[Federal Register Volume 84, Number 100 (Thursday, May 23, 2019)]
[Rules and Regulations]
[Pages 23902-23927]
[FR Doc No: 2019-10742]

Vol. 84

Thursday,

No. 100

May 23, 2019

Part IV

Department of Energy

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Federal Energy Regulatory Commission

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18 CFR Part 35

Electric Storage Participation in Markets Operated by Regional
Transmission Organizations and Independent System Operators; Final Rule

Federal Register / Vol. 84 , No. 100 / Thursday, May 23, 2019 / Rules
and Regulations

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 35

[Docket Nos. RM16-23-001; AD16-20-001; Order No. 841-A]

Electric Storage Participation in Markets Operated by Regional
Transmission Organizations and Independent System Operators

AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Order on rehearing and clarification.

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SUMMARY: The Federal Energy Regulatory Commission addresses petitions
for rehearing and clarification and generally affirms its
determinations in 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.

DATES: This order on rehearing and clarification will become effective
August 21, 2019.

FOR FURTHER INFORMATION CONTACT:
Kaitlin Johnson (Technical Information), Office of Energy Policy and
Innovation, Federal Energy Regulatory Commission, 888 First Street NE,
Washington, DC 20426,<PHONE_NUMBER><EMAIL_ADDRESS>Karin Herzfeld (Legal Information), Office of the General Counsel,
Federal Energy Regulatory Commission, 888 First Street NE, Washington,
DC 20426,<PHONE_NUMBER><EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Table of Contents

                                                         Paragraph No.

I. Introduction......................................                  1
II. Discussion.......................................                  5
    A. Definition of Electric Storage Resource.......                  5
        1. Final Rule................................                  5
        2. Requests for Rehearing or Clarification...                 11
        3. Commission Determination..................                 30
    B. Participation Model for Electric Storage                       63
     Resources.......................................
        1. Final Rule................................                 63
        2. Requests for Rehearing or Clarification...                 64
        3. Commission Determination..................                 65
    C. Eligibility of Electric Storage Resources To                   66
     Participate in the RTO/ISO Markets..............
        1. Final Rule................................                 66
        2. Requests for Rehearing or Clarification...                 67
        3. Commission Determination..................                 68
    D. Participation in the RTO/ISO Markets as Supply                 69
     and Demand......................................
        1. Eligibility To Participate as a Wholesale                  69
         Seller and Wholesale Buyer..................
        2. Participation as Price Takers.............                 82
    E. Physical and Operational Characteristics of                    86
     Electric Storage Resources......................
        1. Requirement To Incorporate Bidding                         86
         Parameters as Part of the Electric Storage
         Resource Participation Model................
    F. Minimum Size Requirement......................                 94
        1. Final Rule................................                 94
        2. Requests for Rehearing or Clarification...                 98
        3. Commission Determination..................                102
    G. Energy Used To Charge Electric Storage                        107
     Resources (Charging Energy).....................
        1. Price for Charging Energy.................                107
        2. Metering and Accounting Practices for                     124
         Charging Energy.............................
III. Compliance Requirements.........................                145
    A. Final Rule....................................                145
    B. Requests for Rehearing or Clarification.......                147
    C. Commission Determination......................                154
IV. Document Availability............................                158

I. Introduction

    1. On February 15, 2018, the Federal Energy Regulatory Commission
(Commission) issued Order No. 841, which established reforms to remove
barriers to the participation of electric storage resources \1\ in the
Regional Transmission Organization and Independent System Operator
markets (RTO/ISO markets).\2\ The Commission found that existing RTO/
ISO market rules are unjust and unreasonable in light of barriers that
they present to the participation of electric storage resources in the
RTO/ISO markets, thereby reducing competition and failing to ensure
just and reasonable rates.\3\ To help ensure that the RTO/ISO markets
produce just and reasonable rates, pursuant to the Commission's legal
authority under Federal Power Act (FPA) section 206,\4\ the Commission
in Order No. 841 modified Sec.  35.28 of the Commission's regulations
\5\ to require each RTO/ISO to revise its tariff to establish market
rules that, recognizing the physical and operational characteristics of
electric storage resources, facilitate their participation in the RTO/
ISO markets.\6\
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    \1\ Electric Storage Participation in Markets Operated by
Regional Transmission Organizations and Independent System
Operators, Order No. 841, 83 FR 9580, 162 FERC ] 61,127, at P 1
(2018). Order No. 841 defined an electric storage resource as a
resource capable of receiving electric energy from the grid and
storing it for later injection of electric energy back to the grid.
Id. P 1 n.1.
    \2\ For purposes of Order No. 841, the Commission defined RTO/
ISO markets as the capacity, energy, and ancillary services markets
operated by the RTOs and ISOs. Id. P 1 n.2.
    \3\ Id. P 1.
    \4\ 16 U.S.C. 824e (2012).
    \5\ 18 CFR 35.28 (2018).
    \6\ Order No. 841, 162 FERC ] 61,127 at P 1.
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    2. More specifically, Order No. 841 required each RTO/ISO to revise
its tariff to establish a participation model consisting of market
rules that, recognizing the physical and

operational characteristics of electric storage resources, facilitates
their participation in the RTO/ISO markets.\7\ For each RTO/ISO, the
tariff provisions for the participation model for electric storage
resources must (1) ensure that a resource using the participation model
for electric storage resources is eligible to provide all capacity,
energy, and ancillary services that it is technically capable of
providing in the RTO/ISO markets; (2) ensure that a resource using the
participation model for electric storage resources can be dispatched
and can set the wholesale market clearing price as both a wholesale
seller and wholesale buyer consistent with existing market rules that
govern when a resource can set the wholesale price; (3) account for the
physical and operational characteristics of electric storage resources
through bidding parameters or other means; and (4) establish a minimum
size requirement for participation in the RTO/ISO markets that does not
exceed 100 kW.\8\ Additionally, Order No. 841 directed each RTO/ISO to
specify that the sale of electric energy from the RTO/ISO markets to an
electric storage resource that the resource then resells back to those
markets must be at the wholesale locational marginal price (LMP).
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    \7\ Id. P 3. In Order No. 841, the Commission used the term
``participation model'' to refer to distinct tariff provisions that
an RTO/ISO creates for a particular type of resource when that type
of resource has unique physical and operational characteristics or
other attributes that warrant distinctive treatment from other
market participants. The Commission further explained that it was
requiring a participation model for electric storage resources that
will help facilitate the participation of electric storage resources
in the RTO/ISO markets. Id.
    \8\ Id. P 4.
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    3. The following petitioners filed timely requests for rehearing or
rehearing and clarification of Order No. 841: AES Companies; American
Municipal Power, Inc., American Public Power Association, and National
Rural Electric Cooperative Association (collectively, AMP/APPA/NRECA);
California Energy Storage Alliance; California Independent System
Operator Corporation (CAISO); Edison Electric Institute (EEI);
Midcontinent Independent System Operator, Inc. (MISO); National
Association of Regulatory Utility Commissioners (NARUC); Transmission
Access Policy Study Group (TAPS); and Xcel Energy Services Inc. (Xcel
Energy Services).\9\ Organization of MISO States; Pacific Gas and
Electric Company; PJM Interconnection, L.L.C. (PJM); and Southwest
Power Pool, Inc. (SPP) filed requests for clarification. For the
reasons discussed below, we deny the requests for rehearing and deny in
part and grant in part the requests for clarification.
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    \9\ Advanced Energy Economy, Energy Storage Association, and
Monitoring Analytics, LLC acting in its capacity as the Independent
Market Monitor for PJM filed answers to the requests for rehearing
or clarification. Title 18 CFR 385.713(d)(1), Rule 713(d)(1) of the
Commission's Rules of Practice and Procedure, prohibits an answer to
a request for rehearing. Accordingly, we reject these answers.
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    4. Specifically, we grant SPP's request for clarification that
Order No. 841 does not require an RTO/ISO to create and provide a
capacity product that an RTO/ISO market does not otherwise offer. We
also grant PJM's request for clarification that the final rule allows
for flexibility in how RTOs/ISOs account for the physical and
operational characteristics of electric storage resources, including
State of Charge. We further grant EEI's request to clarify that the
Commission will not dismiss as per se unreasonable any proposal to
establish a non-facility-specific rate for wholesale distribution
service to an electric storage resource for its charging. We also grant
CAISO's request to clarify that an RTO/ISO could require verification
from the host distribution utility that it is unable or unwilling to
net wholesale demand from retail settlement before the RTO/ISO ceases
to settle an electric storage resource's wholesale demand at the
wholesale LMP. Finally, we grant clarification of the Commission's
finding that applicable transmission charges should apply when an
electric storage resource is charging to resell energy at a later time.
We also modify Sec.  35.28(g)(9)(i)(B) of the Commission's regulations
to clarify that each RTO/ISO is required to allow resources using the
participation model for electric storage resources to participate in
the RTO/ISO markets as dispatchable resources, not that such resources
are required to be dispatchable to use that participation model.

II. Discussion

A. Definition of Electric Storage Resource

1. Final Rule
    5. In Order No. 841, the Commission revised Sec.  35.28(b) of the
Commission's regulations to define an electric storage resource as ``a
resource capable of receiving electric energy from the grid and storing
it for later injection of electric energy back to the grid.'' \10\ The
Commission stated that this definition is intended to cover electric
storage resources capable of receiving electric energy from the grid
and storing it for later injection of electric energy back to the grid,
regardless of their storage medium (e.g., batteries, flywheels,
compressed air, and pumped-hydro). Additionally, the Commission stated
that electric storage resources located on the interstate transmission
system, on a distribution system, or behind the meter fall under this
definition. The Commission stated that, by including all electric
storage technologies, and by allowing resources that are interconnected
to the transmission system, distribution system, or behind the meter to
use the participation model for electric storage resources, the
Commission was ensuring that the market rules will not be designed for
any particular electric storage technology.\11\
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    \10\ Order No. 841, 162 FERC ] 61,127 at P 29.
    \11\ Id.
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    6. The Commission observed that an electric storage resource that
injects electric energy back to the grid for purposes of participating
in an RTO/ISO market engages in a sale of electric energy at wholesale
in interstate commerce.\12\ As a result, the Commission found that such
an electric storage resource must fulfill certain responsibilities set
forth in the FPA and the Commission's rules and regulations.\13\
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    \12\ Id. P 30. The Commission also observed that injections of
electric energy back to the grid do not necessarily trigger the
Commission's jurisdiction. Id. n.49 (citing Sun Edison LLC, 129 FERC
] 61,146 (2009), reh'g granted on other grounds, 131 FERC ] 61,213
(2010) (the Commission's jurisdiction would arise only when a
facility operating under a state net metering program produces more
power than it consumes over the relevant netting period);
MidAmerican Energy Co., 94 FERC ] 61,340 (2001)).
    \13\ Id. P 30. The Commission provided the following examples of
such responsibilities: Filing rates under FPA section 205
(potentially including obtaining market-based rate authority);
submitting FPA sections 203 and 204 filings related to corporate
mergers and other activities; and fulfilling FPA section 301
accounting obligations and FPA section 305(b) interlocking
directorate obligations. Id. (citing 16 U.S.C. 824b, 824c, 824d,
825, 825d(b)).
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    7. The Commission disagreed with commenters who asserted that the
definition of an electric storage resource should be limited to those
electric storage resources that are interconnected to the transmission
system.\14\ The Commission found that electric storage resources
interconnected to the distribution system are already participating in
the RTO/ISO markets \15\ and that they should continue to be able to do
so. The Commission stated that such a limitation also would be
inconsistent with the participation of other types of resources because
various types of traditional generation and demand-side resources that
are not connected directly to the transmission

