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

    77. Eversource argues that, because the participation of
distributed energy resources in RTO/ISO markets could convert a
previously state-jurisdictional distribution facility into a
Commission-jurisdictional distribution facility and potentially
necessitate hundreds or thousands of interconnection agreement filings,
the Commission should revisit the interconnection agreement filing
criteria for distributed energy resources and develop a process that
fairly balances the administrative burden on parties with respect for
Commission and state jurisdictional lines.\186\ Icetec requests that
the Commission reinforce the traditional bright line between Commission
and state jurisdiction at the transmission-distribution boundary by
confirming that relevant electric retail regulatory authorities have
sole jurisdiction over the interconnection of resources to the
distribution system, while ensuring that that jurisdiction may not be
used to discriminatorily restrict or condition distributed energy
resource participation in RTO/ISO markets.\187\
---------------------------------------------------------------------------

    \186\ Eversource Comments (2018 RM18-9) at 9-10.
    \187\ Icetec Comments (2018 RM18-9) at 2-3, 11.
---------------------------------------------------------------------------

    78. Advanced Energy Management requests that the Commission
recognize the clear distinction between the distribution
interconnection process and the wholesale market registration
process.\188\ Advanced Energy Management states that the Commission has
authority over the criteria for wholesale market registration and
participation, and that state and local regulators have authority over
the criteria for a non-discriminatory distribution interconnection
process that ensures that interconnecting distributed energy resources
that wish to participate in the wholesale market do not create
distribution reliability issues.\189\ According to Advanced Energy
Management, if a distributed energy resource imposes costs on the grid
when it interconnects, regardless of reason, those costs can be
recovered as interconnection costs under the authority of state
regulators.\190\
---------------------------------------------------------------------------

    \188\ Advanced Energy Management Comments (2018 RM18-9) at 18;
Advanced Energy Management Comments (2019 RM18-9) at 3.
    \189\ Advanced Energy Management Comments (2018 RM18-9) at 18-
19; Advanced Energy Management Comments (2019 RM18-9) at 3.
    \190\ Advanced Energy Management Comments (2018 RM18-9) at 10.
---------------------------------------------------------------------------

    79. Stem recommends that the Commission initiate a process to
revise distribution utilities' interconnection tariffs (e.g., the
Wholesale Distribution Access Tariffs in California) so that (1)
individual distributed energy resources, participating through an
aggregator, are not required to do more than satisfy the local
interconnection requirements in order to offer residual capability
through the RTO/ISO markets, and (2) the tariffs accommodate the
potential for coordinated dispatch of a distributed energy resource
aggregation such as including limitations on aggregated behavior due to
distribution system constraints, which would be communicated to the
RTO/ISO as a reduced size resource during registration as a market
participant.\191\ Microgrid Resource Coalition similarly asserts that a
responsive distributed energy resource needs to specify its expected
modes of operation during the interconnection process by establishing
its physical capabilities subject to any residual distribution system
constraints, which will establish the limits of its ability to provide
services to the grid.\192\
---------------------------------------------------------------------------

    \191\ Stem Comments (2018 RM18-9) at 9-10, 15-16.
    \192\ Microgrid Resources Coalition Comments (2018 RM18-9) at
12.
---------------------------------------------------------------------------

    80. Public Interest Organizations argue that some RTO/ISO tariffs
present significant barriers to distributed energy resource
interconnection, particularly those that require individual distributed
energy resources to complete a wholesale interconnection process.\193\
Therefore, Public Interest Organizations propose that distributed
energy resource interconnection be solely under retail jurisdiction,
and that RTO/ISO purview over distributed energy resource aggregations
be limited to market rules, and where cause is shown, for transmission
system impacts.\194\
---------------------------------------------------------------------------

    \193\ Public Interest Organizations Comments (2019 RM18-9) at 3.
    \194\ Id. at 3-4.
---------------------------------------------------------------------------

    81. Some commenters contend that PJM's interconnection processes
impose significant transaction costs on distributed energy
resources.\195\ Icetec asserts that every distributed energy resource
that wishes to participate in PJM markets, no matter how small, must go
through PJM's interconnection queue; that an individual residential
owner must file an OATT with the Commission registering the 120 volt
wiring in its house as a transmission

provider before a third party can apply to interconnect distributed
energy resources located behind a residential meter; and that PJM
refers most distribution-connected projects to distribution utilities
for further study, even if the resource is already interconnected and
injecting power under a distribution interconnection tariff.\196\
Icetec claims that, in contrast, distribution utilities may operate
distributed energy resources attached to their systems without going
through RTO/ISO interconnection, which creates partially discriminatory
market access by placing merchant distributed energy resource
developers at a significant disadvantage relative to incumbent
utilities.\197\ Icetec requests that the Commission require RTOs/ISOs
to accept a distributed energy resource as deliverable to the wholesale
transmission system, with further studies limited to the transmission
system, when it is properly connected to the distribution system under
an arrangement approved by the relevant electric retail regulatory
authority.\198\ Icetec also asks the Commission to both allow
distributed energy resources that deliver to the transmission system at
a bus that is primarily load-serving to participate in wholesale
markets without further transmission studies and to direct RTOs/ISOs to
file tariff revisions setting procedures and timelines for
interconnection studies carried out by distribution utilities for
interconnection of distributed energy resources intending to
participate in RTO/ISO markets.\199\
---------------------------------------------------------------------------

    \195\ Icetec Comments (2018 RM18-9) at 7-9; UofD/Mensah Comments
(2019 RM18-9) at 2-5.
    \196\ Icetec Comments (2018 RM18-9) at 7-8.
    \197\ Id. at 8.
    \198\ Id. at 8-9.
    \199\ Id. at 9.
---------------------------------------------------------------------------

    82. UofD/Mensah similarly contend that PJM's existing processes are
unjust and unreasonable in light of barriers that they present to small
resources that interconnect under state or local jurisdiction.\200\
According to UofD/Mensah, PJM imposes a more burdensome market
participation process on resources that interconnect under state or
local jurisdiction than on resources that interconnect under Commission
jurisdiction.\201\ Specifically, they contend that PJM's Small
Generator Interconnection Procedures use screens based only on the
local distribution system rather than studies to assess safety and
reliability, require PJM to provide interconnection customers that pass
the screens an Interconnection Service Agreement within 15-20 days of
the request, and only cost $500--$5,000 depending on the circumstances.
They assert, however, that for non-jurisdictional interconnections,
each resource must wait up to six months for the queue study process to
begin and undergo a Feasibility Study and sometimes a System Impact
Study, expected to take three months each, before approval. They assert
that UofD was required to provide deposits totaling $27,000 for its 933
kW electric vehicle project, which is nine times the deposit that they
would have been charged if the interconnection was Commission
jurisdictional.
---------------------------------------------------------------------------

    \200\ UofD/Mensah Comments (2019 RM18-9) at 2, 4.
    \201\ Id. at 2.
---------------------------------------------------------------------------

    83. UofD/Mensah therefore request that the Commission align the
RTO/ISO market participation process requirements for non-Commission-
jurisdictional interconnections with the Commission's Small Generator
Interconnection Procedures.\202\ UofD/Mensah also recommend that the
current distributed energy resource interconnection process be improved
by permitting a subset of small, behind-the-meter resources that
already have state or local interconnection approval to be
automatically approved to provide wholesale services.\203\ For those
resources not automatically approved, UofD/Mensah recommend that the
Commission limit the allowable cost and time of existing RTO/ISO
processes and allow aggregations to be studied as a group. Finally,
after correcting the non-Commission-jurisdictional interconnection
process, UofD/Mensah recommend that the Commission consider declining
to exercise its authority over the interconnection of distributed
energy resources that seek to provide wholesale services or at least
clarify the ``dual-use doctrine'' in specific cases so that developers
need not rely on RTOs/ISOs to interpret it.\204\ In response to UofD/
Mensah, PJM notes that its stakeholder process is currently considering
reforms designed to provide a ``fast-track'' avenue for processing
energy-only resources under 2 MW.\205\
---------------------------------------------------------------------------

    \202\ Id. at 4-5.
    \203\ Id. at 5.
    \204\ Id. at 5-6.
    \205\ PJM Reply Comments (2019 RM18-9) at 4.
---------------------------------------------------------------------------

    84. Advanced Energy Economy asserts that the Commission does not
need to address interconnection practices in order to issue a final
rule, and suggests that, if the Commission is interested in exploring a
different approach for interconnection of distributed energy resources,
it should do so in a separate proceeding.\206\ Advanced Energy Economy
also asserts that each of the RTOs/ISOs described processes that are
generally consistent with the Commission's long-standing ``dual use''
policy.\207\
---------------------------------------------------------------------------

    \206\ Advanced Energy Economy Comments (2019 RM18-9) at 1-2, 7-
8.
    \207\ Id. at 2-3.
---------------------------------------------------------------------------

    85. Several commenters argue that distribution interconnection
requirements should address distribution-level reliability concerns
that are raised by the interconnection of distributed energy resources
to distribution systems.\208\ Vice Chairman Place of the Pennsylvania
Public Utilities Commission argues for primacy of a distribution
utility's interconnection requirements in determining the eligibility
of distributed energy resources to participate in distributed energy
resource aggregations, and asserts that distributed energy resource
aggregations may necessitate new interconnection requirements or
study.\209\ Vice Chairman Place asserts that distribution utilities are
authorized by state regulators to protect distribution operations, and
that distributed energy resources participating in aggregations will
need to comply with state-level interconnection agreements.\210\
FirstEnergy argues that states must address the development of
distributed energy resource interconnection standards and technical
requirements, and that distribution utilities are best situated to
identify system issues that may affect ongoing reliable operations on
local systems.\211\
---------------------------------------------------------------------------

    \208\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 17; PJM Comments (2018 RM18-9) at 18-19; Stem Comments (2018
RM18-9) at 15.
    \209\ Vice Chairman Place Comments (2018 RM18-9) at 2.
    \210\ Id. at 2-3.
    \211\ FirstEnergy Comments (2019 RM18-9) at 4-5.
---------------------------------------------------------------------------

    86. Several commenters argue that the RTOs/ISOs should perform some
sort of study of a distributed energy resource aggregation because
distribution-level interconnection reviews are only a reliability and
safety check for individual resources, and do not evaluate the combined
impact that an aggregation would have on the system or the impact that
the distributed energy resource will have on the system if it chooses
to participate in an aggregation.\212\ EEI, PJM Utilities Coalition,
and San Diego Gas & Electric recommend that an aggregation study be
done if a distributed energy resource joins an aggregation and if the
composition of an aggregation changes

after registration.\213\ TAPS agrees, and notes that, even for
distribution utilities with robust generation interconnection processes
that include rigorous modeling and studies, it may be impossible to
anticipate and fully evaluate every possible combination of loads,
resources, and distribution system configurations to determine in
advance whether potential RTO/ISO and distributed energy resource
aggregator dispatch decisions might have adverse impacts.\214\
Similarly, NRECA asserts that an interconnection agreement with the
distributed energy resource is necessary but not sufficient; NRECA
argues that distribution utilities need to be able to conduct an
integration study within a reasonable timeline that considers grid
topology, as well as to modify their interconnection procedures to
ensure third-party distributed energy resource participation in RTO/ISO
markets will not create any safety, reliability or power quality
concerns, and that implementation will conform with IEEE standards
(such as IEEE 1547).\215\ Pacific Gas & Electric concurs with the need
to modify existing processes and protocols for distribution review
requirements for assessing aggregation impacts and points to an ongoing
collaborative process underway in California that requires additional
time to complete.\216\
---------------------------------------------------------------------------

    \212\ EEI Comments (2018 RM18-9) at 14-16; Organization of MISO
States Comments (2018 RM18-9) at 8-9; San Diego Gas & Electric
Comments (2018 RM18-9) at 5; SoCal Edison Comments (2018 RM18-9) at
11.
    \213\ EEI Comments (2018 RM18-9) at 15-16; PJM Utilities
Coalition Comments (2018 RM18-9) at 14; San Diego Gas & Electric
Comments (2018 RM18-9) at 5.
    \214\ TAPS Comments (2018 RM18-9) at 12.
    \215\ NRECA Comments (2018 RM18-9) at 29, 30.
    \216\ Pacific Gas & Electric Comments (2018 RM18-9) at 14-15,
18.
---------------------------------------------------------------------------

