841, today’s order on rehearing fails to recognize the states’ interests in ESRs located behind a retail meter (behind-the-meter) or connected to distribution facilities.”

In this statement, McNamee says that “I am troubled, however, that the Storage Orders do not fully respect or consider the impact they may have on local distribution systems, the states that regulate those local distributions systems, and local retail customers. To that end, I dissent from today’s order. I would have granted the rehearing requests asking the Commission to reconsider: (i) its finding that it has jurisdiction over whether ESRs located behind-the-meter or on the local distribution system are permitted to participate in the RTO/ISO markets through the ESR participation model and thereby asserting jurisdiction over distribution facilities; and (ii) its failure to provide states the opportunity to opt-out of the participation model created by the Storage Orders.”

“Electric energy storage resources (ESRs) have the potential to transform the electricity industry.” This is because they “will allow the electric transmission system to take full advantage of periods of high generation from intermittent resources, such as wind and solar, and use that energy in times when those resources are not available, but energy is needed.” He explained that there has been a growing amount of ESRs participating in the electricity market, which will allow a “greater shifting between generation and load — thereby enhancing reliability and market signals.” He says the ESRS can make a significant impact on the market and economic efficiency, which has to date been unattainable by the industry and its consumers.

“Order No. 841-A mandates that ESRs be permitted to use distribution facilities so that they may access the wholesale electric market,” McNamee writes. “There is no doubt that the participation of ESRs behind-the-meter or on the distribution lines can ‘affect wholesale rates,’ but in order to ‘affect’ wholesale rates such ESRs must first have access to the wholesale market, and they can only do so by using distribution facilities. In my view, the FPA does not provide the Commission with the authority to require that distribution facilities permit ESRs to use those facilities to access wholesale markets.”

For an ESR that’s “located either behind-the-meter or on the distribution system, the only way it can sell its energy at wholesale is by using distribution facilities to deliver energy to the wholesale market.” FERC concluded in Order 841 “that because ESRs’ sales and purchases can affect wholesale rates, the Commission therefore has the authority to dictate that ESRs have access to the wholesale market through distribution facilities… It is only when an ESR is provided access to the wholesale power markets through the distribution facilities that the Commission can exercise its authority; but the Commission cannot mandate that such access be provided on the local distribution facilities. That decision remains with the local distribution utilities and the states that regulate them.”

“In Order No. 841, the Commission asserted that because ESRs can [affect] wholesale rates, ESRs must be allowed to connect behind-the-meter and to the distribution facilities in order to participate in the wholesale markets… I believe that the requirement in the Storage Orders that states must permit distribution and behind-the-meter ESRs to use distribution facilities to access the wholesale markets creates a regulatory plan that fails to ‘happen exclusively’ on the wholesale market and fails to exclusively govern the wholesale market’s rules.”

At one point, FERC “considered a request for a declaratory ruling that, among other things, found the Commission had exclusive jurisdiction under the FPA to regulate the participation of certain EERs in wholesale electricity markets and that the states lacked the authority to bar or otherwise interfere with the participation of EERs in those markets.”

“The Storage Orders will likely result in day-to-day operational impacts on the distribution system greater than those presented by EERs or DR, but without providing states an opportunity to avoid these impacts by allowing them to opt out… An ESR’s activity quite literally pushes or pulls energy across the distribution facilities and thereby has a very real physical impact on the distribution system. The physical nature of an ESR’s activities may impact the operations of distribution-level facilities as well as their safety and reliability in a manner that DR’s and EERs’ voluntary decision not to consume electricity does not… The real physical and operational impacts ESRs have on the distribution system in my estimation weigh in favor of the Commission exercising its discretion to provide an opt-out to the states in this matter.”

“I am concerned that the Storage Orders potentially will create complications for, and impact the day-to-day operations and management of, the distribution system – as well as its safety and reliability – in a manner that is in fact greater than the impact of demand response resources because ESRs actually inject energy into the system.”

“Order No. 841 holds that ‘state responsibilities include, among other things, retail services and matters related to the distribution system, including design, operations, power quality, reliability, and system costs.’ However, the majority in Order No. 841-A dismisses the issue of increased cost on the distribution system as ‘outside the scope of this proceeding’ and argues that ‘we are not changing the responsibilities of the distribution utilities.’” McNamee says he disagrees with this, because “it is clear that many parties feel strongly that the Storage Orders do in fact increase their responsibilities, and if the majority does not want to address these issues in this proceeding, then they should at least provide an option for states to avoid these costs by opting out.”

“The majority also should not dismiss concerns over equity or cost allocation. When a distribution utility is concerned that it ‘will need to harden the underlying distribution system to support bidirectional power flows and pay for substantial metering upgrades’ to accommodate ESRs, and that the associated costs ‘could be trapped at the distribution level and allocated to end-users rather than wholesale market participants,’ in my view the Commission should not flatly disclaim involvement. The majority is willing to assert jurisdiction over the distribution system through the participation model, but they are unwilling to confront or take responsibility for the practical ramifications of their decisions.”

“In the complex and overlapping jurisdictions of electricity, a retail customer with a complaint or question about his or her bill or service may find it difficult to know whom to contact about that service. When service involves the distribution system, it is natural for a customer to call the local utility or the state public utility commission. The Commission should be cognizant that, by denying states an opt-out provision with respect to the Storage Orders, the majority is not only placing a burden on the distribution utility or the state to address any impacts of ESRs on the distribution system, they are in effect asking the distribution utility or state to take ownership of and accountability for that burden.”

McNamee concluded saying that if ESRs have the “correct regulatory and policy framework,” they could “transform the electricity industry by unlocking significant economic and market efficiency benefits.”

The order for rehearing will become effective 90 days after its publication in the Federal Register.