system currently participate in the RTO/ISO markets.
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    \14\ Id. P 31.
    \15\ Id. (citing PJM Interconnection L.L.C., 149 FERC ] 61,185
(2014), order on reh'g, 151 FERC ] 61,231 (2015)).
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    8. The Commission also explained that, by ``capable of . . . later
injection of electric energy back to the grid,'' it meant that the
electric storage resource is both physically designed and configured to
inject electric energy back onto the grid and, as relevant, is
contractually permitted to do so (e.g., per the interconnection
agreement between an electric storage resource that is interconnected
on a distribution system or behind-the-meter with the distribution
utility to which it is interconnected).\16\ Consequently, the
Commission found that the definition of an electric storage resource
excludes a resource that is either (1) physically incapable of
injecting electric energy back onto the grid due to its design or
configuration or (2) contractually barred from injecting electric
energy back onto the grid. Further, the Commission explained that Order
No. 841 requires each RTO/ISO to implement market rules applicable to
electric storage resources, as defined therein, that voluntarily seek
to participate in the RTO/ISO markets; Order No. 841 does not require
electric storage resources to participate in those markets.\17\
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    \16\ Id. P 33.
    \17\ Id. P 35.
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    9. The Commission stated that it has exclusive jurisdiction over
the wholesale markets and the criteria for participation in those
markets, including the wholesale market rules for participation of
resources connected at or below distribution-level voltages.\18\ The
Commission also noted its understanding that numerous resources
connected to the distribution system participate in the RTO/ISO markets
today.\19\ Under those circumstances, the Commission was not persuaded
to grant commenters' request that the Commission allow states to decide
whether electric storage resources in their state that are located
behind a retail meter or on the distribution system are permitted to
participate in the RTO/ISO markets through the electric storage
resource participation model.
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    \18\ Id. (citing FERC v. Elec. Power Supply Ass'n, 136 S. Ct.
760 (2016) (EPSA); Advanced Energy Economy, 161 FERC ] 61,245, at PP
59-60 (2017) (AEE), reh'g denied, 163 FERC ] 61,030 (2018) (AEE
Rehearing Order)).
    \19\ Id. (citing Southern California Edison Co., Docket No.
ER10-1356-000 (2010) (accepting Southern California Edison's
Wholesale Distribution Access Tariff); PJM Interconnection, L.L.C.,
Docket No. ER11-3148-000 (2011) (delegated letter order) (accepting
Wholesale Market Participation Agreement among PJM, CleanLight
Power, L.L.C. and Public Service Electric and Gas Company); PJM
Manual 14C, section 1.3 (discussing requirements of Wholesale Market
Participation Agreements)).
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    10. That said, the Commission emphasized the ongoing, vital role of
the states with respect to the development and operation of electric
storage resources.\20\ The Commission noted that such state
responsibilities include, among other things, retail services and
matters related to the distribution system, including design,
operations, power quality, reliability, and system costs. The
Commission added that nothing in Order No. 841 was intended to affect
or implicate the responsibilities of distribution utilities to maintain
the safety and the reliability of the distribution system or their use
of electric storage resources on their systems. Further, in Order No.
841, the Commission added Sec.  35.28(g)(9)(ii) to the Commission's
regulations to require that the sale of electric energy from the RTO/
ISO markets to an electric storage resource that the resource then
resells back to those markets be at the wholesale LMP.\21\
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    \20\ Id. P 36.
    \21\ The substantive requirements of this determination are
discussed further in section II.G. (Energy Used to Charge Electric
Storage Resources).
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2. Requests for Rehearing or Clarification
    11. Petitioners raise several issues concerning the Commission's
authority with respect to electric storage resources' participation in
RTO/ISO markets. First, some petitioners contend that the Commission
must, or should, provide relevant electric retail regulatory
authorities (RERRA) with an electric storage resource opt-out similar
to that afforded for demand response in Order No. 719. Second,
petitioners raise concerns about the Commission's authority to require
that the sale of electric energy from the RTO/ISO markets to an
electric storage resource that the resource then resells back to those
markets be at the wholesale LMP.
    12. Several petitioners \22\ ask the Commission to grant rehearing
or clarification of the Commission's denial of requests to ``allow
states to decide whether electric storage resources in their state that
are located behind a retail meter or on the distribution system are
permitted to participate in the RTO/ISO markets through the electric
storage resource participation model.'' \23\ Generally, these
petitioners contend that the Commission's decision to decline to adopt
an electric storage resource opt-out is a violation of FPA section 201,
which expressly excludes from Commission jurisdiction retail electric
service and facilities for the local distribution of electric
energy.\24\ Petitioners also cite to the Commission's demand response
rule in Order No. 719 and the U.S. Supreme Court's decision in EPSA to
support their proposition that the Commission must adopt an electric
storage resource opt-out.\25\
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    \22\ See e.g., AMP/APPA/NRECA; EEI; NARUC; Organization of MISO
States; TAPS; and Xcel Energy Services.
    \23\ Order No. 841, 162 FERC ] 61,127 at P 35 (referred to
herein as the decision not to adopt an ``electric storage resource
opt-out'').
    \24\ See, e.g., AMP/APPA/NRECA Rehearing Request at 8 (citing 16
U.S.C. 824(b); NARUC Rehearing Request at 3 (citing 16 U.S.C.
824(b), 824o(i); Cal. Indep. Sys. Operator Corp. v. FERC, 372 F.3d
395, 398-99 (D.C. Cir. 2004)); Xcel Energy Services Rehearing
Request at 8.
    \25\ See Wholesale Competition in Regions with Organized
Electric Markets, Order No. 719, 125 FERC ] 61,071 (2008), order on
reh'g, Order No. 719-A, 128 FERC ] 61,059, order on reh'g, Order No.
719-B, 129 FERC ] 61,252 (2009); EPSA, 136 S. Ct. 760.
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a. Whether the Commission Is Required To Adopt an Opt-Out
    13. AMP/APPA/NRECA ask the Commission to grant rehearing and
declare that Order No. 841 is limited to RTO/ISO market rules, and
nothing in Order No. 841 overrides state laws or tariff requirements
that might prohibit or limit an electric storage resource
interconnected with the distribution system or behind a retail meter
from directly accessing the wholesale market.\26\ They assert that the
Commission does not have authority to disregard or override state and
local restrictions on the participation of distribution-level and
behind-the-meter electric storage resources in wholesale markets
because FPA section 201(b) reserves to the states the regulation of
retail service and specifically excludes local distribution facilities
from the Commission's jurisdiction.\27\ They further argue that the
Commission lacks authority to compel entities exempt from the
Commission's rate jurisdiction under FPA section 201(f), such as public
power and cooperative utilities, to allow retail behind-the-meter
electric storage resources to participate in wholesale markets.\28\
They contend that, while certain distribution-connected resources may
participate in wholesale markets, the Commission has indicated that
``the vast majority of small generator interconnections will be with
state jurisdictional facilities'' and that such interconnections will
be governed by state law.\29\ Therefore, they argue that

the Commission has exceeded its authority if Order No. 841 indicates
that an electric storage resource taking retail service from a
distribution utility may disregard retail service terms and conditions
that limit direct participation in the wholesale market.\30\
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    \26\ AMP/APPA/NRECA Rehearing Request at 8.
    \27\ Id. at 9 (citing 16 U.S.C. 824(b)(1); EPSA, 136 S. Ct. at
775).
    \28\ Id. at 9 n.25.
    \29\ Id. at 9 (citing Standardization of Small Generator
Interconnection Agreements and Procedures, Order No. 2006-A, 113
FERC ] 61,195, at P 105 (2005), clarified, Order No. 2006-B, 116
FERC ] 61,046 (2006), corrected, 71 FR 53,965 (Sept. 13, 2006)).
    \30\ Id. at 9.
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    14. TAPS similarly asserts that states' exclusive jurisdiction to
set the terms and conditions of retail service includes conditioning
receipt of retail service on the customer's agreement as to whether and
how to interconnect behind-the-meter resources and what the customer
may do with such resources.\31\ Xcel Energy Services contends that
granting rehearing would not allow states to change the Commission's
criteria for participating in wholesale markets, but would require
electric storage resources connected at the distribution level or
behind the meter to also ensure that their activities are in accordance
with state legal requirements governing retail sales and use of the
distribution system.\32\
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    \31\ TAPS Rehearing Request at 7-8.
    \32\ Xcel Energy Services Rehearing Request at 6-7.
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    15. Some petitioners argue that, while the Commission cites EPSA
\33\ for the proposition that it ``has exclusive jurisdiction over the
wholesale markets and the criteria for participation in those
markets,'' \34\ EPSA does not support the Commission's decision not to
adopt an electric storage resource opt-out.\35\ AMP/APPA/NRECA assert
that (1) EPSA concerned federal authority to regulate wholesale demand
response compensation, not state authority over demand response
resource participation,\36\ (2) the Order No. 719 opt-out rules were
not at issue in EPSA because the Supreme Court treated those rules as
an established part of the regulatory framework for demand
response,\37\ and (3) the authority of states to veto retail customer
participation in demand response aggregations was a reason for the
Court's finding that the Commission did not improperly intrude on
states' jurisdiction over retail sales.\38\ NARUC argues that, while
EPSA supports the assertion that the Commission may determine how
resources participate in the RTO/ISO markets because the Commission has
the authority to determine how prices are set, EPSA does not support
the finding that states cannot determine whether resources can
participate in the RTO/ISO markets.\39\
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    \33\ 136 S. Ct. 760.
    \34\ Order No. 841, 162 FERC ] 61,127 at P 35.
    \35\ See, e.g., AMP/APPA/NRECA, NARUC, and Xcel Energy Services.
    \36\ AMP/APPA/NRECA Rehearing Request at 10-11 (citing Order No.
841, 162 FERC ] 61,127 at P 35; EPSA, 136 S. Ct. at 773).
    \37\ Id. at 11 (citing EPSA, 136 S. Ct. at 771, 772, 779-80).
They assert that the Court had no reason to address and did not
address the scope of the Commission's authority to determine which
demand response resources are eligible to participate in the
wholesale market in the first place, nor did it suggest that the
Commission may override retail service terms and conditions that
might restrict or condition such eligibility. Id.
    \38\ Id. (citing EPSA, 136 S. Ct. at 779-80).
    \39\ NARUC Rehearing Request at 6 (citing EPSA, 136 S. Ct. at
771, 773, 780).
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    16. Xcel Energy Services claims that the Supreme Court permitted
the Commission's demand response pricing changes in EPSA because,
there, the Commission addressed only ``transactions occurring on the
wholesale market,'' and ``every aspect of the regulatory plan
happen[ed] exclusively on the wholesale market and govern[ed]
exclusively that market's rules.'' \40\ Xcel Energy Services argues
that, unlike the indirect effects on retail sales that the Supreme
Court permitted in EPSA, Order No. 841 directly affects retail sales
because it allows distribution-connected and behind-the-meter electric
storage resources to make wholesale sales and purchases, which
fundamentally changes how retail sales occur and directly interferes
with a state's ability to regulate retail sales.\41\ For instance, Xcel
Energy Services argues that, if a retail customer sells into the
wholesale market and sells more than it purchases for the applicable
billing period, then what had previously been a retail sale by the
distribution company is now a wholesale sale within the Commission's
jurisdiction.\42\ Xcel Energy Services adds that, because Order No. 841
entitles an electric storage resource to purchase at wholesale from the
RTO/ISO market, Order No. 841 removes what was previously a franchised
retail sale by the distribution provider, which could preempt the
distribution utility's state-granted franchise.\43\ Xcel Energy
Services also claims that, unlike Order No. 745, which was at issue in
EPSA, Order No. 841 will require distribution utilities to establish
extensive and expensive processes to assist the market participation of
distribution-connected and behind-the-meter electric storage resources,
including (1) processes that allow electric storage resources to use
their wires to transmit energy to and from the electric transmission
grid, and (2) processes to separately track retail and wholesale sales
and purchases.\44\ Xcel Energy Services further argues that Order No.
841 will require distribution providers to manage both state-regulated
and Commission-jurisdictional interconnections, interfere with state
regulation of distribution system reliability, permit resources to
cycle in and out of state jurisdiction, and force states to accommodate
the Commission's electric storage policy.\45\
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    \40\ Xcel Energy Services Rehearing Request at 7 (citing EPSA,
136 S. Ct. at 764, 777).
    \41\ Id. at 7.
    \42\ Id. at 8 (citing Order No. 841, 162 FERC ] 61,127 at P 289
(``The Commission has found that the sale of energy from the grid
that is used to charge electric storage resources for later resale
into the energy or ancillary service markets constitutes a sale for
resale in interstate commerce.'')).
    \43\ Id. at 8-9 (citing Order No. 841, 162 FERC ] 61,127 at P
56).
    \44\ Id. at 9.
    \45\ Id. at 10-12.
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    17. Some petitioners further argue that the Commission's decision
not to adopt an opt-out is inconsistent with other provisions of Order
No. 841 that, according to petitioners, indicate that RERRAs and
distribution utilities have the authority to limit the ability of
electric storage resources to access the RTO/ISO markets.\46\ Some of
these petitioners point to the Commission's finding that ``[t]o the
extent that the host distribution utility is unable . . . or unwilling
to net out any energy purchases associated with . . . electric storage
resources' wholesale charging activities from the host customer's
retail bill, the RTO/ISO would be prevented from charging that resource
wholesale rates for the charging energy for which it is already paying
retail rates.'' \47\ These petitioners also argue that, by finding that
an electric storage resource is not eligible, by definition, for
participation in the RTO/ISO markets if it is ``contractually barred
from injecting electric energy back onto the grid,'' the Commission
acknowledged that an electric storage resource could be barred from
participation by a distribution interconnection agreement.\48\ NARUC
asserts that the Commission failed, however, to acknowledge that the
states have jurisdiction over those agreements.\49\
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    \46\ See, e.g., AMP/APPA/NRECA, NARUC, Organization of MISO
States, and TAPS.
    \47\ AMP/APPA/NRECA Rehearing Request at 6; TAPS Rehearing
Request at 7 (citing Order No. 841, 162 FERC ] 61,127 at P 326).
    \48\ AMP/APPA/NRECA Rehearing Request at 6 (citing Order No.
841, 162 FERC ] 61,127 at P 33 (``per the interconnection agreement
between an electric storage resource that is interconnected on a
distribution system or behind-the-meter with a distribution utility
to which it is interconnected'')); NARUC Rehearing Request at 8
(citing Order No. 841, 162 FERC ] 61,127 at P 33).
    \49\ NARUC Rehearing Request at 8.
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    18. NARUC also adds that PJM Manual 14C, which the Commission cited
as support for the finding that