    87. On the other hand, several commenters raise concerns about the
use of distribution interconnection processes to limit participation of
distributed energy resources in wholesale markets. Advanced Energy
Economy argues that the distribution interconnection process should not
be used as a lever to unduly limit participation in wholesale
markets.\217\ Similarly, Stem asserts that the Commission must prevent
a distribution utility from imposing discriminatory state-level
interconnection requirements that are intended to foreclose distributed
energy resources from participating in the RTO/ISO markets.\218\ Stem
asserts that, for instance, the Commission should not allow the
distribution utilities to effectively veto distributed energy resource
participation in wholesale markets by unreasonably delaying necessary
updates to interconnection tariffs.\219\ Advanced Energy Management and
Icetec agree that distributed energy resources should comply with
distribution interconnection requirements, but argue that the exercise
of state and local regulatory and distribution utility authority should
occur prior to a distributed energy resource's registration in an RTO/
ISO.\220\ Specifically, they argue that state and local regulatory
authorities and distribution utilities should define non-discriminatory
interconnection procedures that ensure the distribution grid can
accommodate distributed energy resources.\221\ NRG argues that
distributed energy resources should only be required to have one
interconnection study and should not be subject to additional review,
noting that collaboration on transmission and distribution impact
studies may be necessary, and that NYISO, PJM, and CAISO are already
engaged in some form of collaboration with distribution utilities on
these matters.\222\
---------------------------------------------------------------------------

    \217\ Advanced Energy Economy Comments (2018 RM18-9) at 18.
    \218\ Stem Comments (2018 RM18-9) at 15.
    \219\ Id. at 16.
    \220\ Advanced Energy Management Comments (2018 RM18-9) at 18;
Icetec Comments (2018 RM18-9) at 18.
    \221\ Advanced Energy Management Comments (2018 RM18-9) at 18;
Icetec Comments (2018 RM18-9) at 18-19.
    \222\ NRG Comments (2018 RM18-9) at 8-9.
---------------------------------------------------------------------------

    88. Several commenters argue that the relevant electric retail
regulatory authorities must have discretion to allocate any
distribution system-related costs incurred by utilities as a result of
distributed energy resource participation in RTO/ISO markets.\223\ Some
commenters warn that, without proper cost allocation methods, retail
customers effectively would be subsidizing wholesale market
participation.\224\ EEI argues that distribution utilities should not
have to absorb any stranded costs if they invest in upgrades needed for
distributed energy resource aggregation that are ultimately not
utilized.\225\ APPA and EEI argue that there is little evidence of
significant demand for distributed energy resource aggregation
programs, and so distribution utilities may have to invest in upgrades
to the distribution system that are ultimately never needed.\226\ The
Indiana Commission asserts that distribution utilities may have to
procure additional capacity to account for uncertainty in their
forecasts regarding the amount of future distributed generation
available to them.\227\
---------------------------------------------------------------------------

    \223\ Vice Chairman Place Comments (2018 RM18-9) at 3; APPA
Comments (2018 RM18-9) at 21; EEI Comments (2018 RM18-9) at 20; New
Jersey Board Comments (2018 RM18-9) at 4.
    \224\ APPA Comments (2018 RM18-9) at 10; Indiana Commission
Comments (2018 RM18-9) at 8; NRECA Comments (2018 RM18-9) at 12.
    \225\ EEI Comments (2018 RM18-9) at 20.
    \226\ APPA Comments (2018 RM18-9) at 10-12; EEI Comments (2018
RM18-9) at 21.
    \227\ Indiana Commission Comments (2018 RM18-9) at 8.
---------------------------------------------------------------------------

    89. Other commenters argue that any cost allocation associated with
a distributed energy resource aggregator participating in RTO/ISO
markets would fall under the Commission's jurisdiction because the
aggregator would be acting as a wholesale entity engaged in a
Commission-jurisdictional transaction.\228\ Hence, a few commenters
suggest that, to the extent a distribution utility incurs additional
costs to provide service to distributed energy resource aggregations,
those costs should be recovered through a wholesale distribution tariff
filed with the Commission.\229\ NRECA asserts that the impact of a
distributed energy resource or distributed energy resource aggregation
interconnection on a host distribution utility must be considered in
the interconnection process, whether under RTO/ISO procedures or state-
jurisdictional procedures.\230\ NRECA notes that to do so will require
that cooperatives in RTO/ISO regions develop new distributed energy
resource interconnection agreements and procedures.\231\
---------------------------------------------------------------------------

    \228\ Icetec Comments (2018 RM18-9) at 12 (citing PJM
Interconnection, LLC, 149 FERC ] 61,185, order on reh'g, 151 FERC ]
61,231); SoCal Edison Comments (2018 RM18-9) at 6 (citing Detroit
Edison Co., 334 F.3d 48 (D.C. Cir. 2003)).
    \229\ Advanced Energy Economy Comments (2018 RM18-9) at 18
(citing Order No. 841, 162 FERC ] 61,127 at P 301); Icetec Comments
(2018 RM18-9) at 12; Stem Comments (2018 RM18-9) at 3.
    \230\ NRECA Comments (2019 RM18-9) at 6-7.
    \231\ Id. at 7.
---------------------------------------------------------------------------

b. Commission Determination
    90. For the reasons discussed below, we decline to exercise our
jurisdiction over the interconnections of distributed energy resources
to distribution facilities for the purpose of participating in RTO/ISO
markets exclusively as part of a distributed energy resource
aggregation. Thus, we will not require standard interconnection
procedures and agreements or wholesale distribution tariffs for such
interconnections.
    91. In Order Nos. 2003 and 2006, the Commission first adopted
standard interconnection procedures and agreements that apply when an
interconnection customer ``that plans to engage in a sale for resale in
interstate commerce or to transmit electric energy

in interstate commerce'' \232\ requests interconnection to the
facilities of a public utility's Transmission System \233\ or
Distribution System \234\ that, at the time that the interconnection is
requested, are used either to transmit electric energy in interstate
commerce or to sell electric energy at wholesale in interstate commerce
pursuant to a Commission-filed OATT.\235\ The Commission recognized
that ``some [lower-voltage facilities] are used for jurisdictional
service such as carrying power to a wholesale power customer for resale
and are included in a public utility's OATT,'' and that ``in some
instances, there is a separate OATT rate for using them, sometimes
called a Wholesale Distribution Rate.'' \236\ The Commission also noted
that, with respect to a Commission-jurisdictional interconnection to a
distribution facility, the cost of upgrades needed on the Distribution
System to accommodate the interconnection must be directly assigned to
the interconnection customer because an upgrade to the Distribution
System generally does not benefit all transmission customers.\237\ In
Order No. 2003-C, the Commission concluded that, while it does not have
the authority to directly regulate a ``local distribution'' facility
that is used to transmit energy being sold at wholesale, ``the
Commission may regulate the entire transmission component (rates, terms
and conditions) of the wholesale transaction.'' \238\
---------------------------------------------------------------------------

    \232\ Order No. 2003, 104 FERC ] 61,103 at P 804; see also Order
No. 845, 163 FERC ] 61,043.
    \233\ The Commission defined ``Transmission System'' as ``[t]he
facilities owned, controlled or operated by the Transmission
Provider or the Transmission Owner that are used to provide
transmission service under the Tariff.'' Order No. 2006, 111 FERC ]
61,220 at P 6.
    \234\ The Commission defined ``Distribution System'' as ``[t]he
Transmission Provider's facilities and equipment used to transmit
electricity to ultimate usage points such as homes and industries
directly from nearby generators or from interchanges with higher
voltage transmission networks which transport bulk power over longer
distances. The voltage levels at which Distribution Systems operate
differ among areas.'' Id. P 7.
    \235\ Order No. 2003, 104 FERC ] 61,103 at P 804; see Order No.
2006, 111 FERC ] 61,220 at P 5; see also Order No. 845, 163 FERC ]
61,043.
    \236\ Order No. 2003, 104 FERC ] 61,103 at P 803; see also Order
No. 845, 163 FERC ] 61,043.
    \237\ Order No. 2003, 104 FERC ] 61,103 at P 697; see also Order
No. 845, 163 FERC ] 61,043.
    \238\ Order No. 2003-C, 111 FERC ] 61,401 at P 53; see also
Order No. 845, 163 FERC ] 61,043.
---------------------------------------------------------------------------

    92. In practice, Order Nos. 2003 and 2006 established what some
RTOs/ISOs have labeled the ``first use'' test, under which the first
interconnection to a distribution facility for the purpose of making
wholesale sales is not subject to Commission jurisdiction. This is
because, at the time of the request, the distribution facility is not
used to transmit electric energy in interstate commerce or subject to
wholesale open access under an OATT. Therefore, the first
interconnecting resource ``that plans to engage in a sale for resale in
interstate commerce or to transmit electric energy in interstate
commerce'' \239\ on a distribution facility is not required to use the
transmission provider's Commission-jurisdictional Generator
Interconnection Procedures or obtain a Commission-jurisdictional
Generator Interconnection Agreement.\240\ As a result, such
interconnections are governed by the applicable state or local law.
---------------------------------------------------------------------------

    \239\ Order No. 2003, 104 FERC ] 61,103 at P 804; see also Order
No. 845, 163 FERC ] 61,043.
    \240\ See Order No. 2003-C, 111 FERC ] 61,401 at P 53; Order No.
2006, 111 FERC ] 61,220 at P 7; Order No. 845, 163 FERC ] 61,043;
see also PJM Interconnection, L.L.C., 114 FERC ] 61,191, at P 14,
order on reh'g, 116 FERC ] 61,102 (2006).
---------------------------------------------------------------------------

    93. However, under the ``first use'' test, subsequent
interconnections of resources to the same distribution facility for the
purpose of engaging in wholesale sales or transmission in interstate
commerce are subject to Commission jurisdiction because the
distribution facilities are already being used to facilitate wholesale
transactions and therefore are subject to an OATT. Thus, any subsequent
resources interconnecting to the same distribution facility for
Commission-jurisdictional purposes (e.g., to make wholesale sales in
interstate commerce) must use the Commission-jurisdictional Generator
Interconnection Procedures and Generator Interconnection Agreement
established in Order Nos. 2003 and 2006 and later amended in Order No.
845. The United States Court of Appeals for the District of Columbia
Circuit upheld this jurisdictional application as consistent with the
FPA.\241\
---------------------------------------------------------------------------

    \241\ See Nat'l Ass'n of Regulatory Util. Comm'rs v. FERC, 475
F.3d at 1280-82 (``By establishing standard agreements FERC has
exercised its jurisdiction over the terms of those relationships.'')
(citing Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667,
696 (D.C. Cir. 2000) (``FPA [section] 201 makes clear that all
aspects of wholesale sales are subject to federal regulation,
regardless of the facilities used.'')).
---------------------------------------------------------------------------

    94. The Commission adopted this limited jurisdictional approach to
avoid ``allow[ing] a potential wholesale seller to cause the
involuntary conversion of a facility previously used exclusively for
state jurisdictional interconnections and delivery, and subject to the
exclusive jurisdiction of the state, into a facility also subject to
the Commission's interconnection jurisdiction,'' believing that this
outcome would cross the jurisdictional line established by
Congress.\242\ Nevertheless, the Commission anticipated that its
standard interconnection procedures and agreement terms would rarely
apply to distributed generation: ``We recognize that Order No. 2003
does not apply to most distributed generation, since these facilities
almost always interconnect to facilities that are not subject to an
OATT.'' \243\
---------------------------------------------------------------------------

    \242\ Order No. 2003-C, 111 FERC ] 61,401 at P 51; see also
Order No. 845, 163 FERC ] 61,043.
    \243\ Order No. 2003-A, 106 FERC ] 61,220 at P 739; see also
Order No. 2006, 111 FERC ] 61,220 at P 8 (``Because of the limited
applicability of this Final Rule, and because the majority of small
generators interconnect with facilities that are not subject to an
OATT, this Final Rule will not apply to most small generator
interconnections.''); Order No. 845, 163 FERC ] 61,043.
---------------------------------------------------------------------------

    95. We agree with commenters that the integration of distributed
energy resource aggregations into the RTO/ISO markets warrants our
addressing the application of the Commission's interconnection policy
to the distributed energy resource aggregations enabled by this final
rule. As the Commission recognized in Order No. 792, renewable
portfolio standards, state policies promoting distributed generation,
and decreases in capital costs have driven a substantial increase in
small generator interconnection requests.\244\ In the intervening
years, those trends have only intensified, further stimulating
distributed energy resource development.\245\ We anticipate that
increased participation of distributed energy resources in RTO/ISO
markets via distributed energy resource aggregations will substantially
increase the number of distributed energy resource interconnections to
distribution facilities for the purpose of engaging in wholesale
transactions and/or transmission in interstate commerce. Such growth
could increase the number of distribution-level interconnections
subject to the Commission's jurisdiction. As Public Interest
Organizations suggest, a large influx of distribution-level
interconnections could create uncertainty as to whether certain
interconnections are subject to Commission jurisdiction or state/local
jurisdiction, and whether they would require the use of the
Commission's

standard interconnection procedures and agreement.\246\ It could
additionally burden RTOs/ISOs with an overwhelming volume of
interconnection requests.\247\
---------------------------------------------------------------------------

    \244\ Small Generator Interconnection Agreements & Procedures,
Order No. 792, 145 FERC ] 61,159, at P 23 (2013), as modified,
errata notice, 146 FERC ] 61,019, as modified, errata notice, 148
FERC ] 61,215, clarified, Order No. 792-A, 146 FERC ] 61,214 (2014).
    \245\ See Public Interest Organizations Comments (2019 RM18-9)
at 6-7. See also EIA, August 2019 Monthly Energy Review at Figure
7.2a, https://www.eia.gov/totalenergy/data/monthly; Office of Energy
Projects, Energy Infrastructure Update For July2019 at 4 (July
2019), https://www.ferc.gov/legal/staff-reports/2019/july-energy-infrastructure.pdf).
    \246\ Public Interest Organizations Comments (2019 RM18-9) at 9.
    \247\ Id. at 5.
---------------------------------------------------------------------------

