example, telemetry may be necessary if an electric storage resource is
participating exclusively in the frequency regulation market but less
important if that resource is providing capacity or energy to the RTOs/
ISOs.
    215. Second, we clarify that the upper and lower charge limits
discussed in the NOPR represent the minimum and maximum state of charge
of an electric storage resource. Because they are state of charge
values, we will refer to these values in this Final Rule as the Maximum
and Minimum State of Charge. More specifically, the Maximum State of
Charge represents the state of charge that should not be exceeded
(i.e., gone above) when the electric storage resource is receiving
electric energy from the grid, while the Minimum State of Charge
represents the state of charge that should not be exceeded (i.e., gone
below) when an electric storage resource is injecting electric energy
onto the grid. These values will allow a resource using the
participation model for electric storage resources to place limits on
the degree to which the RTO/ISO can charge or discharge the resource,
ensuring that it is operated within its design limitations and
preventing excessive wear and tear. These values may be either static
values based on manufacturer specifications or dynamic values depending
on the operational characteristics of the resource (e.g., if it is
providing multiple services and needs to reserve part of its state of
charge for another service).
    216. Finally, we clarify that the maximum charge and discharge
rates discussed in the NOPR represent the operating limits of an
electric storage resource. As such, we refer to them in this Final Rule
as Maximum Charge Limit and Maximum Discharge Limit. Specifically, we
clarify that the Maximum Charge Limit for a resource using the electric
storage resource participation model is the maximum MW quantity of
electric energy that it can receive from the grid, and the Maximum
Discharge Limit is the maximum MW quantity that the resource can inject
onto the grid. The Maximum Discharge Limit is analogous to, and could
potentially be represented by, the economic maximum that traditional
generation resources can generally submit with their offers. Having
both a Maximum Charge Limit and Maximum Discharge Limit ensures that
RTO/ISO modeling and dispatch can account for the capabilities of
resources using the participation model for electric storage resources
to both receive and inject electric energy in accordance with their
maximum physical capabilities in both directions.
3. Minimum Charge Time, Maximum Charge Time, Minimum Run Time, and
Maximum Run Time
a. NOPR Proposal
    217. In the NOPR, the Commission proposed to require that each RTO/
ISO include in its participation model for electric storage resources
the following bidding parameters that market participants may submit,
at their discretion, for their resource based on its physical
constraints or desired operation: minimum charge time, maximum charge
time, minimum run time, and maximum run time.\258\
---------------------------------------------------------------------------

    \258\ See NOPR at P 68. The Commission acknowledged that some of
these optional bidding parameters may not be necessary for resources
participating under the proposed participation model for electric
storage resources that provide certain information to the RTO/ISO
through telemetry. Id. n.130.
---------------------------------------------------------------------------

b. Comments
    218. Energy Storage Association, NESCOE, Open Access Technology,
and SPP support the NOPR proposal.\259\ Specifically, Energy Storage
Association and NESCOE contend that establishing these optional bidding
parameters that reflect the physical and operational characteristics of
electric storage resources may allow RTOs/ISOs to more efficiently
dispatch all of the resources (including electric storage resources)
that participate in their markets, thereby reducing system costs.
Magnum supports the NOPR proposal given that the proposed bidding
parameters are optional for resources using the electric storage
resource participation model to submit; however, Magnum argues that
these requirements should not require an electric storage resource to
be a ``must run'' facility.\260\
---------------------------------------------------------------------------

    \259\ See Energy Storage Association Comments at 14; NESCOE
Comments at 11-12; Open Access Technology Comments at 2; SPP
Comments at 12.
    \260\ Magnum Comments at 12.
---------------------------------------------------------------------------

    219. CAISO and ISO-NE oppose the NOPR proposal.\261\ CAISO does not
agree that minimum charge time, maximum charge time, minimum run time,
and maximum run time should be bidding parameters because (1) they
represent the physical characteristics of a particular electric storage
resource and (2) other resources (such as pumped-hydro resources) are
not permitted to change their physical operating characteristics
through a bid. According to ISO-NE, these bidding parameters are not
necessary for all electric storage resources to participate in the RTO/
ISO markets nor to clear these markets or

operate the power system. ISO-NE adds that these additional bidding
parameters may increase the complexity of implementing the final rule's
requirements but provide little value. Thus, ISO-NE requests that the
Commission allow each RTO/ISO to determine whether and how to implement
these parameters in the future based on their experience working with
different types of electric storage technologies.
---------------------------------------------------------------------------