distribution-level resources currently participate in the wholesale
markets, indicates that the Commission does not determine whether
distribution-level resources can participate in wholesale markets.\50\
NARUC asserts that PJM's Manual 14C specifies that the only reason for
a Wholesale Market Participation Agreement is to facilitate
participation by distribution-level generators over which the
Commission lacks jurisdiction.\51\ According to NARUC, the Commission
and PJM generally are not involved in the physical interconnection of
distribution-level facilities using the Wholesale Market Participation
Agreement; rather, it is a product of federal-state comity that should
not be mistaken for an exercise of exclusive federal jurisdiction.\52\
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    \50\ Id. at 6.
    \51\ Id. at 6-7 (citing PJM Manual 14C, Generation and
Transmission Interconnection Facility Construction, Revision 12,
section 1.3 (``Generators planning to connect to the local
distribution systems at locations that are not under FERC
jurisdiction and wish to participate in PJM's market need to execute
a PJM Wholesale Market Participation Agreement'')).
    \52\ Id. (citing PJM Manual 14C: Generation and Transmission
Interconnection Facility Construction, Revision 12, section 1.3
(``Generators planning to connect to the local distribution systems
at locations that are not under FERC jurisdiction and wish to
participate in PJM's market need to execute a PJM Wholesale Market
Participation Agreement''); PJM Manual 14A: New Service Request
Process, Revision 20, 4.3 (``Developers interconnecting to non-FERC
jurisdictional facilities who intend on participating in the PJM
wholesale market will receive a three party agreement known as a
[Wholesale Market Participation Agreement]. The [Wholesale Market
Participation Agreement] is a non-Tariff agreement which must be
filed with the FERC. The [Wholesale Market Participation Agreement]
is essentially an ISA without interconnection provisions.'')
(emphasis added)).
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    19. AMP/APPA/NRECA, NARUC, and TAPS also point to the Commission's
acknowledgment in Order No. 2006-A that the vast majority of
distribution-level interconnections are subject to state, rather than
Commission, jurisdiction.\53\ TAPS asserts that, because the Commission
has acknowledged that the vast majority of distribution-level
interconnections are subject to RERRA jurisdiction, the language in
Order No. 841 requiring an electric storage resource to be
``contractually permitted'' to inject electric energy back to the grid
gives RERRAs a veto over wholesale sales by distribution-connected and
behind-the-retail-meter electric storage resources.\54\ TAPS adds that,
while the Commission has reached into the distribution systems of
public utilities in narrow circumstances where the purpose of the
interconnection is for wholesale sales and the distribution facilities
at issue are already subject to the public utility's open access
transmission tariff (OATT), facilities behind the retail meter are
plainly beyond the scope of facilities ``included in a public utility's
Commission-filed OATT.'' \55\ TAPS also states that, with respect to
net metering, the Commission allows the RERRA to set the netting
interval to determine whether a distributed resource makes a net sale
of electricity subject to the Commission's jurisdiction.\56\ TAPS
asserts that, because electric storage resources that rely on energy
purchases to charge always purchase more energy than they sell, if the
RERRA sets a netting interval for such a resource that is longer than
its charge/discharge cycle, there does not appear to be a net sale of
electricity from that resource under the ``MidAmerican standard.'' \57\
---------------------------------------------------------------------------

    \53\ AMP/APPA/NRECA Rehearing Request at 9; NARUC Rehearing
Request at 3; TAPS Rehearing Request at 6 n.8 (citing Order No.
2006-A, 113 FERC ] 61,195 at P 105).
    \54\ TAPS Rehearing Request at 6 (quoting Order No. 2006-A, 113
FERC ] 61,195 at P 105 (``Order No. 2006 in no way affects rules
adopted by the states for the interconnection of generators with
state jurisdictional facilities. We expect that the vast majority of
small generator interconnections will be with state jurisdictional
facilities. The Commission encourages development of state
interconnection programs, and interconnections with state
jurisdictional facilities continue to be governed by state law.'')).
    \55\ Id. at 6 n.8 (quoting Standardization of Generator
Interconnection Agreements and Procedures, Order No. 2003-A, 106
FERC ] 61,220, at PP 710, 730, order on reh'g, Order No. 2003-B, 109
FERC ] 61,287 (2004), order on reh'g, Order No. 2003-C, 111 FERC ]
61,401 (2005), aff'd sub nom. Nat'l Ass'n of Regulatory Util.
Comm'rs v. FERC, 475 F.3d 1277 (D.C. Cir. 2007); Standardization of
Small Generator Interconnection Agreements and Procedures, Order No.
2006, 111 FERC ] 61,220, at P 481, order on reh'g, Order No. 2006-A,
113 FERC ] 61,195 (2005), order granting clarification, Order No.
2006-B, 116 FERC ] 61,046 (2006)).
    \56\ TAPS Rehearing Request at 6 n.9 (citing MidAmerican Energy
Co., 94 FERC ] 61,340, at 62,263 (2001); Order No. 2003-A, 106 FERC
] 61,220 at P 747; Sun Edison LLC, 129 FERC ] 61,146, at P 19
(2009), on reh'g, 131 FERC ] 61,213 (2010)).
    \57\ Id. at 6 n.9.
---------------------------------------------------------------------------

    20. Organization of MISO States argues that being ``contractually
permitted'' to inject electric energy back onto the grid could be
interpreted broadly to include the rules surrounding operation and
interconnection to the distribution system or narrowly to address only
technical interconnection rules.\58\ Organization of MISO States asks
the Commission to clarify that nothing in Order No. 841 is intended to
impact existing rules related to interconnection or operation of
resources connected to the distribution system and that each RTO/ISO
may adopt tariff provisions that require compliance with applicable
rules as confirmed by the distribution utility and RERRA before an
asset can be authorized to participate in the RTO/ISO markets.\59\
---------------------------------------------------------------------------

    \58\ Organization of MISO States Rehearing Request at 5.
    \59\ Id. at 5-6.
---------------------------------------------------------------------------

    21. MISO seeks clarification with respect to the Commission's
statement that it did not intend Order No. 841 ``to affect or implicate
the responsibilities of distribution utilities to maintain the safety
and the reliability of the distribution system or their use of electric
storage resources on their systems.'' MISO requests that the Commission
clarify that each RTO/ISO may require a distribution-connected electric
storage resource to comply with interconnection and/or operating
requirements intended to address, to the reasonable satisfaction of the
RTO/ISO, any potential material adverse reliability impacts on the
distribution system raised by the relevant local distribution company.
If the Commission declines to provide this clarification, MISO seeks
rehearing on this issue.
    Organization of MISO States similarly asks the Commission to
clarify that an RTO/ISO may propose tariff provisions recognizing a
unique regional situation that requires additional RERRA oversight of
resources connected to the distribution system that participate in
wholesale markets.
b. Whether the Commission Should Exercise Its Discretion and Adopt an
Opt-Out
    22. Several petitioners argue that, even if the Commission
concludes that it is not required to adopt an electric storage resource
opt-out, the Commission's decision not to adopt an opt-out is an
unexplained departure from Order No. 719, in which the Commission
reasoned that its demand response resource opt-out properly balanced
the Commission's goal of removing barriers to the development of demand
response resources in the organized wholesale markets with the
interests and concerns of state and local regulatory authorities.\60\
EEI contends that the Commission's sole reason for declining to pursue
a path of cooperative federalism by adopting an opt-out is that
distribution-connected resources already participate in the wholesale
market, which lacks factual support as to penetration and impact.\61\
AMP/APPA/NRECA and TAPS claim that the Commission's decision in Order
No. 841 not to adopt an opt-out for

electric storage resources is arbitrary or inconsistent because an
electric storage resource may still choose to participate in RTO/ISO
markets as demand response, in which case it would be subject to the
RERRA opt-out rules.\62\
---------------------------------------------------------------------------

    \60\ See, e.g., AMP/APPA/NRECA, EEI, NARUC, TAPS, and Xcel
Energy Services.
    \61\ EEI Rehearing Request at 7 (citing Order No. 841, 162 FERC
] 61,127 at P 35).
    \62\ AMP/APPA/NRECA Rehearing Request at 14 n.48 (citing Order
No. 841, 162 FERC ] 61,127 at P 56; 18 CFR 35.28(g)(1)(iii)); TAPS
Rehearing Request at 4 (citing Order No. 841, 162 FERC ] 61,127 at
PP 32, 55-56) (arguing that the electric storage resource owner's
choice of which construct to use to participate in the RTO/ISO
markets should not strip away the RERRA's authority that the
Commission has previously recognized).
---------------------------------------------------------------------------

    23. AMP/APPA/NRECA, EEI, and TAPS argue that there is a more
compelling argument for the Commission to adopt an opt-out in Order No.
841 than there was in Order No. 719 because electric storage resources
inject power into the distribution system, thereby creating more
significant operational, safety, and reliability concerns for retail
customer interconnections and distribution systems than demand response
resources.\63\ EEI adds that, in some regions, the infrastructure,
technology and resources are not in place to support large numbers of
distribution-connected electric storage resources participating in the
wholesale markets.\64\ Organization of MISO States notes that, in AEE,
the Commission cited the distinction between wholesale energy
efficiency resources and demand response resources, finding that
``[energy efficiency resources] are not likely to present the same
operational and day-to-day planning complexity.'' \65\ Organization of
MISO States argues that the potential moment-to-moment changes in
utilization of electric storage resources are more in line with demand
response than energy efficiency.\66\
---------------------------------------------------------------------------

    \63\ See, e.g., EEI Rehearing Request at 5 (claiming that the
charging and discharging activity of distribution-connected electric
storage resources could raise complicated interactions between
wholesale and retail market activity that the distribution utility
and RERRA will need to address); TAPS Rehearing Request at 4
(claiming that the need for deference is especially high for behind-
the-retail-meter electric storage resources that may involve retail
customers using retail interconnections to make wholesale purchases
and sales).
    \64\ EEI Rehearing Request at 5.
    \65\ Organization of MISO States Rehearing Request at 3 (citing
Order No. 841, 162 FERC ] 61,127 at P 35; AEE, 161 FERC ] 61,245 at
P 63).
    \66\ Id. at 3.
---------------------------------------------------------------------------

    24. TAPS asserts that the lack of an opt-out creates confusion that
will undermine investment and create market uncertainty.\67\ Therefore,
TAPS argues that, instead of leaving RERRA policies to be implemented
on a case-by-case basis, the Commission should provide a
straightforward mechanism to enable RTOs/ISOs to implement RERRA
decisions in a systematic and orderly way.\68\ TAPS argues that the
opt-out approach afforded for demand response in Order No. 719 has a
proven record and can be implemented easily by RTOs/ISOs because they
already use the mechanism for demand response resources. According to
TAPS, this approach could help avoid the need to consider disruptive
market re-runs or alternative enforcement mechanisms if an RTO/ISO
accepts supply offers or demand bids from distribution-connected or
behind-the-retail-meter electric storage resources that are barred from
making such sales or purchases under state law.\69\
---------------------------------------------------------------------------

    \67\ TAPS Rehearing Request at 9.
    \68\ Id. at 10.
    \69\ Id. at 11.
---------------------------------------------------------------------------