    96. Given these concerns and the confluence of local, state, and
federal authority over distributed energy resource interconnections, in
this final rule, we decline to exercise jurisdiction over the
interconnections of distributed energy resources to distribution
facilities for those distributed energy resources that seek to
participate in RTO/ISO markets exclusively as part of a distributed
energy resource aggregation. We do not believe that requiring standard
interconnection procedures and agreement terms for these
interconnections is necessary to advance the objectives of Order Nos.
2003, 2006 and 845, which established standard interconnection
procedures and agreements in order to prevent undue discrimination,
preserve reliability, increase energy supply, lower wholesale prices
for customers by increasing the number and types of new generation that
would compete in the wholesale electricity market, reduce
interconnection time and costs, and facilitate development of non-
polluting alternative energy sources.\248\ Rather, we agree with
commenters that state and local authorities, which have traditionally
regulated distributed energy resource interconnections, have the
requisite experience, interest, and capacity to oversee these
distribution-level interconnections.
---------------------------------------------------------------------------

    \248\ See Order No. 2003, 104 FERC ] 61,103 at P 1; Order No.
2006, 111 FERC ] 61,220 at P 1; Order No. 845, 163 FERC ] 61,043;
see also New York v. FERC, 535 U.S. 1, 26-27 (2002) (upholding the
Commission's discretion to issue a tailored remedy where ``the
remedy it ordered constituted a sufficient response to the problems
. . . identified in the wholesale market''). In issuing Order Nos.
2003 and 2006, the Commission acknowledged that their requirements
would rarely apply to the interconnections of distributed energy
resources. See Order No. 2003-A, 106 FERC ] 61,220 at P 739; Order
No. 2006, 111 FERC ] 61,220 at P 8; Order No. 845, 163 FERC ]
61,043.
---------------------------------------------------------------------------

    97. Because we decline here to exercise our jurisdiction over the
interconnection of a distributed energy resource to a distribution
facility for the purpose of participating in RTO/ISO markets
exclusively through a distributed energy resource aggregation, the
interconnection of such a resource for the purpose of participating in
a distributed energy resource aggregation would not constitute a first
interconnection for the purpose of making wholesale sales under the
``first use'' test. As such, only a distributed energy resource
requesting interconnection to the distribution facility for the purpose
of directly engaging in wholesale transactions (i.e., not through a
distributed energy resource aggregation) would create a ``first use''
and any subsequent distributed energy resource interconnecting for the
purpose of directly engaging in wholesale transactions would be
considered a Commission-jurisdictional interconnection. We believe that
this approach will minimize any increase in the number of distribution-
level interconnections subject to the Commission's jurisdiction that
this final rule may cause.
    98. This final rule does not require any changes to the pro forma
Generator Interconnection Procedures or Generator Interconnection
Agreements. To the extent that the jurisdictional conditions described
in Order Nos. 2003 and 2006 are met, those standard interconnection
procedures and agreement terms originally established in Order Nos.
2003 and 2006 and later amended by Order No. 845 will continue to apply
to the interconnections of distributed energy resources that
participate in RTO/ISO markets individually, independent of a
distributed energy resource aggregation. This final rule also does not
revise the Commission's jurisdictional approach to the interconnections
of QFs that participate in distributed energy resource
aggregations.\249\
---------------------------------------------------------------------------

    \249\ See Order No. 2003, 104 FERC ] 61,103 at PP 813-815; Order
No. 2006, 111 FERC ] 61,220 at PP 516-518; Order No. 845, 163 FERC ]
61,043.
---------------------------------------------------------------------------

    99. With respect to arguments that distributed energy resources
should only be required to have one interconnection study--at the
distribution interconnection stage--and should not be subject to
additional review in connection with the possibility of RTO/ISO market
participation, and competing arguments that both distribution
interconnection studies and separate distributed energy resource
aggregation studies are needed when distributed energy resources join
an aggregation, we believe that there could be different approaches to
this issue that would work in appropriate circumstances. We therefore
decline to create new universal requirements or initiate a process to
standardize tariffs with respect to these matters at this time. In
response to increased demand for distributed energy resource
aggregations for wholesale market participation, some state or local
authorities may choose to voluntarily update their distribution
interconnection processes to assess the impacts of distributed energy
resource aggregations on the distribution system at the initial
interconnection stage, while other state and local authorities may not.
In the latter scenario, it may be both necessary and appropriate for
the RTO/ISO, in coordination with affected distribution utilities, to
conduct separate studies of the impact on the distribution system after
a distributed energy resource joins a distributed energy resource
aggregation. Moreover, as the individual distributed energy resources
in an aggregation may change over time,\250\ we cannot discount the
possibility that the electrical characteristics of the aggregation will
change significantly enough to require restudy. In practice, we expect
that modifications to the list of resources in a distributed energy
resource aggregation could occasionally indicate changes to the
electrical characteristics of the distributed energy resource
aggregation that are significant enough to potentially adversely impact
the reliability of the distribution or transmission systems and justify
restudy of the full distributed energy resource aggregation; therefore,
RTOs/ISOs and distribution utilities may perform such aggregation
restudies if necessary. Similarly, while the interconnections of
distributed energy resources seeking to participate in RTO/ISO markets
as part of a distributed energy resource aggregation would be subject
to state or local interconnection procedures, we believe that
coordination between RTOs/ISOs and distribution utilities, as discussed
in Section IV.H below, should ensure that RTOs/ISOs have the
information that they need to study the impact of the aggregations on
the transmission system. In general, where needed, such studies of the
impact of an aggregation as a whole on the transmission system should
be the only aggregation-related studies that the RTO/ISO needs to
undertake.\251\
---------------------------------------------------------------------------

    \250\ See infra Section IV.I (Modifications to List of Resources
in Aggregation).
    \251\ However, as explained earlier, RTOs/ISOs may still need to
study individually those distributed energy resources intending to
individually participate in RTO/ISO markets rather than through
aggregations.
---------------------------------------------------------------------------

    100. In response to the comments of Advanced Energy Economy, we
decline to require standard interconnection tariffs in those states
where no retail tariff exists for distributed energy resources that are
not QFs under PURPA. We believe that such a situation should be
addressed at the state level, as discussed above.
    101. While some commenters raise concerns that declining to create
new

universal distribution interconnection requirements or initiate a
process to standardize distribution interconnection tariffs could
result in uncertainty and delay, or could be used to unduly limit
participation of distributed energy resource aggregations in wholesale
markets, we believe that such concerns are speculative at this time. In
this regard, we note that, while we are herein declining to exercise
jurisdiction over the interconnections of distributed energy resources
to distribution facilities for the purpose of participating in
distributed energy resource aggregations, the Commission may revisit
this policy decision in the future, should we discover abuses of the
distribution interconnection process or the rise of unnecessary
barriers to the participation of distributed energy resource
aggregations in RTO/ISO markets.
    102. With respect to the related arguments that the distribution
interconnection process and the distributed energy resource aggregation
registration process are separate but require coordination, we agree,
and believe that the coordination requirements discussed in Section
IV.H of this final rule appropriately address this need.
    103. Although we find it appropriate to decline to exercise
jurisdiction over the interconnections of distributed energy resources
intending to participate in RTO/ISO markets exclusively through a
distributed energy resource aggregation, we recognize that such
distributed energy resources may already have interconnected pursuant
to procedures that were accepted by the Commission prior to the
effective date of this final rule. Therefore, to minimize disruption to
existing interconnection agreements for distributed energy resources,
we are not requiring distributed energy resources that already
interconnected under Commission-jurisdictional procedures to convert to
state or local interconnection agreements.
    104. Accordingly, in its compliance filing, we require each RTO/ISO
to make any necessary tariff changes to reflect the guidance above.

B. Definitions of Distributed Energy Resource and Distributed Energy
Resource Aggregator

1. NOPR Proposal
    105. In the NOPR, the Commission proposed to define a distributed
energy resource as ``a source or sink of power that is located on the
distribution system, any subsystem thereof, or behind a customer
meter.'' \252\ The Commission added that these resources may include,
but are not limited to, electric storage resources, distributed
generation, thermal storage, and electric vehicles and their supply
equipment. The Commission proposed to define a distributed energy
resource aggregator as ``an entity that aggregates one or more
distributed energy resources for purposes of participation in the
capacity, energy and ancillary service markets of the regional
transmission operators and independent system operators.'' \253\
---------------------------------------------------------------------------

    \252\ NOPR, 157 FERC ] 61,121 at PP 1 n.2, 104.
    \253\ Id. P 5 n.13.
---------------------------------------------------------------------------

2. Comments
    106. Several commenters raise concerns with the proposed definition
of distributed energy resource. EEI suggests that the Commission use a
term besides ``source or sink of power'' to reflect the Commission's
desire to include all electric devices that can produce or consume
energy because a source or sink is a location and not a resource.\254\
AES Companies, MISO Transmission Owners, and NYISO Indicated
Transmission Owners seek clarification whether the definition of
distributed energy resources includes resources that are behind and in
front of the meter. AES Companies explain that it is not out of the
ordinary for resources such as solar or batteries to be interconnected
at the distribution system but not behind the meter, and NYISO
Indicated Transmission Owners state that aggregations of front-of-the-
meter distributed energy resources should be able to elect to
participate in wholesale markets as part of a distributed energy
resource aggregation.\255\
---------------------------------------------------------------------------

    \254\ EEI Comments (RM16-23) at 16 n.23.
    \255\ AES Companies Comments (RM16-23) at 40-41; NYISO Indicated
Transmission Owners Comments (RM16-23) at 13.
---------------------------------------------------------------------------

    107. NYISO Indicated Transmission Owners caution that, while a
general definition of a distributed energy resource is appropriate,
rules for elective participation in RTO/ISO markets may still require
individual classifications for types of distributed energy resources
because differences in their capabilities may warrant specific
operational, reliability, and compensation considerations.\256\ NYISO
points out that it has a broader definition of distributed energy
resource than that proposed in the NOPR and therefore asks the
Commission to permit regional flexibility to allow NYISO to fashion
rules and market designs that meet its needs while still achieving the
Commission's goal of integrating distributed energy resources into the
wholesale markets.\257\ NYISO notes that it has also proposed to allow
small aggregations of community distributed generation to provide
wholesale market services as distributed energy resources.\258\ NRG
encourages the Commission to direct the RTOs/ISOs to use a definition
of distributed energy resources based on technology-neutral principles,
including the capability to provide load curtailment, load consumption
or charging, injection, and ancillary services (e.g., regulation,
reserves, and flexible ramping services).\259\ According to NRG,
regulatory authorities may differ in their definition of distributed
energy resources, but generally reference their ability to ``generate
and inject power into the distribution and/or transmission systems.''
Thus, NRG states, distributed energy resources should be defined as a
class of assets that can both inject and curtail electricity.\260\
---------------------------------------------------------------------------

    \256\ NYISO Indicated Transmission Owner Comments (RM16-23) at
15.
    \257\ NYISO Comments (RM16-23) at 11 (stating it defines
distributed energy resource as ``a resource, or a set of resources,
typically located on an end-use customer's premises that can provide
wholesale market services but are usually operated for the purpose
of supplying the customer's electric load''). We note that, on
January 23, 2020, the Commission accepted NYISO's proposed tariff
revisions related to aggregations, including its proposal to define
Distributed Energy Resource as: (i) A facility comprising two or
more Resource types behind a single point of interconnection with an
Injection Limit of 20 MW or less; or (ii) a Demand Side Resource; or
(iii) a Generator with an Injection Limit of 20 MW or less, that is
electrically located in the [New York Control Area]. NYISO
Aggregation Order, 170 FERC ] 61,033; see NYISO, NYISO Tariffs,
NYISO MST, Section 2.4 MST Definitions--D (15.0.0).
    \258\ NYISO Comments (RM16-23) at 11.
    \259\ NRG Comments (2018 RM18-9) at 3.
    \260\ Id. at 5-6.
---------------------------------------------------------------------------

    108. EEI asks the Commission to clarify the types of distributed
energy resources that qualify as ``thermal storage,'' noting that if
the thermal energy cannot be readily transformed into electric energy,
then the storage device cannot be used as an electric resource.\261\
Public Interest Organizations seek clarification that thermal storage
includes, but is not limited to, both grid-enabled water heaters and
grid-enabled thermostats, which can precool or preheat to avoid energy
usage during peak demand, make and store ice to use as air
conditioning, and direct control of smart-home energy management.\262\
---------------------------------------------------------------------------

    \261\ EEI Comments (RM16-23) at 16 n.23.
    \262\ Public Interest Organizations Comments (RM16-23) at 15-16
& nn.45-46.
---------------------------------------------------------------------------