    \261\ See CAISO Comments at 10-11; ISO-NE Comments at 19.
---------------------------------------------------------------------------

c. Commission Determination
    220. To implement the new requirement in section 35.28(g)(9)(i)(C)
of the Commission's regulations, in this Final Rule, we modify the NOPR
proposal, with the clarification provided below, to require each RTO/
ISO to revise its tariff to include a participation model for electric
storage resources that accounts for the following physical and
operational characteristics of such resources: Minimum Charge Time,
Maximum Charge Time, Minimum Run Time, and Maximum Run Time. As
discussed above in the Requirement to Incorporate Bidding Parameters as
Part of the Electric Storage Resource Participation Model section,\262\
each RTO's/ISO's participation model for electric storage resources
must account for these physical and operational characteristics,
whether through bidding parameters or other means. We do not adopt the
component of the NOPR proposal to require the RTO/ISO to allow market
participants to submit this information at their discretion. Instead,
consistent with the discussion above, we provide flexibility to each
RTO/ISO to determine, consistent with how it treats other resources,
whether it is mandatory for resources using the participation model for
electric storage resources to submit information regarding these
physical and operational characteristics, or whether resources using
the participation model for electric storage resources should be
allowed to submit this information at their discretion. Additionally,
to the extent that an RTO/ISO proposes to comply with this requirement
through its existing bidding parameters or other existing market
mechanisms, it must demonstrate in its compliance filing how its
existing market rules account for these characteristics of electric
storage resources.
---------------------------------------------------------------------------

    \262\ See supra P 191.
---------------------------------------------------------------------------

    221. We find that it is necessary for a resource using an RTO's/
ISO's participation model for electric storage resources to be able to
provide information concerning these physical and operational
characteristics to the RTO/ISO because, like traditional generation
resources, it may only be economic for the resource to operate if it is
guaranteed to do so for minimum amount of time. Additionally, unlike
traditional generation resources, it is physically impossible for an
electric storage resource to charge or discharge energy for longer than
their state of charge would allow.
    222. However, we clarify the NOPR proposal, further explaining the
meaning of these physical and operational characteristics. First, we
clarify that Minimum Charge Time represents the shortest duration that
a resource using the participation model for electric storage resources
is able to be dispatched by the RTO/ISO to receive electric energy from
the grid. For example, it may only be possible for resources with
slower transition speeds (such as pumped-hydro resources) to receive
electric energy from the grid if it can do so for some minimum period
of time (e.g., for one hour). Minimum Charge Time is similar to the
Minimum Run Time for traditional generation resources but represents
the minimum time the resource can receive electric energy from the
grid, rather than provide electric energy to the grid.
    223. We further clarify that Maximum Charge Time represents the
maximum duration that a resource using the participation model for
electric storage resources is able to be dispatched by the RTO/ISO to
receive electric energy from the grid (e.g., for four hours). If the
RTO/ISO is not managing the state of charge of the electric storage
resource in real time, then this parameter will prevent it from
dispatching the resource to charge for a duration that would exceed the
resource's Maximum State of Charge. It also provides useful information
about how long the electric storage resource can be relied upon to
receive energy from the grid if the system operator needs to dispatch
it to do so.
    224. Finally, we clarify that Minimum Run Time and Maximum Run Time
are the minimum and maximum amounts of time that a resource using the
participation model for electric storage resources is able to discharge
electric energy. Maximum Run Time reflects the maximum amount of time
that a resource using the participation model for electric storage
resources is able to inject electric energy to the grid due to physical
or operational constraints, such as its state of charge or potential
obligations to provide other services. Similarly, Minimum Run Time
allows the resource to identify the minimum amount of time the resource
is physically able to discharge electric energy onto the grid. Minimum
Run Time already exists in the RTOs/ISOs to prevent excessive wear and
tear on traditional generation resources due to starting and stopping a
resource too frequently and to ensure they are able to recover the
costs of starting. To the extent that an RTO/ISO already accounts for
this characteristic of the participation model for electric storage
resources through its existing bidding parameters or other means, it
must demonstrate in its compliance filing how its existing market rules
do so.
4. Additional Physical and Operational Characteristics
a. Comments
    225. In addition to the bidding parameters that the Commission
proposed in the NOPR, a number of commenters identify physical and
operational characteristics that they argue the Commission should also
require each RTO/ISO to incorporate into its participation model for
electric storage resources.\263\ For example, EPRI contends that, to
the extent that the Upper and Lower Charge Limit bidding parameters
proposed in the NOPR do not represent the maximum and minimum amount of
energy that an electric storage resource can store, the Commission
should adopt additional bidding parameters in the final rule to capture
this information. According to EPRI, this information is necessary for
an RTO/ISO to manage an electric storage resource's state of charge
within that resource's limits.
---------------------------------------------------------------------------