    25. NARUC also expresses concern that the Commission's decision not
to adopt an opt-out in Order No. 841 could inhibit state energy storage
initiatives and posits that adopting an opt-out would provide clarity
that would advance federal and state policymakers' shared interest in a
resilient electric system with a diverse resource mix. If the
Commission does not grant rehearing on the opt-out, NARUC asks the
Commission to defer the determination of this jurisdictional issue to
Docket No. RM18-9-000.\70\
---------------------------------------------------------------------------

    \70\ NARUC Rehearing Request at 9.
---------------------------------------------------------------------------

    26. If the Commission does not grant rehearing and provide an opt-
out for electric storage resources, Xcel Energy Services requests that
the Commission allow states, in conjunction with RTOs/ISOs, to
determine the appropriate minimum capacity threshold at which electric
storage resources connected to the distribution system or located
behind a retail meter can participate in wholesale markets.\71\
---------------------------------------------------------------------------

    \71\ Excel Energy Services Rehearing Request at 16.
---------------------------------------------------------------------------

c. Other Issues
    27. SPP seeks clarification regarding whether it is the
responsibility of the RTO/ISO to ensure that the necessary contractual
arrangements are in place to permit an electric storage resource to
inject energy onto the grid, or whether it is sufficient for an RTO/ISO
to require an electric storage resource to attest that it has all the
necessary contractual arrangements in place.\72\ SPP states that it has
taken the attestation approach in the area of demand response
aggregation and seeks confirmation that such an approach would be
sufficient for SPP to determine that a facility meets that particular
qualification for an electric storage resource.\73\
---------------------------------------------------------------------------

    \72\ SPP Motion for Clarification at 2 (citing Order No. 841,
162 FERC ] 61,127 at P 33), 13.
    \73\ Id. at 2-3.
---------------------------------------------------------------------------

    28. SPP also seeks clarification that, while nothing in Order No.
841 requires an electric storage resource to participate in an RTO/ISO
market, this does not supersede other reasons outside of the context of
Order No. 841 that an electric storage resource might be required to
comply with provisions of RTO/ISO tariffs applicable to all resources
and loads.\74\ SPP argues that these generally applicable requirements
are critical as they give SPP awareness of the loads and resources that
may exist within its markets and ensure that its tariff is administered
in a manner that is not unduly discriminatory to any type of load or
resource.\75\
---------------------------------------------------------------------------

    \74\ Id. at 3 (citing Order No. 841, 162 FERC ] 61,127 at P 35).
For example, SPP states that it requires all loads and resources
within the SPP region to register with SPP and it has certain must-
offer requirements that apply to all available registered resources.
SPP also states that it requires behind-the-meter resources of 10 MW
or greater to register. Id. at 3-4.
    \75\ Id. at 4.
---------------------------------------------------------------------------

    29. Finally, AMP/APPA/NRECA claim that the assertion of
jurisdiction over the purchase of charging energy as a wholesale sale
presupposes that the electric storage resource may bypass the
distribution utility and purchase directly from the wholesale
market.\76\ TAPS argues that the Commission does not have the authority
to authorize retail customers to purchase energy from entities other
than their distribution utility because the decision to allow a retail
customer to purchase directly from suppliers other than its retail
utility is a matter of state law or voluntary choice by the public-
utility distribution company.\77\
---------------------------------------------------------------------------

    \76\ AMP/APPA/NRECA Rehearing Request at 10 (citing Order No.
841, 162 FERC ] 61,127 at P 294 (requiring that the sale of electric
energy from the RTO/ISO markets to an electric storage resource that
the resource then resells back to those markets be at the wholesale
LMP)).
    \77\ TAPS Rehearing Request at 8 n.11 (citing New York v. FERC,
535 U.S. 1, 12 n.9, 13, 20, 23 (2002) (quoting 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, at 31,782-83, 31,969 (1996), (cross-referenced at 77
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. Commission Determination
    30. We deny rehearing. As a preliminary matter, we decline to defer
the determination of whether to adopt an electric storage resource opt-
out to

Docket No. RM18-9-000.\78\ That proceeding is focused on issues
relating to distributed energy resource aggregations, while Order No.
841 addresses the participation of non-aggregated electric storage
resources in RTO/ISO markets. We find that the Commission had
sufficient record evidence before it to determine whether to adopt an
electric storage resource opt-out, regardless of its decision to gather
more information with respect to its proposals to remove barriers to
the participation of distributed energy resource aggregations in RTO/
ISO markets in Docket No. RM18-9-000.\79\
---------------------------------------------------------------------------

    \78\ See NARUC Rehearing Request at 9.
    \79\ See Order No. 841, 162 FERC ] 61,127 at P 5.
---------------------------------------------------------------------------

    31. We continue to find that the Commission's establishing the
criteria for participation in the RTO/ISO markets of electric storage
resources, 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.\80\ Below, we outline the relevant precedent with
respect to the Commission's authority over electric storage
participation in RTO/ISO markets, and then we address arguments raised
by petitioners and the dissent concerning the Commission's decision not
to adopt an electric storage resource opt-out. Finally, we address
arguments that the Commission does not have authority to require that
the sale of electric energy from the RTO/ISO markets to an electric
storage resource that the resource then resells back to those markets
be at the wholesale LMP.
---------------------------------------------------------------------------

    \80\ See id. PP 1, 35.
---------------------------------------------------------------------------

a. Whether the Commission Must Adopt an Opt-Out
    32. As discussed below, we find that the FPA and relevant precedent
does not legally compel the Commission to adopt an opt-out with respect
to participation in RTO/ISO markets by electric storage resources
interconnected on a distribution system or located behind a retail
meter. FPA section 201 \81\ authorizes the Commission to regulate the
transmission of electric energy in interstate commerce and the
wholesale sale of electric energy in interstate commerce, as well as
all facilities used for such transmission or sale of electric energy.
Section 201 also defines a public utility as ``any person who owns or
operates facilities subject to the jurisdiction of the Commission.''
\82\ FPA sections 205 \83\ and 206 \84\ provide the Commission with
jurisdiction over all rates and charges made, demanded, or received by
any public utility for or in connection with the transmission or sale
of electric energy subject to the Commission's jurisdiction. Those
sections also provide the Commission with jurisdiction over all rules,
regulations, practices, or contracts affecting jurisdictional rates,
charges, or classifications.
---------------------------------------------------------------------------

    \81\ 16 U.S.C. 824.
    \82\ Id. 824(e).
    \83\ Id. 824d.
    \84\ Id. 824e.
---------------------------------------------------------------------------

    33. In EPSA, the U.S. Supreme Court interpreted those FPA sections
to uphold the Commission's jurisdiction over the participation in RTO/
ISO markets of demand response resources: A type of non-traditional
resource that, by definition, is located behind a customer meter and
generally is located on the distribution system.\85\ The Court did not
find the Commission's authority to be lessened by the location of
demand response resources behind the retail customer meter.
---------------------------------------------------------------------------

    \85\ See EPSA, 136 S. Ct. 760; 18 CFR 35.28(b)(4) (defining
demand response as ``a reduction in the consumption of electric
energy by customers from their expected consumption in response to
an increase in the price of electric energy or to incentive payments
designed to induce lower consumption of electric energy'').
---------------------------------------------------------------------------

    34. First, the Court found that the Commission's regulation of
demand response participation in wholesale markets met the
``affecting'' standard in FPA sections 205 and 206 ``with room to
spare.'' \86\ In making this finding, the Court approved a ``common-
sense'' construction of the FPA's language, previously articulated by
the U.S. Court of Appeals for the District of Columbia Circuit (D.C.
Circuit), that ``limit[s] [the Commission]'s `affecting' jurisdiction
to rules or practices that directly affect the wholesale rate.'' \87\
The Court then described, among other considerations, how RTOs/ISOs
employ demand response bids in competitive auctions that balance
wholesale supply and wholesale demand and thereby set wholesale prices.
For these reasons, the Court found that ``[w]holesale demand response,
in short, is all about reducing wholesale rates; so too, then, the
rules and practices that determine how those programs operate.'' \88\
The Court concluded that ``[c]ompensation for demand response thus
directly affects wholesale prices. Indeed, it is hard to think of a
practice that does so more.'' \89\
---------------------------------------------------------------------------

    \86\ EPSA, 136 S. Ct. at 774 (referring to the Commission's
jurisdiction under FPA sections 205 and 206 to regulate practices
affecting jurisdictional rates).
    \87\ Id. (citing Cal. Indep. Sys. Operator Corp. v. FERC, 372
F.3d 395, 403 (2004) (internal quotation marks omitted)).
    \88\ Id. at 774.
    \89\ Id. at 775.
---------------------------------------------------------------------------

    35. Second, the Court found that the Commission's regulation of
demand response resources did not regulate retail sales in violation of
FPA section 201(b).\90\ In making that finding, the Court rejected
EPSA's arguments that the Commission (1) effectively regulated the
retail price by increasing effective retail rates and (2) forced retail
customers to respond to wholesale price signals for the express purpose
of overriding state policy. Rather, the Court held that the
Commission's regulation did ``anything but increase retail prices'' and
that, ``[i]n promoting demand response, [the Commission] did no more
than follow the dictates of its regulatory mission to improve the
competitiveness, efficiency, and reliability of the wholesale market.''
\91\
---------------------------------------------------------------------------

    \90\ Id. at 784.
    \91\ Id. at 778-79.
---------------------------------------------------------------------------

    36. Finally, the Court stated that the ``finishing blow to both of
EPSA's arguments comes from [the Commission]'s notable solicitude
toward the States.'' \92\ Describing and commenting on the opt-out for
states that the Commission included in Order No. 745, the Court stated
that
---------------------------------------------------------------------------

    \92\ Id. at 779. Earlier in its decision, the Court described
the Commission's action as follows: ``Pointing to the Commission's
analysis in Order No. 719, [Order No. 745] explained that the FPA
gives [the Commission] jurisdiction over such bids because they
directly affect wholesale rates. Nonetheless, [Order No. 745] noted,
[the Commission] would continue Order No. 719's policy of allowing
any state regulatory body to prohibit consumers in its retail market
from taking part in wholesale demand response programs.'' Id. at
772.

the Rule allows any State regulator to prohibit its consumers from
making demand response bids in the wholesale market. Although
claiming the ability to negate such state decisions, the Commission
chose not to do so in recognition of the linkage between wholesale
and retail markets and the States' role in overseeing retail sales.
The veto power thus granted to the States belies EPSA's view that
FERC aimed to `obliterate[ ]' their regulatory authority or
`override' their pricing policies. And that veto gives States the
means to block whatever `effective' increases in retail rates demand
response programs might be thought to produce. Wholesale demand
response as implemented in the Rule is a program of cooperative
federalism, in which the States retain the last word. That feature
of the Rule removes any conceivable doubt as to its compliance with
824(b)'s allocation of federal and state authority.\93\
---------------------------------------------------------------------------

    \93\ Id. at 779-80 (internal citations omitted).