    109. Some commenters seek to capture a broad range of distributed

energy resources in the definition. Advanced Energy Economy asks the
Commission to revise the definition to explicitly include energy
efficiency and demand response resources of all types as well as
``customer site[s] capable of demand reduction.'' \263\ Other
commenters also request or support including energy efficiency
resources in the definition of distributed energy resource.\264\ NYISO
Indicated Transmission Owners request clarification that intermittent
generation may be considered a distributed energy resource, which can
be aggregated into dispatchable distributed energy resource
aggregations.\265\ They add that certain behind-the-meter intermittent
generation may not be a distributed energy resource if it participates
in a distribution utility's net metering or other program regarding
which the Commission has clarified that the resource is not engaging in
a wholesale sale for jurisdictional purposes.\266\
---------------------------------------------------------------------------

    \263\ Advanced Energy Economy Comments (RM16-23) at 21.
    \264\ E4TheFuture Comments (RM16-23) at 1; Efficient Holdings
Comments (RM16-23) at 6-7; Public Interest Organizations Comments
(RM16-23) at 15-16.
    \265\ NYISO Indicated Transmission Owners Comments (RM16-23) at
15.
    \266\ Id. at n.17.
---------------------------------------------------------------------------

    110. Advanced Energy Management requests that the Commission
clarify that its definition of distributed energy resources includes
demand response resources, or that demand response resources can choose
to participate in distributed energy resource participation models
where they are a better fit.\267\
---------------------------------------------------------------------------

    \267\ Advanced Energy Management Comments (RM16-23) at 8-10.
---------------------------------------------------------------------------

    111. Commenters ask for assurance that the NOPR does not change
existing demand response rules, and that resources currently
participating as demand response could continue to do so, even if they
would fall under the definition of a distributed energy resource.\268\
They note that certain reforms may drive existing, low-cost commercial
and industrial demand response from the market.\269\ Advanced Energy
Management argues that the NOPR may be more applicable to newer forms
of distributed energy resources that currently are not accommodated by
a demand response model and that the demand response model should not
be changed.\270\
---------------------------------------------------------------------------

    \268\ Advanced Energy Economy Comments (RM16-23) at 50-51
(noting that existing market rules recognize a distinction between
demand response and distributed energy resource aggregations, such
as in CAISO, where there are separate programs for exporting
distributed energy resources and non-exporting distributed energy
resources that operate as demand response); Advanced Energy
Management Comments (RM16-23) at 6 (noting specifically the reforms
in Section III.B.4 of the NOPR for distributed energy resource
aggregators as it applies to commercial and industrial demand
response); IRC Comments (RM16-23) at 7; PJM Comments (RM16-23) at 6.
    \269\ Advanced Energy Management Comments (RM16-23) at 7.
    \270\ Id. at 6-8.
---------------------------------------------------------------------------

    112. PJM, however, states that it does not view energy efficiency
or load curtailment as distributed energy resources, based upon PJM's
distinction between its existing and robust participation models for
energy efficiency and demand response.\271\ To limit disruption to its
models, PJM distinguishes distributed energy resources by limiting them
to generation and electric storage resources capable of injecting
energy onto the distribution system.\272\
---------------------------------------------------------------------------

    \271\ PJM Comments (2018 RM18-9) at 1.
    \272\ Id. at 2.
---------------------------------------------------------------------------

    113. A few commenters discuss the definition of a distributed
energy resource aggregator. E4TheFuture supports the Commission's
proposal to require each RTO/ISO to revise its tariff to define
distributed energy resource aggregators as a type of market
participant.\273\ Efficient Holdings asks the Commission to create a
universal and comprehensive market participant definition for
distributed energy resource aggregators that would be flexible enough
to incorporate emerging technologies and provide these resources the
same ability to offer multiple products afforded to large scale
generators.\274\ MISO Transmission Owners also assert that the term
``distributed energy resource aggregator'' should be formally defined;
in addition, they ask whether that term is inclusive of behind- and
front-of-the-meter products and whether a utility could bid its
existing demand response peak shaving assets into the market as a
distributed energy resource aggregator.\275\ Advanced Energy Management
requests clarification on the distinction between demand response and
distributed energy resource aggregators, arguing that the former should
consist of behind-the-meter resources that participate only in the
demand response framework, while the latter could be either behind- or
front-of-the-meter resources and participate in any model.\276\
---------------------------------------------------------------------------

    \273\ E4TheFuture Comments (RM16-23) at 2.
    \274\ Efficient Holdings Comments (RM16-23) at 7.
    \275\ MISO Transmission Owners Comments (RM16-23) at 17-18.
    \276\ Advanced Energy Management Comments (RM16-23) at 6.
---------------------------------------------------------------------------

3. Commission Determination
    114. Upon consideration of the comments received, we modify the
definition of distributed energy resource proposed in the NOPR.
Specifically, we amend Sec.  35.28(b) of the Commission's regulations
to define a distributed energy resource as ``any resource located on
the distribution system, any subsystem thereof or behind a customer
meter.'' These resources may include, but are not limited to, resources
that are in front of and behind the customer meter, electric storage
resources, intermittent generation, distributed generation, demand
response, energy efficiency, thermal storage, and electric vehicles and
their supply equipment--as long as such a resource is ``located on the
distribution system, any subsystem thereof or behind a customer
meter.'' \277\ The revised definition of distributed energy resource
that we adopt in this final rule is technology-neutral, thereby
ensuring that any resource that is technically capable of providing
wholesale services through aggregation is eligible to do so, which
enhances competition in the RTO/ISO markets and, in turn, helps to
ensure that these markets produce just and reasonable rates.\278\
---------------------------------------------------------------------------

    \277\ As discussed further in Section IV.C.2 below, we find that
RTOs/ISOs may not prohibit any particular type of distributed energy
resource technology from participating in distributed energy
resource aggregations. We note that the types of thermal storage
described by EEI and Public Interest Organizations may qualify as
demand response or energy efficiency resources under RTO/ISO market
rules.
    \278\ See infra Section IV.C.2 (Types of Technologies).
---------------------------------------------------------------------------

    115. In response to Advanced Energy Economy's request, we clarify
that energy efficiency and demand response resources are capable of
providing demand reductions at customer sites, and therefore ``customer
sites capable of demand reduction'' may meet the definition of a
distributed energy resource.\279\ In response to requests for regional
flexibility, we further note that RTOs/ISOs can propose their own
definitions for the Commission's evaluation as long as the scope and
applicability of the proposed definitions are consistent with the
Commission's definition of distributed energy resource and consistent
with all aspects of this final rule.
---------------------------------------------------------------------------

    \279\ See Advanced Energy Economy Comments (RM16-23) at 21.
---------------------------------------------------------------------------

    116. We find that the NOPR proposal to define a distributed energy
resource as a source or sink of power risked creating unnecessary
confusion because it was not clear as to which resources could qualify
and the definition inadvertently excluded some resources

that could be aggregated to sell energy, capacity, or ancillary
services. The revised definition of distributed energy resource is
intended to be broad enough to encompass current and future
technologies that qualify as distributed energy resources with no
further need to clarify or revise the definition as new technologies
are developed.
    117. As discussed further below in Sections IV.C, IV.F, and IV.H,
we clarify that distributed energy resource aggregations must be able
to meet the qualification and performance requirements to provide the
service that they are offering into RTO/ISO markets. For example,
because a type of resource like energy efficiency cannot be dispatched,
metered, or telemetered, it would likely be impossible for distributed
energy resource aggregations comprised exclusively of energy efficiency
resources to be able to provide energy or ancillary services to the
RTOs/ISOs because the aggregation would not be technically capable of
providing those services.
    118. We also adopt a modified definition of distributed energy
resource aggregator than was proposed in the NOPR, and therefore amend
Sec.  35.28(b) of the Commission's regulations to define a distributed
energy resource aggregator as ``the entity that aggregates one or more
distributed energy resources for purposes of participation in the
capacity, energy and/or ancillary service markets of the regional
transmission organizations and/or independent system operators.'' \280\
We clarify that, because demand response falls under the definition of
distributed energy resource, an aggregator of demand response could
participate as a distributed energy resource aggregator. However, this
final rule does not affect existing demand response rules.
---------------------------------------------------------------------------

    \280\ As discussed further in Section IV.C.6, consistent with
Order No. 719, we require each RTO/ISO to allow a single qualifying
distributed energy resource to serve as its own distributed energy
resource aggregator. See Order No. 719, 125 FERC ] 61,071 at P
158(d) (``An [aggregator of retail customers] can bid demand
response either on behalf of only one retail customer or multiple
retail customers.'').
---------------------------------------------------------------------------

C. Eligibility To Participate in RTO/ISO Markets Through a Distributed
Energy Resource Aggregator

1. Participation Model
a. NOPR Proposal
    119. In the NOPR, the Commission proposed to require each RTO/ISO
to revise its tariff as necessary to allow distributed energy resource
aggregators to offer to sell capacity, energy, and ancillary services
in RTO/ISO markets.\281\ Specifically, the Commission proposed to
require that each RTO/ISO revise its tariff to define distributed
energy resource aggregators as a type of market participant that can
participate in RTO/ISO markets under the participation model that best
accommodates the physical and operational characteristics of its
distributed energy resource aggregation. The Commission explained that
this means that the distributed energy resource aggregator would
register as, for example, a generation asset if that is the
participation model that best reflects its physical
characteristics.\282\ The Commission stated that, while it expects
efficiencies to be gained by allowing distributed energy resource
aggregations to participate under existing participation models, it
also acknowledges that the use of existing participation models may not
be possible in every RTO/ISO based on how market participation is
structured. However, the Commission emphasized that, where
participation under existing participation models is possible, the
distributed energy resource aggregation must still satisfy the
eligibility requirements of the applicable participation model before
it can participate in RTO/ISO markets under that participation model.
Therefore, to accommodate the participation of distributed energy
resource aggregations, the Commission proposed that each RTO/ISO modify
the eligibility requirements for existing participation models as
necessary to allow for such participation.
---------------------------------------------------------------------------

    \281\ NOPR, 157 FERC ] 61,121 at P 124.
    \282\ Id. P 128.
---------------------------------------------------------------------------

b. Comments
    120. Several commenters assert that a new participation model for
distributed energy resource aggregations is necessary.\283\ The Ohio
Commission, Tesla/SolarCity, and Public Interest Organizations support
the Commission's efforts to require each RTO/ISO to modify its tariff
to provide a participation model for distributed energy resource
aggregators.\284\ AES Companies explain that a new and separate
participation model is necessary to facilitate market participation of
distributed energy resource aggregations due to their unique impacts on
the bulk electric system and state-jurisdictional considerations.\285\
Stem also asserts that each RTO/ISO needs to implement a model that
accommodates behind-the-meter exporting resources or, if that is
impractical, to implement a model in which behind-the-meter non-
exporting resources can fully participate.\286\ Microgrid Resources
Coalition notes its support for allowing aggregations of behind-the-
meter distributed energy resources to participate fully and notes that
it is important to allow for the participation of distributed energy
resources that have flexible controllable output.\287\
---------------------------------------------------------------------------

    \283\ See, e.g., Microsoft Comments (2018 RM18-9) at 15; NRG
Comments (2018 RM18-9) at 4.
    \284\ Ohio Commission Comments (RM16-23) at 4; Public Interest
Organizations Comments (RM16-23) at 21; Tesla/SolarCity Comments
(RM16-23) at 20.
    \285\ AES Companies Comments (RM16-23) at 32 (noting that,
because the proposed definition of a distributed energy resource
aggregation includes resources that are both a source and a sink,
the aggregation can be a distributed generation entity or a micro
grid (includes generation, load, and distribution lines)).
    \286\ Stem Comments (RM16-23) at 12-13.
    \287\ Microgrid Resources Coalition Comments (2018 RM18-9) at 3,
4-5.
---------------------------------------------------------------------------

    121. Commenters offer a range of views regarding how distributed
energy resource aggregations should be treated under an RTO's/ISO's
participation model. Some commenters suggest that when acting as a
generator, distributed energy resource aggregations should be treated
like any generator.\288\ Other commenters focus on the need for clarity
around what services distributed energy resources will be allowed to
provide and how they can be aggregated.\289\ For example, Xcel Energy
Services contends that distributed energy resources will likely not
have firm transmission service and may not be able to deliver services
to the system that depend on firm transmission such as capacity or
black start capability.\290\ Some commenters argue that an aggregation
of distributed energy resources should be treated as a single resource
by the wholesale market operator, noting that this would reduce
barriers and may improve performance.\291\ Other commenters similarly
support the ability of an aggregator to transact directly in the
wholesale market without a load serving entity or electric distribution
company as agent.\292\
---------------------------------------------------------------------------