    \263\ See EPRI Comments at 7-8, 17-18; NRG Comments at 9, 15;
NYPA Comments at 9; Pacific Gas & Electric Comments at 9.
---------------------------------------------------------------------------

    226. Several commenters support the concept of a bidding
parameter(s) that reflects the time that an electric storage resource
needs to transition from charging to discharging and from discharging
to charging. NYPA asserts that an electric storage resource may also
need a bidding parameter that reflects any ramp rate for those
transitions. Relatedly, EPRI explains that energy storage resources
that cannot transition from charging to discharging (and vice versa)
instantaneously may require minimum charge level as a bidding
parameter. EPRI further explains that software models may also require
that the values for maximum energy charge and discharge rates (ramp
rates) bidding parameters to be the same for these resources.
    227. Some commenters propose bidding parameters to reflect any
limits on an electric storage resource's

operations.\264\ California Energy Storage Alliance and Pacific Gas &
Electric suggest that the Commission could adopt through-put limit as a
bidding parameter. California Energy Storage Alliance claims that such
a bidding parameter is necessary because cycling multiple times a day
can cause excessive wear and tear to electric storage resources. NYISO
Indicated Transmission Owners suggest maximum and minimum allowable
charge and maximum daily charging and discharging cycles as bidding
parameters. NYPA argues that bidding parameters should reflect the
unique operating costs of electric storage resources (such as wear and
tear, lost opportunity costs, and efficiency losses). Research
Scientists assert that, to contribute to their economic viability,
bidding parameters for most electrochemical energy storage technologies
should represent their power limits, efficiency/losses, and
degradation.
---------------------------------------------------------------------------

    \264\ See California Energy Storage Alliance Comments at 13;
NYISO Indicated Transmission Owners Comments at 6; NYPA Comments at
9-10; Pacific Gas & Electric Comments at 9; Research Scientists
Comments at 6-7.
---------------------------------------------------------------------------

    228. Other commenters propose various additional bidding
parameters, including charge and discharge price, maximum consumption
for dispatch asset-related demand, minimum time between discharge
cycles for demand response resources,\265\ minimum energy charge and
discharge rate, self-discharge rate,\266\ round-trip efficiency (i.e.,
the ratio of how much energy is lost from charge to discharge),\267\
and separate ramp rates for energy and reserves,\268\ as well as
bidding parameters that reflect electric storage resources' ability to
respond to transients with automatic voltage regulation, power system
stability, and generator droop.\269\
---------------------------------------------------------------------------

    \265\ See NYISO Indicated Transmission Owners Comments at 6.
    \266\ See Pacific Gas & Electric Comments at 9.
    \267\ See EPRI Comments at 17-18.
    \268\ See Dominion Comments at 6-7.
    \269\ See Magnum Comments at 11.
---------------------------------------------------------------------------