    37. Consistent with EPSA, the Commission found in AEE that,
although the Commission in Order Nos. 719 and 745 granted RERRAs an
opt-out

from allowing retail customers to participate as wholesale demand
response, the Commission was not obligated to do so.\94\ Like
compensation for demand response, the Commission held that it has
jurisdiction over the participation of energy efficiency resources in
RTO/ISO markets as a practice directly affecting wholesale markets,
rates, and prices.\95\ The Commission found that, because it has
exclusive jurisdiction to regulate the participation of energy
efficiency resources in RTO/ISO markets, RERRAs may not bar, restrict,
or otherwise condition the participation of energy efficiency resources
in RTO/ISO markets unless the Commission expressly gives RERRAs such
authority.\96\ The Commission explained that, as part and parcel of the
participation of energy efficiency resources in RTO/ISO markets, the
terms of eligibility of energy efficiency resource participation in the
RTO/ISO markets has a direct effect on wholesale rates and that the
Commission may set the terms of transactions occurring in the RTO/ISO
markets, including which resources are eligible to participate, to
ensure the reasonableness of wholesale prices and the reliability of
the interstate grid.\97\ The Commission thus concluded that a provision
directly restricting retail customers' participation in RTO/ISO
markets, even if contained in the terms of retail service, nonetheless
intrudes on the Commission's jurisdiction over those markets and
prevents the Commission from carrying out its statutory authority to
ensure that wholesale electricity markets produce just and reasonable
rates.\98\
---------------------------------------------------------------------------

    \94\ AEE, 161 FERC ] 61,245 at P 62 (citing EPSA, 136 S. Ct. at
776).
    \95\ Id. P 60.
    \96\ Id. P 61.
    \97\ Id. (citing EPSA, 136 S. Ct. 760 at 784).
    \98\ AEE Rehearing Order, 163 FERC ] 61,030 at P 37 (citing
Oneok, Inc. v. Learjet, Inc., 135 S. Ct. 1591, 1600 (2015) (finding
that the proper test for determining whether a state action is
preempted is ``whether the challenged measures are `aimed directly
at interstate purchasers and wholesalers for resale' or not'')
(Oneok) (quoting N. Natural Gas Co. v. State Corp. Comm'n of Kan.,
372 U.S. 84, 94 (1963)); Nantahala Power & Light Co. v. Thornburg,
476 U.S. 953, 970 (finding that ``a State may not exercise its
undoubted jurisdiction over retail sales to prevent the wholesaler-
as-seller from recovering the costs of paying the FERC-approved
rate'')).
---------------------------------------------------------------------------

    38. Several of these findings are relevant to the Commission's
decision to apply Order No. 841 to electric storage resources,
including those connected at distribution-level voltages or behind the
meter, without adopting an electric storage resource opt-out.\99\ The
Commission has exclusive jurisdiction over the wholesale markets and
the criteria for participation in those markets, including the
wholesale market rules for participation of resources connected at
distribution-level voltages or behind the meter.\100\ As the Commission
previously has found, the authority to determine which resources are
eligible to participate in the RTO/ISO markets is a fundamental
component of the regulation of the RTO/ISO markets.\101\ By applying
Order No. 841 to electric storage resources connected at distribution-
level voltages or behind the meter, and by finding that the Commission
is not required to adopt an electric storage resource opt-out, the
Commission is not specifying any terms of sale at retail. Rather, the
Commission is merely exercising its authority under the FPA to
``regulate what takes place in the wholesale market'' by ensuring that
technically capable resources are eligible and able to participate in
those markets.\102\
---------------------------------------------------------------------------

    \99\ See Order No. 841, 162 FERC ] 61,127 at P 35.
    \100\ Id. P 35 (citing EPSA, 136 S. Ct. 760).
    \101\ See AEE Rehearing Order, 163 FERC ] 61,030 at P 36.
    \102\ See EPSA, 136 S. Ct. at 776.
---------------------------------------------------------------------------

    39. We disagree with assertions by petitioners and the dissent
that, unless the Commission adopts an opt-out, the Commission's
regulation of the RTO/ISO market participation of distribution-
connected and behind-the-meter electric storage resources violates FPA
section 201.\103\ We find that the Supreme Court's jurisdictional
findings in EPSA regarding wholesale demand response apply with at
least as much force to participation in RTO/ISO markets by electric
storage resources engaged in wholesale sales in interstate commerce,
even where those resources are interconnected on a distribution system
or located behind a retail meter. Order No. 841 directed changes to
wholesale RTO/ISO markets to remove barriers to the participation of
resources that directly engage in sales for resale under the FPA, an
objective that is at the very core of the Commission's jurisdictional
responsibilities. We acknowledge that the Commission's actions in Order
No. 841 to improve wholesale markets will have impacts beyond those
markets. However, as the Supreme Court stated in EPSA, ``[w]hen FERC
regulates what takes place on the wholesale market, as part of carrying
out its charge to improve how that market runs, then no matter the
effect on retail rates, Sec.  824(b) imposes no bar.'' \104\
---------------------------------------------------------------------------

    \103\ See, e.g., AMP/APPA/NRECA Rehearing Request at 8; NARUC
Rehearing Request at 3; Xcel Energy Services Rehearing Request at 8;
Electric Storage Participation in Markets Operated by Regional
Transmission Organizations and Independent System Operators, Order
No. 841-A, 167 FERC ] 61,154, at PP 5-12 (McNamee, Comm'r,
concurring in part and dissenting in part) (Dissent).
    \104\ EPSA, 136 S. Ct. at 776.
---------------------------------------------------------------------------

    40. Further, contrary to the petitioners' arguments, the Court's
jurisdictional conclusion in EPSA did not rest upon the fact that
states were granted an opt-out. As alluded to above, the Court
described how its ``analysis of FERC's regulatory authority proceeds''
without referring to an opt-out, stating:

    First, the practices at issue in the Rule--market operators'
payments for demand response commitments--directly affect wholesale
rates. Second, in addressing those practices, the Commission has not
regulated retail sales. Taken together, those conclusions establish
that the Rule complies with the FPA's plain terms.\105\
---------------------------------------------------------------------------

    \105\ Id. at 773. Similarly, after concluding its discussion of
the first of these two points, the Court stated, ``The above
conclusion does not end our inquiry into the Commission's statutory
authority; to uphold the Rule, we also must determine that it does
not regulate retail electricity sales.'' Id. at 775.

    When the Court then stated that it viewed the opt-out merely as the
``finishing blow'' to EPSA's already losing arguments that the
Commission ``aimed to obliterate [states'] regulatory authority or
override their pricing policies,'' \106\ that statement was not a
determinative part of its analysis.\107\ Thus, we find that the Court's
overall analysis of the Commission's jurisdiction with respect to
participation by demand response resources in RTO/ISO markets makes
clear that the Commission is not legally compelled to adopt an opt-out
with respect to participation in RTO/ISO markets by electric storage
resources interconnected on a distribution system or located behind a
retail meter. Moreover, as the Commission noted in Order No. 841, there
are already numerous distribution-connected resources participating in
the RTO/ISO markets that are subject to the RTO/ISO tariffs.\108\ For
these reasons, contrary to petitioners' arguments, EPSA does not
require the Commission

to adopt an electric storage resource opt-out.\109\
---------------------------------------------------------------------------

    \106\ Id. at 779 (internal quotations omitted).
    \107\ In his dissent, Justice Scalia shared this understanding
of the Court's analysis, stating, ``Moreover, the rule itself allows
States to forbid their retail customers to participate in the
existing demand response scheme. The majority accepts FERC's
argument that this is merely a matter of grace, and claims that it
puts the `finishing blow' to respondents' argument that 16 U.S.C.
824(b)(1) prohibits the scheme.'' Id. at 789 (Scalia, J.,
dissenting).
    \108\ Order No. 841, 162 FERC ] 61,127 at P 35. Contrary to
EEI's assertion that this statement lacks factual support, the
Commission cited to wholesale market participation programs in both
PJM and CAISO. As further evidence that numerous distribution-
connected resources are participating in the RTO/ISO markets, we
note the filing of Wholesale Market Participation Agreements and
Wholesale Distribution Access Tariffs that allow such resources to
participate in the RTO/ISO markets.
    \109\ See, e.g., AMP/APPA/NRECA Rehearing Request at 10-11;
NARUC Rehearing Request at 5-6.
---------------------------------------------------------------------------

    41. We also disagree with assertions that states can dictate
whether resources are allowed to participate in the RTO/ISO markets
through conditions on the receipt of retail service.\110\ We
acknowledge that states have the authority to include conditions in
their own retail distributed energy resource or retail electric storage
resource programs that prohibit any participating resources from also
selling into the RTO/ISO markets. In that scenario, the owner of a
resource has a choice between participating in the retail market or
wholesale market. However, states may not take away that choice by
broadly prohibiting all retail customers from participating in RTO/ISO
markets. As explained above, the Commission has exclusive jurisdiction
over the terms of eligibility for participation in the RTO/ISO
markets.\111\ Therefore, such conditions aimed directly at the RTO/ISO
markets, even if contained in the terms of retail service, would
intrude on the Commission's jurisdiction over the RTO/ISO markets.\112\
Just as the Commission cannot issue ``a regulation compelling every
consumer to buy a certain amount of electricity on the retail market''
\113\ because such a regulation would specify terms of sale at retail,
states cannot intrude on the Commission's jurisdiction by prohibiting
all consumers from selling into the wholesale market.
---------------------------------------------------------------------------

    \110\ See AMP/APPA/NRECA Rehearing Request at 9; TAPS Rehearing
Request at 7-8.
    \111\ See AEE, 161 FERC ] 61,245 at P 61.
    \112\ See AEE Rehearing Order, 163 FERC ] 61,030 at P 37
(finding that a provision directly restricting retail customers'
participation in RTO/ISO markets, even if contained in the terms of
retail service, nonetheless intrudes on the Commission's
jurisdiction over the wholesale markets). See also Oneok, 135 S. Ct.
at 1600 (finding that the proper test for determining whether a
state action is preempted is ``whether the challenged measures are
`aimed directly at interstate purchasers and wholesalers for resale'
or not'') (quoting N. Natural Gas Co. v. State Corp. Comm'n of Kan.,
372 U.S. 84, 94 (1963)); Nantahala Power & Light Co. v. Thornburg,
476 U.S. 953, 970 (finding that ``a State may not exercise its
undoubted jurisdiction over retail sales to prevent the wholesaler-
as-seller from recovering the costs of paying the FERC-approved
rate'').
    \113\ EPSA, 136 S. Ct. at 776.
---------------------------------------------------------------------------

    42. We thus also disagree with petitioners' arguments that the
requirement in Order No. 841 that an electric storage resource be
``contractually permitted'' to inject electric energy back to the grid
gives RERRAs a ``veto'' over the participation in wholesale markets of
electric storage resources that are interconnected to the distribution
system or located behind a retail meter.\114\ Rather, we clarify that
the requirement to be contractually permitted to inject energy onto the
grid is intended to ensure that the definition of electric storage
resource does not encompass any resource that does not have the
requisite permits, agreements, or other necessary documentation in
place that would ensure its ability to inject electric energy back to
the grid and therefore engage in a wholesale sale. As the Commission
stated in Order No. 841, the Commission recognizes a vital role for the
states with respect to ``retail services and matters related to the
distribution system, including design, operations, power quality,
reliability, and system costs.'' \115\ We acknowledge that states have
jurisdiction over the interconnections of certain resources to the
distribution system and the requirements reasonably related to those
interconnections, such as a requirement to upgrade the distribution
system to facilitate the injection of electric energy back to the grid,
a requirement to install certain technologies to mitigate a reliability
or safety concern, or a charge for wholesale distribution service. We
further understand that interconnection agreements may include
technical requirements to safeguard against reliability or safety
concerns, such as utility curtailment and anti-islanding provisions, or
requirements to install equipment that forces resources to trip offline
during extreme frequency, voltage, or fault current incidents. Indeed,
such requirements could address the concerns raised by petitioners
regarding the physical and operational impacts of electric storage
resources on the distribution system. However, a broad prohibition on
participating in the RTO/ISO markets is not reasonably related to the
interconnection of a particular resource to the distribution system. We
therefore disagree with assertions that state authority over certain
interconnections necessitates that the Commission adopt an opt-out for
electric storage resources connected to the distribution system or
behind the meter.
---------------------------------------------------------------------------

    \114\ See, e.g., AMP/APPA/NRECA Rehearing Request at 6; NARUC
Rehearing Request at 7-8; TAPS Rehearing Request at 6.
    \115\ Order No. 841, 162 FERC ] 61,127 at P 36.
---------------------------------------------------------------------------

    43. We also are not persuaded by Xcel Energy Services' assertion
that, unlike the ``indirect'' effects permitted in EPSA, Order No. 841
directly affects retail sales because it ``fundamentally changes how
retail sales occur and directly interferes with a state's ability to
regulate retail sales.'' \116\ The Court in EPSA recognized that,
because the wholesale and retail markets are not ``hermetically
sealed,'' Commission regulation of the ``wholesale market ha[s] natural
consequences at the retail level.'' \117\ The Court concluded, however,
that when the Commission ``regulates what takes place on the wholesale
market, as part of carrying out its charge to improve how that market
runs,'' the effects on the retail market have ``no legal consequence''
and FPA section 201 ``imposes no bar'' on the Commission's action.\118\
---------------------------------------------------------------------------

    \116\ See Xcel Energy Services Rehearing Request at 7.
    \117\ EPSA, 136 S. Ct. at 776.
    \118\ Id. (``When FERC sets a wholesale rate, when it changes
wholesale market rules, when it allocates electricity as between
wholesale purchasers--in short, when it takes virtually any action
respecting wholesale transactions--it has some effect, in either the
short or the long term, on retail rates. That is of no legal
consequence.'').
---------------------------------------------------------------------------

    44. Like the Commission's regulation of demand response
participation in the wholesale market, Order No. 841 ``addresses--and
addresses only--transactions occurring on the wholesale market.'' \119\
In addition, as with Order No. 745, the Commission's justifications for
Order No. 841 ``are all about, and only about, improving the wholesale
market.'' \120\ And, just as the Court explained with respect to demand
response, the Commission did not ``invent'' wholesale market
participation of electric storage resources and the practice did not
emerge as a ``Commission power grab.'' \121\ Rather ``the impetus came
from wholesale market operators'' that ``sought, and obtained, [the
Commission's] approval to institute such programs.'' \122\ Accordingly,
Order No. 841 does not regulate retail sales and the effects that the
order may have on retail sales are of ``no legal consequence.'' \123\
---------------------------------------------------------------------------