    \288\ NYISO Comments (RM16-23) at 13; PJM Comments (RM16-23) at
5-6.
    \289\ AES Companies Comments (RM16-23) at 39; Avangrid Comments
(RM16-23) at 10; Tesla/SolarCity Comments (RM16-23) at 20; Xcel
Energy Services Comments (RM16-23) at 12-13.
    \290\ Xcel Energy Services Comments (RM16-23) at 12-13.
    \291\ Advanced Microgrid Solutions Comments (RM16-23) at 7; NRG
Comments (RM16-23) at 10; Stem Comments (RM16-23) at 5; Tesla/
SolarCity Comments (RM16-23) at 20-21.
    \292\ Mosaic Power Comments (RM16-23) at 5.
---------------------------------------------------------------------------

    122. Some commenters posit that the Commission should allow the

distributed energy resource aggregator to determine the participation
model for distributed energy resource aggregations based on the
characteristics of the aggregation as a whole, even if it includes
diverse technologies,\293\ and that aggregators should be able to
define the capabilities of the resources in their aggregations.\294\
Some commenters stress the importance of allowing diverse technologies
(e.g., solar, storage, and demand response) \295\ to be in the same
aggregation, while others argue that entities that own multiple
distributed energy resources should be allowed to participate in more
than one aggregation.\296\ Stem asserts that, if behind-the-meter
resources are directed to an existing participation model, then the
Commission should require a detailed review to show that the existing
model does not discriminate against the capabilities of new
resources.\297\
---------------------------------------------------------------------------

    \293\ Advanced Energy Economy Comments (RM16-23) at 21.
    \294\ Microgrid Resources Coalition Comments (RM16-23) at 6.
    \295\ Advanced Energy Economy Comments (RM16-23) at 21.
    \296\ NextEra Comments (RM16-23) at 14; Public Interest
Organizations Comments (RM16-23) at 16.
    \297\ Stem Comments (RM16-23) at 13.
---------------------------------------------------------------------------

    123. Advanced Energy Management states that, if an end-use customer
is capable of curtailing load and discharging a battery located behind
its meter, it is unclear whether the customer's distributed energy
resource aggregator could aggregate both the storage and load
curtailment into the same resource. Advanced Energy Management also
states that it would be inefficient to have the same customer
participate as part of two different resources or through two
unnecessarily separate participation models.\298\ MISO Transmission
Owners request clarity on the interplay between the rules that apply to
storage and the rules that apply to distributed energy resources,
noting that some resources may fall into both categories, and any
potential conflicts should be resolved. For example, MISO Transmission
Owners seek clarity on whether an aggregator of electric vehicles is
considered storage or a distributed energy resource aggregator, or
both.\299\
---------------------------------------------------------------------------

    \298\ Advanced Energy Management Comments (RM16-23) at 9.
    \299\ MISO Transmission Owners Comments (RM16-23) at 20.
---------------------------------------------------------------------------

    124. Microgrid Resources Coalition argues that RTOs/ISOs should
allow aggregators to bid their resources together or separately as
demand response and delivered power.\300\ Energy Storage Association
also argues that any final rule should account for distributed energy
resources' provision of bi-directional services,\301\ and Icetec
asserts that a participation model should allow sites that mix load
reductions and distributed energy resources to offer their combined
capacity as a single market resource.\302\ Microgrid Resources
Coalition also argues that distributed energy resource aggregations,
particularly microgrids, do not fit neatly into existing participation
models or the new participation model for electric storage resources
proposed in the NOPR.\303\
---------------------------------------------------------------------------

    \300\ Microgrid Resources Coalition Comments (2018 RM18-9) at 8.
    \301\ Energy Storage Association Comments (2018 RM18-9) at 2.
    \302\ Icetec Energy Services Comments (2018 RM18-9) at 6.
    \303\ Microgrid Resources Coalition Comments (RM16-23) at 5-6
(noting that demand response participation models that are based on
shutting down an industrial process or activating a seldom used
generator are not appropriate for resources like a microgrid that
uses multiple conventional and unconventional resources to manage
multiple loads of varying flexibility and is optimized by
sophisticated controls).
---------------------------------------------------------------------------

    125. Other commenters recommend that the Commission require the
RTOs/ISOs to incorporate sufficient flexibility into their
participation models. Public Interest Organizations suggest that, in
order to take advantage of distributed energy resources' ability to
absorb excess electricity, shift load, and reinject electricity onto
the grid at peak times, participation models should be flexible and
enable resources to act as demand-side resources and/or as generation
and should not require resources to choose one participation model
exclusively.\304\ Efficient Holdings similarly contends that
participation models should not force distributed energy resources to
choose between individual categories of services to offer into the
market at any given time.\305\ NYISO Indicated Transmission Owners
request that energy-only distributed energy resource aggregations be
allowed in the distributed energy resource participation model, and
consistent with existing practice for other energy-only resources,
should not be required to offer in the day-ahead market and should be
permitted in both the day-ahead and real-time markets.\306\ NYISO also
asks the Commission to permit regional flexibility that would allow
NYISO to create rules and market designs that meet its needs while
meeting the Commission's desire to integrate distributed energy
resources into the wholesale energy, ancillary service, and capacity
markets.\307\
---------------------------------------------------------------------------

    \304\ Public Interest Organizations Comments (RM16-23) at 19.
    \305\ Efficient Holdings Comments (RM16-23) at 7-8.
    \306\ NYISO Indicated Transmission Owners Comments (RM16-23) at
10-11 (citing Cal. Indep. Sys. Operator Corp., 155 FERC ] 61,229 at
P 11 (accepting CAISO model that allows intermittent resources to
participate in a dispatchable aggregation)).
    \307\ NYISO Comments (RM16-23) at 11.
---------------------------------------------------------------------------

    126. New York State Entities ask the Commission to grant RTOs/ISOs
the flexibility to devise participation models that reflect market
conditions and ongoing initiatives such as those described in NYISO's
Distributed Energy Resource Roadmap.\308\ New York State Entities
highlight that NYISO is attempting to harmonize the developing
wholesale market enhancements with the complementary retail programs
emerging from New York's Reforming the Energy Vision initiative.\309\
---------------------------------------------------------------------------

    \308\ New York State Entities Comments (RM16-23) at 12, 13
(citing Distributed Energy Resources Roadmap for New York's
Wholesale Electricity Markets, (January 2017), New York Independent
System Operator, Inc.) (Distributed Energy Resource Roadmap); see
supra note 21.
    \309\ New York State Entities Comments (RM16-23) at 13 (citing
Distributed Energy Resource Roadmap at 4-6).
---------------------------------------------------------------------------

    127. Some commenters note that the RTOs/ISOs need new and revised
market rules to incorporate distributed energy resources, but not
necessarily a new participation model.\310\ ISO-NE argues that a new
participation model would be costly and disruptive and create no
additional value because distributed energy resources can monetize
their value to the grid through several existing avenues.\311\
---------------------------------------------------------------------------

    \310\ Advanced Energy Economy Comments (2018 RM18-9) at 5-6;
Advanced Energy Management Comments (2018 RM18-9) at 3; Icetec
Energy Comments (2018 RM18-9) at 3-4, 6; NYISO Indicated
Transmission Owners Comments (2018 RM18-9) at 5.
    \311\ ISO-NE Comments (2018 RM18-9) at 2-4.
---------------------------------------------------------------------------

    128. Advanced Energy Management argues that a final rule should not
require RTOs/ISOs to replace their existing programs, such as demand
response programs.\312\ Icetec argues, however, that existing
``interconnected generation'' models and demand response models are not
sufficient for distributed energy resource participation, and states
that capacity market requirements for year-round performance in PJM
prevent distributed energy resources from offering their full capacity
value.\313\ Tesla argues that, regardless of model, distributed energy
resources should receive comparable compensation.\314\
---------------------------------------------------------------------------

    \312\ Advanced Energy Management Comments (2018 RM18-9) at 3.
    \313\ Icetec Comments (2018 RM18-9) at 5
    \314\ Tesla Comments (2018 RM18-9) at 1, 9.
---------------------------------------------------------------------------

c. Commission Determination
    129. In this final rule, we adopt the NOPR proposal to require each
RTO/ISO to have tariff provisions that allow

distributed energy resource aggregations to participate directly in
RTO/ISO markets. We conclude that existing participation models may
create barriers to the participation of distributed energy resource
aggregators in RTO/ISO markets by limiting the operation of distributed
energy resource aggregations and the services that they may be eligible
to provide.
    130. We therefore adopt the NOPR proposal to add Sec.
35.28(g)(12)(i) to the Commission's regulations and require each RTO/
ISO to establish distributed energy resource aggregators as a type of
market participant and to allow distributed energy resource aggregators
to register distributed energy resource aggregations under one or more
participation models in the RTO's/ISO's tariff that accommodate the
physical and operational characteristics of the distributed energy
resource aggregation. However, upon consideration of the comments, we
modify the NOPR proposal to provide each RTO/ISO with greater
flexibility to determine how best to revise the participation models
set forth in its market rules to facilitate the participation of
distributed energy resource aggregations. Specifically, to meet the
goals of the final rule, each RTO/ISO can comply with the requirement
to allow distributed energy resource aggregators to participate in its
markets by modifying its existing participation models to facilitate
the participation of distributed energy resource aggregations, by
establishing one or more new participation models for distributed
energy resource aggregations, or by adopting a combination of those two
approaches. The Commission will evaluate each proposal submitted on
compliance to determine whether it meets the goals of this final rule
to allow distributed energy resources to provide all services that they
are technically capable of providing through aggregation.
    131. This approach will provide each RTO/ISO with the flexibility
to facilitate the participation of distributed energy resource
aggregations in its markets in a way that is efficient and cost-
effective as well as fits the market design of the RTO/ISO. Permitting
each RTO/ISO to create one or more new participation models for
distributed energy resources addresses commenter concerns about the
limitations of existing models. Likewise, permitting each RTO/ISO to
modify existing participation models, instead of requiring creation of
one or more new participation models, addresses commenter concerns that
creating a new participation model may be too costly or disruptive, or
that existing models do not need to be replaced.
    132. Providing RTOs/ISOs with the flexibility to determine whether
to modify existing participation models, create one or more new
participation models, or use a combination of existing and new
participation models will allow each RTO/ISO to reflect varying
regional needs in its approach to allow distributed energy resource
aggregators to participate in its markets.
2. Types of Technologies
a. NOPR Proposal
    133. In the NOPR, the Commission stated that distributed energy
resources may include, but are not limited to, electric storage
resources, distributed generation, thermal storage, and electric
vehicles and their supply equipment.\315\ The Commission also
preliminarily found that limiting the types of technologies that are
allowed to participate in the RTO/ISO markets through distributed
energy resource aggregators would create a barrier to entry for
emerging or future technologies, potentially precluding them from being
eligible to provide all of the capacity, energy and ancillary services
that they are technically capable of providing.\316\ The Commission
stated that, while some individual resources or certain technologies
may not be able to meet the qualification or performance requirements
to provide services to the RTO/ISO markets on their own, they may
satisfy such requirements as part of a distributed energy resource
aggregation where resources complement one another's capabilities. The
Commission further stated that combining electric storage resources
with distributed generation could allow the aggregate resource to
achieve performance requirements (such as minimum run times) that an
electric storage resource could not meet on its own and provide
services (such as regulation) that distributed generation may not be
able to provide on its own.\317\
---------------------------------------------------------------------------

    \315\ NOPR, 157 FERC ] 61,121 at P 104; see supra Section IV.B.
(Definitions of Distributed Energy Resource and Distributed Energy
Resource Aggregation).
    \316\ NOPR, 157 FERC ] 61,121 at P 133.
    \317\ Id. P 133 n.231.
---------------------------------------------------------------------------

    134. In the NOPR, the Commission proposed to require that each RTO/
ISO revise its tariff so that it does not prohibit the participation of
any particular type of technology in the RTO/ISO markets through a
distributed energy resource aggregator.\318\ This was to help ensure
that the market rules that RTOs/ISOs develop to comply with any final
rule issued in this proceeding were sufficiently flexible to
accommodate the participation of new distributed energy resources as
technology evolves, and to acknowledge the potential that a distributed
energy resource may meet qualification or performance requirements by
participating in a distributed energy resource aggregation that it
cannot on its own. The Commission stated, however, that, to the extent
that existing rules or regulations explicitly prohibit certain
technologies from participating in RTO/ISO markets, it did not intend
to overturn those rules or regulations.
---------------------------------------------------------------------------

    \318\ Id. P 133.
---------------------------------------------------------------------------

b. Comments
    135. Several commenters support the Commission's proposal not to
prohibit the participation of any particular type of technology in RTO/
ISO markets through a distributed energy resource aggregation.\319\
Generally, they state that it is important for the market rules to be
resource neutral, allowing other attributes such as cost, quality,
flexibility, and other attributes sought by market participants, to
dictate which resources can successfully participate in RTO/ISO
markets. They assert that resource neutrality reduces risk for
investment in new technologies and preserves flexibility for the
participation of future technologies and avoid unnecessary barriers to
entry.
---------------------------------------------------------------------------

    \319\ See, e.g., AES Companies (RM16-23) at 32-33; CAISO
Comments (RM16-23) at 23; City of New York Comments (RM16-23) at 8;
Massachusetts Commission Comments (RM16-23) at 8-10; R Street
Institute Comments (RM16-23) at 8.
---------------------------------------------------------------------------

