Reed Smith Client Alerts

The Federal Energy Regulatory Commission made it clear that energy storage resources (ESRs) will be a valuable component of the nation’s bulk power grid with the issuance of Order No. 841 on February 15, 2018. Order No. 841 requires Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) to modify certain market rules that had stifled the development and utilization of ESRs. The Commission’s rulemaking also establishes fundamental criteria that RTOs and ISOs must adhere to as they incorporate ESRs into their operational footprints. RTOs and ISOs must submit compliance filings to the Commission reflecting the reforms mandated by Order No. 841 within 270 days of the order’s publication in the Federal Register.

Energy storage technology has long outpaced the market and legal rules that govern its implementation. However, on February 15, 2018, the Federal Energy Regulatory Commission (Commission) undertook additional, significant reforms to close the gap between the promise of energy storage and its widespread adoption with the issuance of Order No. 841. Formally titled Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators,1 Order No. 841 is a final rule intended to further integrate electric storage resources (ESRs) into wholesale electricity markets.

This final rule has been long in the making. On November 19, 2015, the Commission hosted a panel discussion on ESRs signaling its intent to rethink its approach to ESR regulation. The Commission then solicited input from Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) about the rules they applied to ESRs in their respective markets. On November 17, 2016, the Commission issued a Notice of Proposed Rulemaking in Docket Nos. RM16-23-000 and AD16-20-000 that proposed to amend certain regulations under the Federal Power Act that had stalled the incorporation of ESR technology into the bulk power grid. Then, on January 19, 2017, the Commission issued a policy statement on Utilization of Electric Storage Resources for Multiple Services When Receiving Cost-Based Rate Recovery.2 In that proceeding, the Commission explained how ESRs could qualify for cost-based rate recovery for certain services while also receiving market-based revenues for market-based services.3 Order No. 841, the culmination of the Commission’s ESR reforms, therefore calls for a new participation model to fully leverage the unique physical and operational attributes of ESRs.

As defined by the Commission, an ESR is “a resource capable of receiving electric energy from the grid and storing it for later injection of electric energy back to the grid.”4 Although RTOs and ISOs have already deployed various types of ESRs to provide energy and ancillary services, the Commission recognized that ESRs have often been wedged into a regulatory framework that was designed for conventional generation or load resources. Consequently, the existing market rules and legal strictures impeded the expansion of ESR technology.