    \119\ Id.
    \120\ Id. at 779.
    \121\ Id.
    \122\ Id. See, e.g., Midwest Indep. Trans. Sys. Operator, Inc.,
129 FERC ] 61,303 (2009); New York Indep. Sys. Operator, Inc., 127
FERC ] 61,135 (2009); California Indep. Sys. Operator Corp., 132
FERC ] 61,211 (2010).
    \123\ EPSA, 136 S. Ct. at 776.
---------------------------------------------------------------------------

    45. Contrary to Xcel Energy Services' contention that Order No. 841
requires distribution utilities to establish expensive processes to
assist the market participation of distribution-connected and behind-
the-meter electric storage resources, the Commission is not imposing
any new requirements on distribution utilities to enable the
participation of electric storage resources in RTO/ISO markets. To the
extent that distribution utilities do incur costs associated with
enabling such

participation, the Commission is also not changing the ability of
distribution utilities to allocate any costs that they incur in
operating and maintaining their respective power systems.\124\ In any
event, any additional costs imposed on distribution utilities could be
outweighed by the overall benefits from increased competition due to
greater participation of electric storage resources in RTO/ISO markets.
---------------------------------------------------------------------------

    \124\ See Order No. 841, 162 FERC ] 61,127 at P 274.
---------------------------------------------------------------------------

    46. In response to Xcel Energy Services' argument that Order No.
841 interferes with state regulation of the reliability of the
distribution system and MISO's request to clarify that each RTO/ISO may
require a distribution-connected electric storage resource to comply
with interconnection or operating requirements to address any potential
material adverse reliability impacts on the distribution system, we
reiterate that nothing in Order No. 841 preempts the states' right to
regulate the safety and reliability of the distribution system and that
all electric storage resources must comply with any applicable
interconnection and operating requirements. As noted above, we
understand that electric storage resources located on the distribution
system are subject to various technical requirements that should help
alleviate any concerns related to the safety and reliability of the
distribution system due to RTO/ISO dispatch. As to Xcel Energy
Services' concern that a distribution utility's retail sale to its
customer could become a wholesale sale if that customer participates in
the wholesale markets and sells more than it purchases for a billing
period, we find that concern regarding a distribution utility's sale of
energy to an electric storage resource to be outside the scope of this
proceeding. The Commission's findings in Order No. 841 are limited to
sales in RTO/ISO markets and do not address what retail customers may
do with energy purchased at retail.\125\
---------------------------------------------------------------------------

    \125\ Moreover, to the extent that Xcel Energy Services is
concerned that retail customers could attempt to make purchases
under a state-regulated retail tariff and then sell that energy into
the Commission-jurisdictional wholesale market, nothing in Order No.
841 prevents states from prohibiting the resale of energy purchased
under a retail tariff in the terms and conditions of retail service.
---------------------------------------------------------------------------

    47. The dissent suggests that today's order ``mandates'' that
electric storage resources ``be permitted to use distribution
facilities so that they may access the wholesale market.'' \126\ That
is incorrect. As explained above, Order No. 841 addressed only the
rules governing electric storage resources' participation in the
wholesale market.\127\ Order No. 841 did not mandate that electric
storage resources must have access to the distribution system. Instead,
Order No. 841 concluded that states cannot directly prohibit electric
storage resources from participating in the wholesale market because
doing so would invade the Commission's ``exclusive jurisdiction over
the wholesale markets and the criteria for participation in those
markets.'' \128\ In reaching that conclusion, the Commission recognized
explicitly, as it must, that the states have authority to regulate the
distribution system, ``including [its] design, operations, power
quality, reliability, and system costs.'' \129\
---------------------------------------------------------------------------

    \126\ Dissent at P 5.
    \127\ See supra P 44 (``[A]s with Order No. 745, the
Commission's justifications for Order No. 841 `are all about, and
only about, improving the wholesale market.' '' (quoting EPSA, 136
S. Ct. at 779)).
    \128\ See supra P 38; supra P 41 (explaining that ``conditions
aimed directly at the RTO/ISO markets, even if contained in the
terms of retail service, would intrude on the Commission's
jurisdiction over the RTO/ISO markets'' (citing Oneok, 135 S. Ct. at
1600)).
    \129\ Order No. 841, 162 FERC ] 61,127 at P 36.
---------------------------------------------------------------------------

    48. The dissent also characterizes today's order as ``hav[ing] the
effect of directing that [electric storage resources] have access to
distribution facilities.'' \130\ That too is incorrect. Although Order
No. 841 provides that states may not prohibit electric storage
resources from participating in wholesale markets,\131\ that
requirement does not amount to an effective right of access to the
distribution system itself.\132\ As noted, Order No. 841 does not
modify states' authority to regulate the distribution system, including
the terms of access, provided that they do not ``aim[ ] directly at the
RTO/ISO markets.'' \133\ Consistent with the FPA's cooperative
federalist foundation, where electric storage resources interconnected
with the distribution system are participating in RTO/ISO markets, it
will be under circumstances that are consistent with states' authority
to regulate the distribution system. Accordingly, Order No. 841 does
not amount to regulation of the distribution system, effectively or
otherwise.\134\
---------------------------------------------------------------------------

    \130\ Dissent at n.18.
    \131\ See supra PP 38, 41.
    \132\ To paraphrase the Court in EPSA, the word ``effect[ ] is
doing quite a lot of work in that argument.'' EPSA, 136 S. Ct. at
777.
    \133\ See supra PP 38, 41.
    \134\ In addition, the D.C. Circuit has held that the Commission
properly may exercise jurisdiction with respect to distribution
facilities in certain circumstances. See Nat'l Ass'n of Regulatory
Util. Comm'rs v. FERC, 475 F.3d 1277 at 1282. Like the orders in
that case, Order No. 841 also ``leave[s] state law completely
undisturbed'' and thus the Commission is not impermissibly
``commandeering'' the states, as the dissent argues. Id. at 1283.
---------------------------------------------------------------------------

    49. Some petitioners cite the Commission's interconnection policies
generally to argue that the Commission must adopt an electric storage
resource opt-out.\135\ However, Order No. 841 did not reform or address
any procedures pertaining to the interconnection of resources to
transmission or distribution facilities. The Commission cited to
certain RTO/ISO interconnection and market participation procedures,
but merely to demonstrate that many distribution-connected resources
are currently participating in those markets.\136\ As the Commission
found in Order No. 841, an electric storage resource that injects
electric energy back into the grid for purposes of participating in an
RTO/ISO market engages in a sale of electric energy at wholesale in
interstate commerce \137\ and the sale of charging energy to an
electric storage resource that the resource then resells into an RTO/
ISO market is also a sale for resale in interstate commerce.\138\
---------------------------------------------------------------------------

    \135\ See, e.g., AMP/APPA/NRECA Rehearing Request at 9; NARUC
Rehearing Request at 3; TAPS Rehearing Request at 6 n.8 (citing the
Commission's acknowledgment in Order No. 2006-A that the vast
majority of distribution-level interconnections are subject to state
jurisdiction); Xcel Energy Services Rehearing Request at 10 (arguing
that Order No. 841 will convert distribution facilities into
Commission-regulated transmission facilities for interconnection
purposes).
    \136\ See Order No. 841, 162 FERC ] 61,127 at P 35 n.56.
    \137\ Id. P 26.
    \138\ See id. P 295.
---------------------------------------------------------------------------

b. Whether the Commission Should Exercise Its Discretion and Adopt an
Opt-Out
    50. We also disagree that the Commission's decision not to exercise
its discretion and adopt an opt-out in Order No. 841 is an unexplained
departure from the demand response resource opt-out adopted in Order
No. 719.\139\ As the Commission explained in AEE, Order No. 719
expressly provided that it only applies to demand response
resources;\140\ therefore, the Commission's decision not to adopt an
electric storage resource opt-out is not a change in policy.\141\
---------------------------------------------------------------------------

    \139\ See EEI Rehearing Request at 7; NARUC Rehearing Request at
3; TAPS Rehearing Request at 3-4; Xcel Energy Services Rehearing
Request at 13-15.
    \140\ AEE, 161 FERC ] 61,245 at P 65.
    \141\ Even if it were a policy change, the Commission ``need not
demonstrate . . . that the reasons for the new policy are better
than the reasons for the old one; it suffices that the new policy is
permissible under the statute, that there are good reasons for it,
and that the agency believes it to be better.'' FCC v. Fox
Television Stations, 556 U.S. 502, 513 (2009).

---------------------------------------------------------------------------

    51. Further, the resources that will use the electric storage
resource participation model under Order No. 841 differ significantly
from the demand response resources at issue in Order No. 719. Most
notably, unlike demand response, electric storage resources are capable
of engaging in sales for resale of electricity and those electric
storage resources making sales in the RTO/ISO markets are public
utilities subject to the Commission's jurisdiction.\142\
---------------------------------------------------------------------------

    \142\ See Order No. 841, 162 FERC ] 61,127 at P 30 (observing
that an electric storage resource that injects electric energy back
to the grid for purposes of participating in an RTO/ISO market
engages in a sale of electric energy at wholesale in interstate
commerce and must fulfill certain responsibilities set forth in the
FPA and the Commission's rules and regulations); EnergyConnect,
Inc., 130 FERC ] 61,031, at P 30 (2010) (finding that an entity only
engaged in the provision of demand response services that makes no
sales of electric energy for resale would not be a public utility
required to have a rate on file with the Commission).
---------------------------------------------------------------------------

    52. In addition, unlike in the case of demand response resources,
RERRAs and distribution utilities do not have a longstanding history of
managing and regulating programs for electric storage resources within
their boundaries. Prior to the Commission's issuance of Order No. 719,
many RERRAs supported the use of demand response resources in their
boundaries, either requiring the distribution utilities that they
regulate to establish demand response programs and compensate retail
customers for their participation, or approving distribution utility-
developed demand response programs. Such entities were concerned that,
as a result of Order No. 719, the ``best'' demand response resources
would choose to participate in the wholesale markets instead of retail
programs, depriving load serving entities of important resources used
to keep rates down for all consumers.\143\ The Commission adopted the
opt-out in Order No. 719 in part to help address that concern.\144\
With respect to electric storage resources, fewer states have policies
that involve electric storage resources, and those policies that exist
were implemented fairly recently.\145\ Accordingly, we find that the
record in these proceedings does not indicate that a comparable opt-out
is appropriate for energy storage resources.
---------------------------------------------------------------------------

    \143\ See Order No. 719, 125 FERC ] 61,071 at P 141.
    \144\ See id. P 155 (explaining that ``[t]he Commission's intent
was not to interfere with the operation of successful demand
response programs'').
    \145\ For instance, among the many comments on the NOPR
submitted by various state agencies and representatives, only
California, Connecticut, Massachusetts and New York mentioned any
specific state electric storage initiatives. See California
Commission Comments (RM16-23-000) at 4-5, 10-13; Connecticut
Commission Comments (RM16-23-000) at 4-5; Massachusetts Commission
Comments (RM16-23-000) at 3, 6-8; New York Commission Comments
(RM16-23-000) at 8.
---------------------------------------------------------------------------

    53. We further reject AMP/APPA/NRECA's and TAPS's argument that,
because an electric storage device may choose to participate in RTO/ISO
markets as demand response and thus become subject to opt-out rules,
the Commission's decision not to adopt an electric storage resource
opt-out is arbitrary or inconsistent.\146\ As the Commission stated in
Order No. 841, participation by demand response resources in an RTO/ISO
market does not involve a sale of electric energy at wholesale in
interstate commerce.\147\ Although electric storage resources
participate in the RTO/ISO markets by injecting electric energy back to
the grid, demand response participates in the RTO/ISO markets as a
``reduction in the consumption of electricity.'' \148\ Therefore, when
an electric storage device chooses to participate in the RTO/ISO
markets as demand response, it is not participating as an ``electric
storage resource'' or injecting electricity onto the grid and should
not be subject to the market rules applicable to electric storage
resources. Accordingly, because demand response and electric storage
resources have differing ways of interacting with RTO/ISO markets and
are subject to different market rules, it is not arbitrary or
inconsistent for the Commission to take different policy approaches
when integrating those resources into the RTO/ISO markets.
---------------------------------------------------------------------------