    136. Several commenters argue that distributed energy resource
aggregation participation models must allow a variety of technology
configurations. Efficient Holdings argues that third party aggregators
of behind-the-meter resources must have better access to the markets,
which can be achieved through reforms including refined product
definitions, reduction of burdensome and expensive operational
requirements, and rules to address distribution utility non-compliance,
embracing the broadest array of technologies possible.\320\ Energy
Storage Association and Stem seek to ensure that front-of-the-meter
resources, behind-the-meter exporting and non-exporting resources, and
heterogeneous groups of resources are all able to participate in
distributed energy

resource aggregations.\321\ Stem states that it is reasonable to
restrict the mixing of front-of-the-meter, behind-the-meter exporting,
and behind-the-meter non-exporting resources within a single
aggregation.\322\
---------------------------------------------------------------------------

    \320\ Efficient Holdings Comments (RM16-23) at 7-9.
    \321\ Energy Storage Association (RM16-23) at 24-25; Stem
Comments (RM16-23) at 7, 12, 13.
    \322\ Stem Comments (RM16-23) at 12, 13.
---------------------------------------------------------------------------

    137. Commenters also note that allowing distributed energy resource
aggregations to include multiple types of distributed technologies
allows multi-technology aggregations such as microgrids and
complementary resources such as solar and storage to participate in
RTO/ISO markets, will provide RTOs/ISOs another source of flexible
controllable output. CAISO states that, consistent with the
Commission's proposal, its Commission-approved Distributed Energy
Resource Provider model allows aggregations to consist of different
distributed energy resource types.\323\ AES Companies encourage the
Commission to review the validity of any prohibitions on the
participation of existing technologies (i.e., rules currently exist
prohibiting certain types of resources in the tariffs for direct market
participation) in a separate docket rather than in this
proceeding.\324\
---------------------------------------------------------------------------

    \323\ CAISO Comments (RM16-23) at 23.
    \324\ AES Companies Comments (RM16-23) at 32-33.
---------------------------------------------------------------------------

    138. In contrast, some commenters express general concerns about
aggregations that include different types of technologies.\325\
American Petroleum Institute contends that aggregating different types
of distributed energy resources will make market optimization more
difficult.\326\ TAPS urges the Commission to give RTOs/ISOs discretion,
claiming that combining multiple types of distributed energy resources
within a single aggregation may be beneficial but could pose issues
when determining locational and minimum size requirements for mixed
aggregations.\327\
---------------------------------------------------------------------------

    \325\ American Petroleum Institute Comments (RM16-23) at 10;
ISO-NE Comments (RM16-23) at 31-35; TAPS Comments (RM16-23) at 27.
    \326\ American Petroleum Institute Comments (RM16-23) at 10.
    \327\ TAPS Comments (RM16-23) at 27.
---------------------------------------------------------------------------

    139. Several commenters state that RTOs/ISOs will need flexibility
to avoid imposing additional costs or barriers to entry on different
types and configurations of prospective distributed energy resource
aggregations.\328\ SPP argues that managing an aggregation as a
discrete set of different assets may be infeasible in commitment and
dispatch and that sub-categorizing different types of distributed
energy resources within a single aggregation would be extremely
complex.\329\ PJM Market Monitor states that distributed generation and
distributed storage should not be mixed within aggregations and that
resources should be aggregated by type for each wholesale market node.
For example, according to PJM Market Monitor, distributed generation
should be aggregated, at the same node with other distributed
generation, while distributed storage should be aggregated at the same
node with other distributed storage.\330\
---------------------------------------------------------------------------

    \328\ CAISO Comments (RM16-23) at 38; Fresh Energy/Sierra Club/
Union of Concerned Scientists Comments (RM16-23) at 3; New York
State Entities Comments (RM16-23) at 21.
    \329\ SPP Comments (RM16-23) at 22.
    \330\ PJM Market Monitor Comments (RM16-23) at 15-16.
---------------------------------------------------------------------------

    140. ISO-NE also asks for flexibility and provides several
arguments as to why certain heterogeneous aggregations are not
desirable.\331\ More specifically, ISO-NE argues that (1) demand-side
load resources should only be allowed to participate in aggregations
with other load because of how certain charges and credits are
allocated to load; \332\ (2) electric storage resources would not
benefit from participating in aggregations with non-storage distributed
energy resources because of state-of-charge management issues; \333\
and (3) aggregations of non-intermittent resources with different
physical and economic characteristics would need to self-schedule,
potentially adding financial risk for the participant, reducing the
efficiency of the dispatch, and contributing to uplift or excess
generation conditions.\334\ In addition, ISO-NE states that demand
response resources should not be allowed to participate in distributed
energy resource aggregations because of their distinct settlement
rules.\335\ According to ISO-NE, in order to accommodate aggregations
that include both demand response and non-demand response resource
components, ISO-NE would need to establish rules to disaggregate these
components for purposes of settlement. ISO-NE requests that, if they
are not required to participate separately, the Commission clarify
which rules must apply to such resources.\336\ ISO-NE adds that its
region is steadily transitioning its energy market away from self-
scheduling and toward requiring all energy supply and demand to be
priced and that being required to implement rules that accommodate
aggregations composed of heterogenous resource types would be a
significant step backwards in that effort.\337\
---------------------------------------------------------------------------

    \331\ ISO-NE Comments (RM16-23) at 31-36.
    \332\ Id. at 33.
    \333\ Id. at 33-34.
    \334\ Id. at 34-35.
    \335\ Id. at 32.
    \336\ Id. at 32-33.
    \337\ Id. at 34-35.
---------------------------------------------------------------------------

c. Commission Determination
    141. To implement Sec.  35.28(g)(12)(ii)(a) of the Commission's
regulations, we require that each RTO's/ISO's rules do not prohibit any
particular type of distributed energy resource technology from
participating in distributed energy resource aggregations. We find that
limiting the types of technologies that are allowed to participate in
RTO/ISO markets through a distributed energy resource aggregator would
create a barrier to entry for emerging or future technologies,
potentially precluding them from being eligible to provide all of the
capacity, energy, and ancillary services that they are technically
capable of providing. Requiring that each RTO's/ISO's rules do not
exclude any particular types of technology from participating in
distributed energy resource aggregations in RTO/ISO markets will ensure
a technology-neutral approach to distributed energy resource
aggregations, which will ensure that more resources are able to
participate in such aggregations, thereby helping to enhance
competition and ensure just and reasonable rates.
    142. We agree with commenters that generally support requiring
RTOs/ISOs to allow groupings of different technology types in
distributed energy resource aggregations.\338\ Additionally, we agree
with NRG that, while some individual resources or certain technologies
may not be able to meet the qualification or performance requirements
to provide certain services to RTO/ISO markets on their own, they may
be able to satisfy such requirements as part of a distributed energy
resource aggregation where resources complement one another's
capabilities.\339\ For instance, in the NOPR, the Commission stated
that aggregating electric storage resources with distributed generation
could allow the aggregation to achieve performance requirements (such
as minimum run times) that an electric storage resource could not meet
on its own and provide services (such as regulation) that

distributed generation may not be able to provide on its own.\340\
Therefore, to implement Sec.  35.28(g)(12)(ii)(a) of the Commission's
regulations, we clarify the NOPR proposal and require each RTO/ISO to
revise its tariff to allow different types of distributed energy
resource technologies to participate in a single distributed energy
resource aggregation (i.e., allow heterogeneous distributed energy
resource aggregations).\341\ Requiring that RTOs/ISOs allow
heterogeneous aggregations will further enhance competition in RTO/ISO
markets by ensuring that complementary resources, including those with
different physical and operational characteristics, can meet
qualification and performance requirements such as minimum run times,
which will help ensure that these markets produce just and reasonable
rates.
---------------------------------------------------------------------------

    \338\ See, e.g., AES Companies (RM16-23) at 32-33; CAISO
Comments (RM16-23) at 23; City of New York Comments (RM16-23) at 8;
Energy Storage Association (RM16-23) at 24-25; Fresh Energy/Sierra
Club/Union of Concerned Scientists Comments (RM16-23) at 3;
Massachusetts Commission Comments (RM16-23) at 8-10; New York State
Entities Comments (RM16-23) at 21; R Street Institute Comments
(RM16-23) at 8; Stem Comments (RM16-23) at 7, 12, 13.
    \339\ NRG Comments (RM16-23) at 19.
    \340\ NOPR, 157 FERC ] 61,121 at P 133 n.231.
    \341\ ISO-NE defines a heterogeneous aggregation as consisting
of ``different resource types, such that, for example, a single
aggregation might consist of a battery, distributed generation
assets, and electric vehicles.'' ISO-NE Comments (RM16-23) at 31.
---------------------------------------------------------------------------

    143. We are unconvinced by arguments in favor of homogeneous
aggregations. We find that the benefits of allowing heterogeneous
aggregations outweigh the concerns regarding complexity of
implementation. While SPP and ISO-NE indicate that market rules
allowing for heterogeneous aggregations would be challenging to develop
and implement,\342\ neither explains why their markets are unique such
that it would be necessary for the Commission to permit regional
flexibility. In addition, concerns about RTOs'/ISOs' ability to manage
a diverse set of distributed energy resources are misplaced because the
distributed energy resource aggregator, not an individual distributed
energy resource in the aggregation, is the market participant with whom
the RTO/ISO would be interacting. Moreover, the aggregator, not the
RTO/ISO, would be responsible for ensuring that the distributed energy
resource aggregation meets applicable RTO/ISO performance and
registration requirements.
---------------------------------------------------------------------------

    \342\ ISO-NE Comments (RM16-23) at 32; SPP Comments (RM16-23) at
21-22.
---------------------------------------------------------------------------

    144. We also are not persuaded by ISO-NE's reservations related to
state-of-charge management and self-scheduling. We find that market
participants are best positioned to make these participation decisions.
If ISO-NE is correct that self-scheduling adds financial risk for the
participant and that, because of state-of-charge management issues,
electric storage resources would not benefit from participating in
distributed energy resource aggregations, then we would expect market
participants to act in their economic interest.
    145. As to ISO-NE's concerns about incorporating demand response
resources into distributed energy resource aggregations, we note that
demand response aggregations and the resources in them that effectuate
load reductions currently are not necessarily composed of the same
types of technologies and are already providing services in numerous
RTO/ISO markets. Therefore, similar to the Commission's finding in
Order No. 745-A, from the perspective of the RTO/ISO, the means by
which an aggregation is able to provide wholesale services does not
change the value of that service to the wholesale grid.\343\ In
response to ISO-NE's request for clarification about which settlement
rules apply to distributed energy resource aggregations composed of
both demand response and non-demand response resources, we clarify that
the requirements in Order No. 745 would apply to demand response
resources participating in heterogeneous aggregations. In addition,
while ISO-NE would prefer to exclude demand response resources from
distributed energy resource aggregations to simplify settlement and the
allocation of charges and credits to load, we reiterate that the
benefits of allowing heterogeneous aggregations outweigh ISO-NE's
preference to limit the types of resources that can participate in
aggregations. We clarify, however, that the participation of demand
response in distributed energy resource aggregations is subject to the
opt-out and opt-in requirements of Order Nos. 719 and 719-A. Therefore,
if the relevant electric retail regulatory authority where a demand
response resource is located has either chosen to opt out or has not
opted in, then the demand response resource may not participate in a
distributed energy resource aggregation.\344\
---------------------------------------------------------------------------

    \343\ As the Commission stated in Order No. 745-A, ``[f]rom the
perspective of the grid, the manner in which a customer is able to
produce such a load reduction from its validly established baseline
(whether by shifting production, using internal generation,
consuming less electricity, or other means) does not change the
effect or value of the reduction to the wholesale grid.'' Demand
Response Compensation in Organized Wholesale Energy Markets, Order
No. 745-A, 137 FERC ] 61,215, at P 66 (2011), reh'g denied, Order
No. 745-B, 138 FERC ] 61,148 (2012), vacated sub nom. Elec. Power
Supply Ass'n v. FERC, 753 F.3d 216 (D.C. Cir. 2014), rev'd &
remanded sub nom. EPSA, 136 S. Ct. 760.
    \344\ See supra P 59.
---------------------------------------------------------------------------

    146. As to ISO-NE's concern that self-scheduling will reduce the
efficiency of the dispatch and contribute to uplift or excess
generation conditions, we note that no other RTOs/ISOs raise this
concern. Market rules allowing for heterogeneous aggregations are
already in place in CAISO,\345\ and the Commission recently accepted
market rules allowing for heterogeneous aggregations in NYISO.\346\
Based on the record before us, ISO-NE has not sufficiently demonstrated
why it is uniquely unable to implement market rules that can overcome
these dispatch, uplift, and excess generation challenges.
---------------------------------------------------------------------------

    \345\ Cal. Indep. Sys. Operator Corp., 155 FERC ] 61,229 at P
11.
    \346\ NYISO Aggregation Order, 170 FERC ] 61,033.
---------------------------------------------------------------------------