    \146\ See AMP/APPA/NRECA Rehearing Request at 14 n.48; TAPS
Rehearing Request at 4.
    \147\ See EnergyConnect, Inc., 130 FERC ] 61,031 at P 30.
    \148\ 18 CFR 35.28(b)(4).
---------------------------------------------------------------------------

    54. We also disagree with Organization of MISO States' argument
that electric storage resources are more similar to demand response
resources than energy efficiency resources due to the operational
challenges that they present and therefore the Commission should adopt
an opt-out here.\149\ As discussed above, electric storage resources
are capable of engaging in sales for resale of electricity, and those
electric storage resources making sales in the RTO/ISO markets are
public utilities subject to the Commission's jurisdiction. These
characteristics distinguish electric storage resources making sales in
the RTO/ISO markets from both demand response resources and energy
efficiency resources.
---------------------------------------------------------------------------

    \149\ See Organization of MISO States Rehearing Request at 3.
---------------------------------------------------------------------------

    55. In response to TAPS' concern about whether there is a net sale
of electricity from an electric storage resource under the MidAmerican
standard, we note that MidAmerican applies only to retail customers
participating in retail net metering programs, which is consistent with
the Commission's acknowledgement in Order No. 841 that injections of
electric energy back to the grid do not necessarily trigger the
Commission's jurisdiction.\150\ If an electric storage resource were to
participate in a retail net metering program and in the RTO/ISO
markets--which the Commission did not prohibit in Order No. 841--
Commission jurisdiction would arise only where the electric storage
resource participates in the wholesale market by making a Commission-
jurisdictional sale for resale. It would be the responsibility of the
RTO/ISO to establish metering and accounting practices to measure which
actions taken by that electric storage resource are wholesale actions
in the RTO/ISO markets.\151\
---------------------------------------------------------------------------

    \150\ See Order No. 841, 162 FERC ] 61,127 at P 30 n.49.
    \151\ See id. P 317.
---------------------------------------------------------------------------

    56. We recognize, as did the Court in EPSA, that sales for resale
of electricity necessarily have effects on the distribution
system.\152\ We have considered those effects in evaluating whether to
exercise our discretion to grant an opt-out, but find that the benefits
of allowing electric storage resources broader access to the wholesale
market outweigh any policy considerations in favor of an opt-out. In
particular, Order No. 841 found that the benefits of removing barriers
to the participation of electric storage resources in RTO/ISO markets
are significant and, in light of those benefits, we are not persuaded
to adopt an opt-out that could limit that participation. In addition,
as discussed in the preceding section, there are several ways that
RERRAs may address any concerns about effects on the distribution
system without broadly prohibiting the participation of distribution-
connected and behind-the-meter resources in RTO/ISO markets.
---------------------------------------------------------------------------

    \152\ See EPSA, 136 S. Ct. 760 at 776.
---------------------------------------------------------------------------

c. Other Issues
    57. Finally, we deny rehearing regarding the Commission's authority
to require that the sale of electric energy from the RTO/ISO markets to
an electric storage resource that the resource then resells back to
those markets be at the wholesale LMP. We find to be misplaced
suggestions that Order No. 841 ``authorizes'' retail customers (in this
case, electric storage resources) to purchase energy from entities
other than their distribution utility or ``entitles'' electric storage
resources to bypass the

distribution utility by purchasing from the RTO/ISO market.\153\ The
Commission is not preempting distribution utilities' franchised right
to continue to make retail sales to their retail customers, as Xcel
Energy Services suggests.
---------------------------------------------------------------------------

    \153\ See AMP/APPA/NRECA Rehearing Request at 10; TAPS Rehearing
Request at 8 n.11; Xcel Energy Services Rehearing Request at 8.
---------------------------------------------------------------------------

    58. First, an electric storage resource purchasing charging energy
directly from the RTO/ISO markets that it will resell back to those
markets is not a retail customer making a purchase of retail energy but
rather is a public utility engaging in a wholesale purchase and a
wholesale sale.\154\ Therefore, such a purchase of charging energy from
the RTO/ISO markets does not infringe upon a distribution utility's
right to sell at retail because that energy will be resold in the RTO/
ISO markets.
---------------------------------------------------------------------------

    \154\ Because such a resource is making wholesale sales in
interstate commerce, it is a public utility that must fulfill
certain responsibilities set forth in the FPA and the Commission's
rules and regulations. See Order No. 841, 162 FERC ] 61,127 at P 30.
---------------------------------------------------------------------------

    59. Second, in Order No. 841, the Commission did not purport to
authorize electric storage resources who are retail customers to bypass
their distribution utilities and make purchases of energy directly from
RTO/ISO markets. Order No. 841 does not require electric storage
resources to participate in the RTO/ISO markets; it only directs RTOs/
ISOs to adopt market rules that apply to electric storage resources
that voluntarily seek to participate in the RTO/ISO markets.
Furthermore, Order No. 841 only addresses sales for resale; for this
reason, the Commission only addressed pricing issues related to the
wholesale sales addressed therein and did not preclude other options
for electric storage resources to obtain charging energy.\155\
---------------------------------------------------------------------------

    \155\ Id. P 299.
---------------------------------------------------------------------------

    60. To further eliminate the potential for confusion on this point,
we clarify that, in declining requests to allow states to decide
whether electric storage resources in their state that are located
behind a retail meter or on the distribution system are permitted to
``participate'' in the RTO/ISO markets through the electric storage
resource participation model, the Commission was referring to the
ability of electric storage resources to sell into the RTO/ISO markets.
Given this clarification, we also dismiss as moot the argument that
there is inconsistency between the Commission's finding that an RTO/ISO
is prevented from charging a resource wholesale rates if the host
distribution utility is unable or unwilling to net out wholesale energy
purchases and the Commission's decision to decline to adopt an opt-
out.\156\
---------------------------------------------------------------------------

    \156\ See AMP/APPA/NRECA Rehearing Request at 6; TAPS Rehearing
Request at 7 (citing Order No. 841, 162 FERC ] 61,127 at P 326).
---------------------------------------------------------------------------

    61. In response to SPP's request for clarification regarding
whether it is sufficient for an RTO/ISO to require an electric storage
resource to attest that it has all the necessary contractual
arrangements in place to permit that resource to inject energy onto the
grid,\157\ we clarify that Order No. 841 did not specify how an RTO/ISO
must determine whether a particular resource seeking to participate in
its markets qualifies as an electric storage resource under the
definition set forth therein. Therefore, we clarify for SPP that, on
compliance, it may propose the attestation approach that it has taken
for demand response. Based on the full record before it, the Commission
will consider on compliance whether allowing a resource to attest that
it meets the definition of electric storage resources, including the
associated requirement that it be contractually permitted to inject
energy onto the grid, is just and reasonable.
---------------------------------------------------------------------------

    \157\ SPP Motion for Clarification at 2 (citing Order No. 841,
162 FERC ] 61,127 at P 33), 13.
---------------------------------------------------------------------------

    62. In response to Organization of MISO States' request for
clarification that RTOs/ISOs may propose tariff provisions that require
electric storage resources to comply with applicable RERRA and
distribution utility rules, we note that any resources subject to a
RERRA's jurisdiction must comply with that RERRA's rules assuming that
such rules do not conflict with the requirements of Order No. 841
(e.g., by placing a broad prohibition on participating in the RTO/ISO
markets).\158\ Similarly, in response to SPP's request for
clarification regarding whether the requirements of Order No. 841
supersede RTO/ISO tariff provisions that apply to all resources, we
clarify that the requirements of Order No. 841 do not absolve electric
storage resources from complying with RTO/ISO tariff provisions of
general applicability as long as those tariff provisions do not
conflict with the requirements of Order No. 841.
---------------------------------------------------------------------------

    \158\ See id. at 5-6.
---------------------------------------------------------------------------

B. Participation Model for Electric Storage Resources

1. Final Rule
    63. In Order No. 841, the Commission added Sec.  35.28(g)(9)(i) to
the Commission's regulations to require each RTO/ISO to revise its
tariff to include a participation model consisting of market rules
that, recognizing the physical and operational characteristics of
electric storage resources, facilitates their participation in the RTO/
ISO markets.\159\ In adopting this requirement, the Commission stated
that it was not convinced by commenters who argued that separate
participation models are necessary for different types of electric
storage resources (e.g., slower, faster, or aggregated).\160\
Specifically, the Commission noted that it believed that the physical
differences between electric storage resources can be represented by
complying with the final rule's requirements for bidding parameters
\161\ and that a single participation model can be designed to be
flexible enough to accommodate any type of electric storage resource.
However, the Commission stated that, to the extent an RTO/ISO seeks to
include in its tariff additional market rules that accommodate electric
storage resources with specific physical and operational
characteristics, the RTO/ISO may propose such revisions to its tariff
through a separate FPA section 205 filing.\162\
---------------------------------------------------------------------------

    \159\ Order No. 841, 162 FERC ] 61,127 at P 51.
    \160\ Id. P 54.
    \161\ In Order No. 841, the Commission added Sec.
35.28(g)(9)(i)(C) to the Commission's regulations to require each
RTO/ISO to have tariff provisions providing a participation model
for electric storage resources that accounts for the physical and
operational characteristics of electric storage resources through
bidding parameters or other means. Id. P 191.
    \162\ Id. P 54 (referencing 16 U.S.C. 824d).
---------------------------------------------------------------------------

2. Requests for Rehearing or Clarification
    64. In their rehearing request, AES Companies argue that there are
significant differences in operating characteristics, such as response
speeds, among the technologies that fall under Order No. 841's
definition of an electric storage resource. According to AES Companies,
legacy RTO/ISO software is incapable of supporting a participation
model that all such technologies can use, and the RTOs/ISOs cannot
anticipate all yet-to-be-developed technologies. AES Companies
therefore argue that, because multiple participation models are needed
to remove the barriers to the participation of electric storage
resources that the Commission identified in Order No. 841, the
Commission's directive to each RTO/ISO to establish a single
participation model for all electric storage resources is an impossible
task, invariably excluding some resources. AES Companies add that the
Commission's statement that an RTO/ISO may propose additional market

rules to accommodate electric storage resources with specific physical
and operational characteristics through a separate FPA section 205
filing is insufficient to address these concerns.\163\
---------------------------------------------------------------------------

    \163\ AES Companies Rehearing Request at 11-13.
---------------------------------------------------------------------------

3. Commission Determination
    65. We deny AES Companies' request for rehearing. While we agree
with AES Companies that the various technologies that qualify as an
electric storage resource under the definition that the Commission
adopted in the final rule may have different operating characteristics
and that new electric storage technologies will likely emerge, we
continue to find that a single participation model can be designed to
be flexible enough to accommodate any type of electric storage
resource.\164\ Specifically, Order No. 841's requirement that each RTO/
ISO must establish tariff provisions providing a participation model
for electric storage resources that accounts for the physical and
operational characteristics of electric storage resources through
bidding parameters or other means should allow for the representation
of the physical and operational differences between different types of
electric storage resources. For this reason, we remain unpersuaded that
the Commission must require separate participation models for different
types of electric storage resources to remove barriers to their
participation in RTO/ISO markets.
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    \164\ Order No. 841, 162 FERC ] 61,127 at P 54.
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C. Eligibility of Electric Storage Resources To Participate in the RTO/
ISO Markets

1. Final Rule
    66. Order No. 841 added Sec.  35.28(g)(9)(i)(A) to the Commission's
regulations to require each RTO/ISO to establish market rules so that a
resource using the participation model for electric storage resources
is eligible to provide all capacity, energy, and ancillary services
that it is technically capable of providing, including services that
the RTOs/ISOs do not procure through an organized market.\165\ While
noting that there is significant variation in how each RTO/ISO
approaches resource adequacy, the Commission found that it is important
for electric storage resources that can provide value in those resource
adequacy constructs to be eligible to participate.\166\ The Commission
further stated that, if an RTO/ISO does not have existing tariff
provisions that enable electric storage resources to provide capacity,
it must propose such rules on compliance.
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    \165\ Id. P 76.
    \166\ Id. P 100.
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2. Requests for Rehearing or Clarification
    67. SPP seeks clarification that Order No. 841 does not require an
RTO/ISO to create and provide a capacity product that an RTO/ISO market
does not otherwise offer, noting that SPP does not currently operate a
forward capacity market or offer capacity as a biddable product on its
system.\167\
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    \167\ SPP Motion for Clarification at 4-5.
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3. Commission Determination
    68. We grant SPP's request for clarification. Order No. 841 does
not require an RTO/ISO that does not have a capacity product in its
markets to create such a product to comply with the final rule.
However, to the extent that an RTO/ISO has a resource adequacy
construct, the RTO/ISO must demonstrate on compliance that the existing
market rules governing its resource adequacy construct provide a means
for electric storage resources to participate in that construct if
electric storage resources are technically capable of doing so.\168\
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    \168\ Order No. 841, 162 FERC ] 61,127 at P 76. See also id. P
100.
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D. Participation in the RTO/ISO Markets as Supply and Demand

1. Eligibility To Participate as a Wholesale Seller and Wholesale Buyer
a. Final Rule
    69. In Order No. 841, the Commission added Sec.  35.28(g)(9)(i)(B)
to the Commission's regulations to require each RTO/ISO to revise its
tariff to ensure that a resource using the participation model for
electric storage resources can be dispatched as supply and demand and
can set the wholesale market clearing price as both a wholesale seller
and wholesale buyer, consistent with rules that govern the conditions
under which a resource can set the wholesale price.\169\ The Commission
found that, for a resource using the participation model for electric
storage resources to be able to set prices in the RTO/ISO markets as
either a wholesale seller or a wholesale buyer, it must be available to
the RTO/ISO as a dispatchable resource. Moreover, the Commission
required that resources using the participation model for electric
storage resources must be allowed to participate in the RTO/ISO markets
as price takers, consistent with the existing rules for self-scheduled
resources.
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    \169\ See id. P 142.
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    70. Additionally, the Commission required in Order No. 841 that
RTOs/ISOs must accept wholesale bids from resources using the
participation model for electric storage resources to buy energy.\170\
The Commission further stated that allowing electric storage resources
to participate in the RTO/ISO markets as dispatchable load will allow
these resources to set the market clearing price under certain
circumstances, thus better reflecting the value of the marginal
resource and ensuring that electric storage resources are dispatched in
accordance with the highest value service that they are capable of
providing during a set market interval.\171\
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    \170\ See id.
    \171\ See id. P 143.
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b. Requests for Rehearing or Clarification
    71. AES Companies seek rehearing of what they construe as Order No.
841's requirement that all resources using an RTO's/ISO's participation
model for electric storage resources be dispatchable, citing to the
Commission's determinations in Order No. 841 that (1) to set prices in
the RTO/ISO markets as either a wholesale seller or a wholesale buyer,
a resource using the participation model for electric storage resources
must be available to the RTO/ISO as a dispatchable resource and (2) an
electric storage resource participation model must ensure that a
resource using it can be dispatched.\172\ AES Companies argue that
these requirements codify the existing unjust, unreasonable, unduly
discriminatory and preferential status quo that prevents resources that
provide services automatically from participating in RTO/ISO markets
without risking the physical damage to their equipment that can occur
if they are subject to RTO/ISO dispatch. AES Companies argue that,
contrary to Order No. 841's statement that a participation model for
electric storage resources must recognize the physical and operational
characteristics of electric storage resources, predicating
participation on dispatchability fails to recognize the physical and
operational characteristics of these electric storage resources.\173\
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    \172\ AES Companies Rehearing Request at 7 (citing Order No.
841, 162 FERC ] 61,127 at PP 142, 4).
    \173\ Id. at 8-11.
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    72. In addition, AES Companies argue that Order No. 841
unreasonably limits its application of the term ``dispatch'' to an
activity performed exclusively by RTO/ISO software. According to AES

Companies, the term ``dispatch'' should instead be ``inclusive of
scheduling an electric storage resource to operate autonomously, and
ordered outside of the RTO/ISO software by the Reliability
Coordinator.'' \174\
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    \174\ Id. at 9.
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    73. SPP seeks clarification that Order No. 841 will not require an
RTO/ISO that does not currently offer a real-time dispatchable load
service, such as SPP, to create a new service to dispatch an electric
storage resource as load or negative generation. To the extent that
Order No. 841 requires the development of such a new service, SPP asks
whether the Commission will provide each RTO/ISO with flexibility to
develop such service consistent with its existing market design
constructs, with a full opportunity to evaluate the potential system
impacts, and with flexibility to propose its own timeline for
developing and implementing such a service.\175\
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    \175\ SPP Motion for Clarification at 5-6.
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c. Commission Determination
    74. In their rehearing request, AES Companies argue that Order No.
841 requires a resource seeking to participate in RTO/ISO markets under
the electric storage resource participation model to be available to
the RTO/ISO as a dispatchable resource. We disagree with this
characterization of Order No. 841's requirements and thus, deny AES
Companies' request for rehearing. However, we find it is necessary to
modify Sec.  35.28(g)(9)(i)(B) of the Commission's regulations to
clarify that, to the extent electric storage resources are
dispatchable, the RTO/ISO is required to allow them to participate as
dispatchable resources and to set the clearing price in the RTO/ISO
markets as part of the participation model. We clarify that not all
electric storage resources that seek to use the electric storage
resource participation model need to be dispatchable to use that
participation model.
    75. Order No. 841 added Sec.  35.28(g)(9)(i)(B) to the Commission's
regulations to require each RTO/ISO to revise its tariff to provide a
participation model for electric storage resources that ensures that a
resource using the participation model can be dispatched and can set
the wholesale market clearing price.\176\
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    \176\ 18 CFR 35.28(g)(9)(i)(B); Order No. 841, 162 FERC ] 61,127
at P 142.
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    76. We clarify here that this requirement was not intended to
require that a resource using the participation model for electric
storage resources be dispatchable. Rather, by stating that this was to
be ``consistent with rules that govern the conditions under which a
resource can set the wholesale price,'' Order No. 841 requires each
RTO/ISO to revise its tariff to include a participation model for
electric storage resources enabling the RTO/ISO to dispatch a resource
using that model to the extent that the resource has indicated to the
RTO/ISO, whether through its offers to sell or bids to buy or some
other mechanism, that it desires to be dispatchable. Our clarification
is consistent with Order No. 841's findings that (1) resources using
the participation model for electric storage resources must be allowed
to participate in the RTO/ISO markets as price takers, consistent with
the existing market rules for self-scheduled resources \177\ and (2) to
ensure consistent treatment in the RTO/ISO markets, electric storage
resources must maintain the same ability to self-schedule their
resource as other market participants.\178\
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    \177\ See Order No. 841, 162 FERC ] 61,127 at P 142.
    \178\ See id. P 144.
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    77. To remove the ambiguity, we revise Sec.  35.28(g)(9)(i)(B) of
the Commission's regulations to require each RTO/ISO to revise its
tariff to provide a participation model for electric storage resources
that enables a resource using the participation model for electric
storage resources to be dispatched and ensures that such a dispatchable
resource can set the wholesale market clearing price.
    78. This modification clarifies that each RTO/ISO is required to
allow resources using the participation model for electric storage
resources to participate in the RTO/ISO markets as dispatchable
resources, not that such resources must be dispatchable to use that
participation model. We reiterate, however, that the Commission will
continue to require that resources using the participation model for
electric storage resources can only set prices in the RTO/ISO markets
as either a wholesale seller or a wholesale buyer if they are available
to the RTO/ISO as a dispatchable resource.\179\
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    \179\ See id. P 142.
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    79. AES Companies request that the Commission expand our use of the
term dispatch beyond those ``activities performed by RTO/ISO
software.'' However, as clarified above, Order No. 841 only required
that each RTO/ISO must be capable of dispatching resources using the
participation model for electric storage resources and allow such
dispatchable resources to set prices in the RTO/ISO markets. Given this
clarification, we do not find it necessary to expand our use of the
term dispatch beyond RTO/ISO activities, as requested by AES Companies.
    80. We deny SPP's request for clarification that it need not revise
its market rules to allow for dispatchable load. In Order No. 841, the
Commission required each RTO/ISO to create a participation model for
electric storage resources that ensures that a resource using that
model can be dispatched as a wholesale buyer.\180\ Additionally, the
Commission required that RTOs/ISOs accept wholesale bids from resources
using the participation model for electric storage resources to buy
energy.\181\ As the Commission stated in Order No. 841, allowing
electric storage resources to participate in the RTO/ISO markets as
dispatchable load will allow these resources to set the market clearing
price under certain circumstances, thus better reflecting the value of
the marginal resource and ensuring that electric storage resources are
dispatched in accordance with the highest value service that they are
capable of providing during a set market interval.\182\
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    \180\ See id.; 18 CFR 35.28 (g)(9)(i)(B).
    \181\ Order No. 841, 162 FERC ] 61,127 at P 142. See also id. P
150 (``This final rule requires an electric storage resource to be
eligible to participate in the RTO/ISO markets as a wholesale buyer
and for each RTO/ISO to be able to dispatch them as such. Such a
mechanism would entail participation in the energy markets, not the
provision of a new service . . . .'').
    \182\ See id. P 143.
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    81. We clarify for SPP that Order No. 841 provides flexibility for
each RTO/ISO to develop a participation model for electric storage
resources consistent with its existing market design constructs, as SPP
requests. Order No. 841 did not, however, provide each RTO/ISO with
flexibility to propose its own timeline for developing and implementing
any aspect of the participation model for electric storage resources,
including the requirement that RTOs/ISOs must ensure a resource using
the participation model for electric storage resources can be
dispatched as a wholesale buyer.
2. Participation as Price Takers
a. Final Rule
    82. In the final rule, the Commission required that resources using
the participation model for electric storage resources must be allowed
to participate in the RTO/ISO markets as price takers, consistent with
the existing rules for self-scheduled resources.\183\ The Commission
rejected assertions that an RTO/ISO must decide whether to allow
electric storage resources to be price takers, finding that, to ensure
consistent

treatment in the RTO/ISO markets, electric storage resources must
maintain the same ability to self-schedule their resource as other
market participants.\184\ Additionally, to ensure that electric storage
resources are treated consistently with the ability of self-scheduled
load resources and traditional generation resources to participate in
the RTO/ISO markets, the Commission determined that the ability of
electric storage resources to participate as price takers should not be
limited to their participation as load.\185\
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    \183\ Id. P 142.
    \184\ Id. P 144.
    \185\ Id. P 148.
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b. Requests for Rehearing or Clarification
    83. MISO requests clarification that, in complying with the
directive to allow electric storage resources to be price takers as
self-scheduled resources,\186\ MISO may also consider treating an
electric storage resource as a self-scheduled price-taker if the
electric storage resource uses its State of Charge to lock its energy
output to a very narrow range. MISO explains that, in real time, an
electric storage resource could use its State of Charge to lock its MW
amount around its day-ahead position, and that locking energy output to
a very narrow range may result in capacity that cleared in the capacity
market not being fully available to the day-ahead market, counter to
the day-ahead must-offer obligation.\187\
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    \186\ MISO Request for Rehearing at 7 (citing Order No. 841, 162
FERC ] 61,127 at P 142).
    \187\ MISO states that such a limitation would be consistent
with the principle articulated in Order No. 841 that an [electric
storage resource] ``must not de-rate its capacity below any capacity
obligations it has assumed, such as any applicable must-offer
requirement.'' Id. at 7-8 (citing Order No. 841, 162 FERC ] 61,127
at P 99).
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c. Commission Determination
    84. We deny MISO's request for clarification. We reiterate that
RTOs/ISOs must provide electric storage resources with the same ability
to self-schedule as other market participants.\188\ We therefore find
that, to the extent that a resource using the participation model for
electric storage resources has not elected to be a self-scheduled price
taker, it would be unreasonable for an RTO/ISO to designate that
resource as a self-scheduled price taker solely based on the State of
Charge parameters that the resource has submitted. We find that the
RTO/ISO must provide resources using the electric storage resource
participation model with the opportunity to determine whether to self-
schedule, consistent with the RTO's/ISO's existing rules for self-
scheduled resources.
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    \188\ See Order No. 841, 162 FERC ] 61,127 at P 144.
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    85. However, in response to MISO's concern that, if a resource
using the participation model for electric storage resources restricts
its energy output to a very narrow range through its State of Charge,
any of its capacity that cleared in the capacity market may not be
fully available to the day-ahead market, we agree that a resource using
the participation model for electric storage resources may not use a
bidding parameter, such as State of Charge, to circumvent its
obligations in the RTO/ISO markets, including any day-ahead must-offer
obligation for capacity resources.

E. Physical and Operational Characteristics of Electric Storage
Resources

1. Requirement To Incorporate Bidding Parameters as Part of the
Electric Storage Resource Participation Model
a. Final Rule
    86. In the final rule, the Commission added Sec.  35.28(g)(9)(i)(C)
to the Commission's regulations to require each RTO/ISO to have tariff
provisions providing a participation model for electric storage
resources that accounts for the physical and operational