3. Double Counting of Services
a. NOPR Proposal
    147. In the NOPR, the Commission stated that it is appropriate for
each RTO/ISO to limit the participation of resources in RTO/ISO markets
through a distributed energy resource aggregator that are receiving
compensation for the same services as part of another program.\347\ The
Commission explained that, because resources able to register as part
of a distributed energy resource aggregation will be located on the
distribution system, they may also be eligible to participate in retail
compensation programs, such as net metering, or other wholesale
programs, such as demand response programs. Therefore, to ensure that
there is no duplication of compensation, the Commission proposed that
distributed energy resources that are participating in one or more
retail compensation programs such as net metering or another wholesale
market participation program will not be eligible to participate in
RTO/ISO markets as part of a distributed energy resource aggregation.
---------------------------------------------------------------------------

    \347\ NOPR, 157 FERC ] 61,121 at P 134.
---------------------------------------------------------------------------

b. Comments
    148. Most commenters that address the issue of double counting
agree that distributed energy resources should not be compensated twice
for providing the same service but disagree on what constitutes ``the
same service,'' how to implement such a requirement, or who should be
responsible.\348\ In this regard, Pacific Gas & Electric supports
prevention of double compensation and discusses the processes in
California that protects against the bypass of retail rates for behind-
the-meter distributed energy resources that both consume and

export electricity for both retail and wholesale purposes.\349\ Some
commenters also assert that the NOPR proposal provides a solution to
prevent double compensation,\350\ provides clear jurisdictional
lines,\351\ reduces confusion,\352\ and could ease coordination issues
for distributed energy resources and alleviate the limitations of
metering and accounting practices to distinguish between wholesale and
retail activities.\353\ In addition, some commenters posit that
allowing distributed energy resources that earn compensation in out-of-
market retail programs to participate in RTO/ISO markets may distort
price formation, skewing market results and clearing prices.\354\ Other
commenters express concern that dual wholesale and retail participation
could enable distributed energy resources to arbitrage between retail
and wholesale markets, creating opportunities for market
manipulation,\355\ or to cherry pick between retail and wholesale
constructs, preventing effective distribution system planning.\356\ To
address this concern, some commenters suggest that the Commission
should require RTOs/ISOs to restrict the ability of distributed energy
resources to switch between wholesale and retail participation by
imposing a waiting period of at least one year.\357\
---------------------------------------------------------------------------

    \348\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
33-34; Calpine Comments (2018 RM18-9) at 6-7; Dominion Comments
(RM16-23) at 9-10; Microsoft Corporation Comments (2018 RM18-9) at
17; New York State Entities Comments (RM16-23) at 13.
    \349\ Pacific Gas & Electric Comments (2019 RM18-9) at 5.
    \350\ Avangrid Comments (RM16-23) at 11; Pacific Gas & Electric
Comments (RM16-23) at 17.
    \351\ Delaware Commission Comments (RM16-23) at 4.
    \352\ See, e.g., Calpine Comments (2018 RM18-9) at 6;
Organization of MISO States Comments (2018 RM18-9) at 8; PJM
Utilities Coalition Comments (2018 RM18-9) at 13.
    \353\ See, e.g., APPA/NRECA Comments (RM16-23) at 39-40; EEI
Comments (RM16-23) at 25-26; Massachusetts Municipal Electric
Comments (RM16-23) at 3; National Hydropower Association Comments
(RM16-23) at 11; Six Cities Comments (RM16-23) at 6.
    \354\ Calpine Comments (2018 RM18-9) at 6; EPSA Comments (2018
RM18-9) at 15; TAPS Comments (2018 RM18-9) at 25.
    \355\ TAPS Comments (2018 RM18-9) at 26.
    \356\ PJM Utilities Coalition Comments (2018 RM18-9) at 13.
    \357\ APPA Comments (2018 RM18-9) at 25 (suggesting a waiting
period of one year); Calpine Comments (2018 RM18-9) at 7 (suggesting
a waiting period of five years as in PJM's Fixed Resource
Requirement process).
---------------------------------------------------------------------------

    149. CAISO comments that, consistent with the NOPR proposal, its
Distributed Energy Resource Provider model specifies that resources
participating in a wholesale market aggregation may not participate in
a retail net energy metering program if that program does not expressly
also permit wholesale market participation.\358\ CAISO states that this
rule extends to various aspects of retail net metering programs such as
net metering with storage or virtual net metering.\359\ CAISO explains
that the rationale for this rule is that CAISO's Distributed Energy
Resource Provider model requires continuous wholesale
participation.\360\ Additionally, CAISO states that under California's
current net energy metering program rules, a participating resource
already benefits from netting its excess energy against subsequent
electricity bills.\361\ Based on this netting approach, there is no
energy available to offer into the CAISO markets because the excess
energy is banked for later withdrawal. CAISO believes the Commission's
approach in the NOPR is consistent with Commission orders determining
that exports to the transmission grid under a net energy metering
program do not constitute a sale for resale of electricity under the
FPA because these customers are, on a net basis, consumers.
---------------------------------------------------------------------------

    \358\ CAISO Comments (RM16-23) at 24 (citing Cal. Indep. Sys.
Operator Corp., 155 FERC ] 61,229 at P 6).
    \359\ Id. at 24.
    \360\ CAISO Comments (2018 RM18-9) at 15.
    \361\ CAISO Comments (RM16-23) at 24.
---------------------------------------------------------------------------

    150. Some commenters ask the Commission to modify or clarify
certain issues related to the NOPR proposal to prevent double counting.
For instance, several commenters urge the Commission to give clear
guidance about the definition of a retail compensation program or to
clarify the scope of the retail prohibition.\362\ A number of
commenters argue that the RTOs/ISOs should be responsible for
demonstrating how they will prevent duplicate compensation for the same
service.\363\ To that end, some commenters urge the Commission to, at a
minimum, direct RTOs/ISOs to establish protocols that address duplicate
compensation,\364\ monitor distributed energy resource offers for true
cost, and hold distributed energy resources accountable for
performance, among other measures.\365\ ISO-NE notes that if
distributed energy resources have to choose between wholesale and
retail participation, retail programs and behind-the-meter demand
response may be more attractive in New England.\366\
---------------------------------------------------------------------------

    \362\ ISO-NE Comments (RM16-23) at 54; SEIA Comments (RM16-23)
at 16-17; TAPS Comments (RM16-23) at 11.
    \363\ See, e.g., Advanced Microgrid Solutions Comments (RM16-23)
at 6; Dominion Comments (RM16-23) at 9-10; EEI Comments (RM16-23) at
25-26; Gridwise Comments (RM16-23) at 2; Public Interest
Organizations Comments (RM16-23) at 23-24; Stem Comments (RM16-23)
at 4, 7-8.
    \364\ EPSA Comments (2018 RM18-9) at 14; TAPS Comments (2018
RM18-9) at 26-27.
    \365\ Calpine Comments (2018 RM18-9) at 7; EPSA Comments (2018
RM18-9) at 20.
    \366\ ISO-NE Comments (2018 RM18-9) at 3.
---------------------------------------------------------------------------

    151. Conversely, numerous commenters assert that the Commission
should permit distributed energy resource aggregations to participate
in both wholesale and retail markets,\367\ provided that the
distributed energy resources are technically capable of doing so and
there are not physical system limitations that would prevent such
participation.\368\ Some of these commenters argue that distributed
energy resources should not receive duplicate compensation for the same
service but should receive compensation for each distinct or
incremental value they provide at the retail or wholesale level, and
that being allowed to do so will improve efficiency and lower overall
costs.\369\ Some commenters that are in favor of RTOs/ISOs allowing
dual participation also note that relevant electric retail regulatory
authorities have the ability to prevent it.\370\ Several commenters
contend that there is precedent for dual participation \371\ and argue
that a blanket ban would create a barrier to distributed energy
resource participation, underestimating their capabilities, and inhibit
competition, undermining the NOPR.\372\ Icetec and Tesla point out that
capacity markets have long avoided duplicate compensation for demand
response and for generators providing multiple services at once (e.g.,
energy and reserves) and urge the Commission to apply the logic of
these constructs to

distributed energy resources.\373\ Advanced Energy Economy claims that
the NOPR proposal would prevent the RTOs/ISOs from accessing a growing
pool of resources located close to load that can be cost-effectively
dispatched to ensure reliability.\374\ Several commenters argue that
requiring resources to choose between markets would diminish the
incremental value of distributed energy resources, leading to less
efficient and flexible markets and reducing distributed energy
resources' commercial viability.\375\ Commenters contend that, even if
some services could qualify generally as the same service, it would be
possible to distinguish them.\376\ Some commenters identify a number of
scenarios in which providing distinct wholesale and retail services is
feasible and explain that dispatch triggers for these programs usually
do not overlap, which further indicates that they are not the same
services.\377\ Additional commenters note potential discrepancies
between the NOPR proposal and the Commission's recent policy statement
enabling multiple-use applications for electric storage resources,\378\
and contend that experience in CAISO has demonstrated that it is
possible to differentiate between services.\379\
---------------------------------------------------------------------------

    \367\ See, e.g., Advanced Energy Buyers Comments (2018 RM18-9)
at 2; Genbright Comments (RM16-23) at 2-4; Global Cold Chain
Alliance Comments (2018 RM18-9) at 2; MISO Transmission Owners
Comments (RM16-23) at 6; New York Commission Comments (2018 RM18-9)
at 16.
    \368\ Energy Storage Association (2018 RM18-9) at 2; Microsoft
Corporation Comments (2018 RM18-9) at 17; NRG Comments (2018 RM18-9)
at 6-8; SEIA Comments (RM16-23) at 16; Sunrun Comments (RM16-23) at
3.
    \369\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 8, 12-13; American Petroleum Institute Comments (RM16-23) at 13;
Direct Energy Comments (2018 RM18-9) at 11-13; EPSA Comments (2018
RM18-9) at 15; NARUC Comments (RM16-23) at 5; Viking Cold Solutions
Comments (2018 RM18-9) at 2.
    \370\ California Commission Comments (2018 RM18-9) at 10-11; New
York Commission Comments (2018 RM18-9) at 17-18.
    \371\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
39; Advanced Energy Management Comments (RM16-23) at 11-14; City of
New York Comments (RM16-23) at 10-11; NRG Comments (2018 RM18-9) at
7-8; NYPA Comments (2018 RM18-9) at 2.
    \372\ See, e.g., California Energy Storage Alliance Comments
(RM16-23) at 4-6; Genbright Comments (RM16-23) at 3-4; Microgrid
Resources Coalition Comments (RM16-23) at 12; SEIA Comments (RM16-
23) at 16; Stem Comments (RM16-23) at 4, 7.
    \373\ Icetec Comments (2018 RM18-9) at 14; Tesla Comments (2018
RM18-9) at 4.
    \374\ Advanced Energy Economy Comments (RM16-23) at 33-34.
    \375\ See, e.g., Advanced Energy Management Comments (RM16-23)
at 10-11; Advanced Microgrid Solutions Comments (RM16-23) at 6;
Energy Storage Association Comments (RM16-23) at 22-23; Public
Interest Organizations Comments (RM16-23) at 22-24; Tesla/SolarCity
Comments (RM16-23) at 3.
    \376\ Energy Storage Association Comments (2018 RM18-9) at 2;
New York Commission Comments (2018 RM18-9) at 15; NYISO Indicated
Transmission Owners Comments (2018 RM18-9) at 13. See also
California Commission Comments (2018 RM18-9) at 8 (noting that the
California Commission declined to categorize the 22 services defined
for the multiple use application framework adopted in D.18-01-003 by
their service elements, which are either energy or capacity).
    \377\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
34-35; California Energy Storage Alliance Comments (RM16-23) at 5-6;
DER/Storage Developers Comments (RM16-23) at 2-3; Tesla/SolarCity
Comments (RM16-23) at 5-7. Advanced Energy Management notes that
dispatch for the Consolidated Edison programs only overlapped with
dispatch for the NYISO programs in six percent of hours from 2011 to
2015. Advanced Energy Management Comments (RM16-23) at 12-13.
    \378\ Institute for Policy Integrity Comments (RM16-23) at 7;
Open Access Technology Comments (RM16-23) at 4-5; Stem Comments
(RM16-23) at 4 (citing Utilization of Elec. Storage Res. for
Multiple Servs. When Receiving Cost-Based Rate Recovery, 158 FERC ]
61,051 (2017)).
    \379\ Leadership Group Comments (RM16-23) at 3 (citing Cal.
Indep. Sys. Operator Corp., 155 FERC ] 61,229 at P 11).
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    152. However, many commenters disagree over how the Commission
should assess what constitutes ``the same service.'' Some commenters
assert that ``same service'' should refer narrowly to retail and
wholesale programs that compensate a distributed energy resource for
the exact same kW or kWh for the same value, providing no incremental
value to the system.\380\ Other commenters argue that tools are
necessary to prevent double compensation for the same service and
suggest using performance requirements and dispatch triggers,
contracting, market/participation rules, registration,protections,
mathematical/accounting solutions, and/or a coordination framework,
among other measures, to prevent double counting.\381\ According to
some of these commenters, market rules could prevent double
compensation when a resource is dispatched simultaneously for multiple
programs or to prevent a resource from being permitted to sell the same
market product as both an individual resource and as part of an
aggregation in the same timeframe.\382\ Some commenters suggest using
certain criteria to determine when a service provides incremental value
to the retail or wholesale system or using metrics to enable
segmentation of time or service provided.\383\ PJM asks the Commission
not to prohibit PJM from using accounting rules to delineate between a
behind-the-meter distributed energy resource aggregation's wholesale
and retail transactions, as applicable.\384\
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    \380\ Advanced Energy Management Comments (2018 RM18-9) at 13;
New York Commission Comments (2018 RM18-9) at 15.
    \381\ See, e.g., California Commission Comments (2018 RM18-9) at
9-10; Microgrid Resources Coalition Comments (2018 RM18-9) at 12-14;
New York Commission Comments (2018 RM18-9) at 16, 18-19; NYISO
Indicated Transmission Owners Comments (2018 RM18-9) at 13-14; Tesla
Comments (2018 RM18-9) at 3-7.
    \382\ Advanced Energy Management Comments (RM16-23) at 13; AES
Companies Comments (RM16-23) at 39; New York State Entities Comments
(RM16-23) at 15-16.
    \383\ Advanced Energy Buyers Comments (2018 RM18-9) at 6;
Advanced Energy Economy Comments (2018 RM18-9) at 13; Advanced
Energy Management Comments (2018 RM18-9) at 14-15.
    \384\ PJM Comments (RM16-23) at 23.
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    153. IRC urges the Commission to work with states to set forth
clear processes for resolving jurisdictional and rate issues to prevent
double compensation based on the details of a particular retail
program.\385\ Some commenters suggest that the Commission collaborate
with local regulatory authorities because local conditions may warrant
special rules and restrictions for distributed energy resource
participation in multiple markets or defer to state jurisdictions.\386\
Some commenters request that the Commission clarify the right of state
regulators to monitor and regulate potential duplicate compensation
\387\ and request that the Commission provide guidance to distribution
utilities regarding the proposal.\388\
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    \385\ IRC Comments (RM16-23) at 3-5.
    \386\ EEI Comments (RM16-23) at 26-27; Pacific Gas & Electric
Comments (2018 RM18-9) at 10.
    \387\ Massachusetts Commission Comments (RM16-23) at 11.
    \388\ ISO-NE Comments (RM16-23) at 54.
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    154. In addition, several commenters seek clarification that RTOs/
ISOs are not precluded from allowing distributed energy resources to
provide multiple non-overlapping wholesale services.\389\ NYISO
requests clarification on whether distributed energy resources are
permitted to offer the ``same service'' to the wholesale markets and
distribution system-level retail programs.\390\ Lastly, some commenters
state that the Commission should revisit and further examine the issue
of dual participation in the future.\391\
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    \389\ NextEra Comments (RM16-23) at 14; NYISO Comments (RM16-23)
at 14-15; Public Interest Organizations Comments (RM16-23) at 21-22.
    \390\ NYISO Comments (RM16-23) at 14-15.
    \391\ EEI Comments (RM16-23) at 25; New York Utility
Intervention Unit Comments (RM16-23) at 6; Pacific Gas & Electric
Comments (RM16-23) at 17-18; SoCal Edison Comments (RM16-23) at 10.
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    155. Other commenters argue that the NOPR proposal would undermine
state policy.\392\ Numerous commenters argue that the NOPR proposal
conflicts with the Commission's findings in New York State Public
Service Commission v. New York Independent System Operator, Inc., in
which the Commission stated that ``[w]hile the wholesale- and the
retail-level demand response programs may complement each other, they
serve different purposes, provide different benefits, and compensate
distinctly different services,'' \393\ and would interfere with New
York's existing programs and state objectives.\394\ The California
Commission maintains that dual participation of a distributed energy
resource in retail programs and RTO/ISO markets is a retail matter
under state jurisdiction.\395\ The

Arkansas Commission, with support from Advanced Energy Economy, states
that dual participation of distributed energy resource aggregations in
RTO/ISO and retail markets requires a cooperative federalism approach
in which the Commission has authority over RTO/ISO eligibility rules,
states have exclusive jurisdiction over retail customer programs and
may set terms and conditions so long as they do not conflict with
Commission orders, and state regulators play a complementary role.\396\
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    \392\ California Commission Comments (RM16-23) at 6-7; City of
New York Comments (RM16-23) at 13; New York State Entities Comments
(RM16-23) at 18.
    \393\ N.Y. Pub. Serv. Comm'n v. N.Y. Indep. Sys. Operator, Inc.,
158 FERC ] 61,137, at P 33 (2017).
    \394\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
35-36; Advanced Energy Management Comments (RM16-23) at 11-13;
Harvard Environmental Policy Initiative Comments (RM16-23) at 7; New
York State Entities Comments (RM16-23) at 14,16-18; Union of
Concerned Scientists Comments (RM16-23) at 19.
    \395\ California Commission Comments (2018 RM18-9) at 10-11.
    \396\ Supplemental Comments of Arkansas Commission (2018 RM18-9-
000) at 1-2; Answer of Advanced Energy Economy to Supplemental
Comments of Arkansas Commission (2018 RM18-9) at 2.
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    156. In addition, some commenters assert that the Commission does
not have authority to prevent distributed energy resources from selling
retail services.\397\ The Harvard Environmental Policy Initiative
argues that there is no legal barrier that prevents distributed energy
resources from participating in both state and Commission programs, and
that the Commission has the authority to allow each RTO/ISO to
determine how to allow distributed energy resources to participate in
both state-level and wholesale programs, though they note it may be
operationally complex.\398\ Tesla/SolarCity asserts that differences in
jurisdiction must not prevent distributed energy resources from
receiving compensation for distinct services \399\ and argues that
effects on retail rates should not be relevant.\400\ Several commenters
add that the Commission's decision in this final rule will not affect
the ability of relevant electric retail regulatory authorities to
restrict wholesale participation for distributed energy resources
wishing to participate in retail programs.\401\
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    \397\ California Commission Comments (RM16-23) at 6; DER/Storage
Developers Comments (RM16-23) at 2; SEIA Comments (RM16-23) at 16;
Stem Comments (RM16-23) at 7.
    \398\ Harvard Environmental Policy Initiative Comments (RM16-23)
at 6-7 (citing NOPR, 157 FERC ] 61,121 at P 134).
    \399\ Tesla/SolarCity Comments (RM16-23) at 2-3.
    \400\ Id. at 3 (quoting EPSA, 136 S. Ct. 760 at 776 (``When FERC
regulates what takes place on the wholesale market, as a part of
carrying out its charge to improve how that market runs, then no
matter that effect on retail rates . . .'')).
    \401\ APPA Comments (2018 RM18-9) at 25-26; PJM Utilities
Coalition Comments (2018 RM18-9) at 13; TAPS Comments (2018 RM18-9)
at 25.
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    157. However, some commenters disagree with other commenters'
proposed approaches to differentiate between wholesale and retail
services. APPA contends that the methods proposed by some commenters of
determining what constitutes the same service are flawed, an
incremental value approach is conceptually complicated, and using
dispatch triggers to distinguish services is problematic because a
resource could not respond to a reliability event in both the wholesale
and retail markets at once.\402\ Similarly, Sunrun argues that a
universal characterization of services would create litigation and
confusion.\403\ PJM asserts that the Commission should not ``over-
define'' the services that distributed energy resources provide but
instead should focus on the services traditionally addressed in the
wholesale market (e.g., capacity, energy and ancillary services), and
require that any unit of capacity/resource adequacy only be compensated
once across the wholesale and retail domains.\404\ NYISO Indicated
Transmission Owners point out that the ability to differentiate
services is dependent on particular programs and markets, and suggest
that the Commission consider programs as they are filed by the relevant
RTOs/ISOs.\405\ MISO states that it defers to relevant electric retail
regulatory authorities to address any double compensation matters.\406\
NYISO states that if competing dispatch obligations still arise, it
will be the aggregator's responsibility to resolve the conflict and
face penalties, as appropriate.\407\
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    \402\ APPA Comments (2018 RM18-9) at 24-25.
    \403\ Sunrun Comments (2018 RM18-9) at 9-10.
    \404\ PJM Comments (2018 RM18-9) at 14.
    \405\ NYISO Indicated Transmission Owners Comments (2018 RM18-9)
at 7-8.
    \406\ MISO Comments (2018 RM18-9) at 22.
    \407\ NYISO Comments (2018 RM18-9) at 9-11.
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    158. NRG and Stem argue that the Commission should only be
concerned with double compensation if retail participation interferes
with the provision of wholesale services.\408\ Similarly, other
commenters argue that the Commission should focus on preventing
distributed energy resources from receiving double payment for the same
wholesale service and not whether those resources are also receiving
retail level compensation.\409\ NYISO Indicated Transmission Owners
note that many distribution utilities have established programs to
accommodate technology within retail service programs and argue that
any changes to market rules for participation of distributed energy
resource aggregations in wholesale markets should avoid encroaching
upon or abrogating the jurisdictional status of these distribution-
level programs, which, they state, do not involve wholesale sales.\410\
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    \408\ NRG Comments (RM16-23) at 8; Stem Comments (RM16-23) at 7.
    \409\ Advanced Energy Economy Comments (2018 RM18-9) at 13;
Energy Storage Association Comments (2018 RM18-9) at 5; New York
Commission Comments (2018 RM18-9) at 18; Stem Comments (RM16-23) at
7.
    \410\ NYISO Indicated Transmission Owners Comments (RM16-23) at
8.
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c. Commission Determination
    159. To implement Sec.  35.28(g)(12)(ii)(a) of the Commission's
regulations and upon consideration of the comments received, we adopt
the NOPR proposal, as modified and clarified below, to allow RTOs/ISOs
to limit the participation of resources in RTO/ISO markets through a
distributed energy resource aggregator that are receiving compensation
for the same services as part of another program.
    160. However, we agree with many commenters that the NOPR proposal
to prohibit distributed energy resources that are receiving
compensation in a retail program from being eligible to participate in
the RTO/ISO markets as part of a distributed energy resource
aggregation was overly broad. Commenters identify multiple examples
where participation in both wholesale and retail markets is feasible
\411\ and is already permitted and occurring,\412\ and they identify a
variety of existing and potential approaches to address reasonable
concerns about double counting and overcompensation.\413\ Therefore,
rather than barring participation in both wholesale and retail or
multiple wholesale programs, we modify the NOPR proposal to require
each RTO/ISO to revise its tariff to: (1) Allow distributed energy
resources that participate in one or more retail programs to
participate in its wholesale markets; (2) allow distributed energy
resources to provide multiple wholesale services; and (3) include any
appropriate restrictions on the distributed energy resources'
participation in RTO/ISO markets through distributed energy resource
aggregations, if narrowly designed to avoid counting more than once the
services provided by distributed energy resources in RTO/ISO markets.
In compliance with this final rule, we

require each RTO/ISO to describe how it will properly account for the
different services that distributed energy resources provide in the
RTO/ISO markets.
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    \411\ See, e.g., Advanced Microgrid Solutions Comments (RM16-23)
at 5-6; American Petroleum Institute Comments (RM16-23) at 13; NRG
Comments (RM16-23) at 8; Open Access Technology Comments (RM16-23)
at 5; Public Interest Organizations Comments (RM16-23) at 22.
    \412\ Direct Energy Comments (2018 RM18-9) at 11-13; Energy
Storage Association Comments (2018 RM18-9) at 5; NRG Comments (2018
RM18-9) at 6-8.
    \413\ NESCOE Comments (RM16-23) at 14-15 (citing Utilization of
Electric Storage Resources for Multiple Services When Receiving
Cost-Base Rate Recovery, 158 FERC ] 61,051 at P 2); SEIA Comments
(RM16-23) at 16 (citing Utilization of Electric Storage Resources
for Multiple Services When Receiving Cost-Based Rate Recovery, 158
FERC ] 61,051).
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    161. We find that it is appropriate for RTOs/ISOs to place narrowly
designed restrictions on the RTO/ISO market participation of
distributed energy resources through aggregations, if necessary to
prevent double counting of services. For instance, if a distributed
energy resource is offered into an RTO/ISO market and is not added back
to a utility's or other load serving entity's load profile, then that
resource will be double counted as both load reduction and a supply
resource. Also, if a distributed energy resource is registered to
provide the same service twice in an RTO/ISO market (e.g., as part of
multiple distributed energy resource aggregations, as part of a
distributed energy resource aggregation and a standalone demand
response resource, and/or a standalone distributed energy resource),
then that resource would also be double counted and double compensated
if it clears the market as part of both market participants. Thus, we
find that it is appropriate for RTOs/ISOs to place restrictions on the
RTO/ISO market participation of distributed energy resources through