b. Commission Determination
    229. Upon consideration of the comments, and to implement the new
requirement in section 35.28(g)(9)(i)(C) of the Commission's
regulations, we require each RTO/ISO to revise its tariff to
incorporate a participation model for electric storage resources that
accounts for the following physical and operational characteristics
that were not proposed in the NOPR: Minimum Discharge Limit, Minimum
Charge Limit, Discharge Ramp Rate, and Charge Ramp Rate. Each RTO's/
ISO's participation model for electric storage resources must account
for these physical and operational characteristics, whether through
bidding parameters or other means. Consistent with the discussion
above, we provide flexibility to each RTO/ISO to determine, consistent
with how it treats other resources, whether it is mandatory for
resources using the participation model for electric storage resources
to submit information regarding these physical and operational
characteristics, or whether resources using the participation model for
electric storage resources should be allowed to submit this information
at their discretion. To the extent that an RTO/ISO proposes to comply
with this requirement through its existing bidding parameters or other
existing market mechanisms, it must demonstrate in its compliance
filing how its existing market rules account for these characteristics
of electric storage resources.
    230. We find that requiring each RTO's/ISO's electric storage
resource participation model to account for these physical and
operational characteristics is necessary to improve the ability of
electric storage resources to provide all of the services that they are
technically capable of providing and to allow the RTOs/ISOs to procure
these services more efficiently, which will enhance competition and, in
turn, help to ensure that the RTO/ISO markets produce just and
reasonable rates.
    231. First, we are persuaded by EPRI's suggestion that some
electric storage resources may need to identify their minimum operating
limits when they are charging or discharging. Specifically, an electric
storage resource may need to identify its Minimum Discharge Limit,
which represents the minimum MW output level that the resource can
inject onto the grid, and its Minimum Charge Limit, which represents
the minimum MW level that the resource can receive from the grid.
    232. Like traditional generation resources, some electric storage
resources may not be able to inject energy onto the grid below a
minimum MW output level due to the physical capabilities of individual
turbines or the power electronic of the system. Also like traditional
generators, we find that resources using the participation model for
electric storage resources should be able to represent such a minimum
value in the RTO/ISO markets. Because electric storage resources are
also able to receive electric energy from the grid, there may be a
Minimum Charge Limit in MWs that they are able to receive from the grid
as well due to similar physical constraints of the resource or its
power electronics.
    233. Therefore, while the Commission did not propose in the NOPR to
require each RTO's/ISO's electric storage resource participation model
to account for the Minimum Charge Limit or Minimum Discharge Limit of a
resource using the electric storage resource participation model, in
this Final Rule, we require each RTO/ISO to revise its tariff to
account for these physical characteristics as part of its participation
model for electric storage resources.
    234. In addition, we agree with EPRI that the speed at which
electric storage resources can move from zero output to full output, or
its Maximum Discharge Limit, is the same as the current ramp rates
provided by traditional generation resources. However, we find that it
is important to ensure that electric storage resources are able to
represent this physical characteristic consistent with how other market
participants are able to do so. Therefore, for purposes of this Final
Rule, we refer to this parameter as the Discharge Ramp Rate and require
each RTO/ISO to account for this physical characteristic in its
participation model for electric storage resources by either making
existing ramp rate parameters available to resources using the
participation model for electric storage resources or by other means.
The unique consideration for electric storage resources is their
ability to both charge and discharge energy and to transition from one
operational state to the other. Therefore, in addition to a Discharge
Ramp Rate, we require each RTO/ISO to account for a Charge Ramp Rate in
its participation models for electric storage resources. The Charge
Ramp Rate represents the speed at which an electric storage resource
can move from zero output to fully charging, or the resource's Maximum
Charge Limit. While electric storage resources are often designed to
charge and discharge at the same speeds, that is not always the case,
and there may be other physical or operational reasons that resources
using the participation model for electric storage resources need to
differentiate their Charge Ramp Rate from the Discharge Ramp Rate.
Therefore, in this Final Rule, we require each RTO/ISO to revise its
tariff to account for these characteristics as part of its
participation model for electric storage resources.
    235. We do not find it necessary to require each RTO/ISO to account
for the other physical and operational characteristics of electric
storage resources that commenters suggest in its participation model
for electric storage

resources. However, we recognize that, given the different market
structures of the RTOs/ISOs, there may be additional physical and
operational characteristics of electric storage resources that each
RTO/ISO wishes to reflect in its participation model for such resources
to allow it to more efficiently dispatch its system. Thus, we will
allow each RTO/ISO to propose in its compliance filing bidding
parameters or other means to account for physical and operational
characteristics of electric storage resources besides those set forth
in this Final Rule. To the extent that an RTO/ISO includes such a
proposal in its compliance filing, the RTO/ISO must demonstrate that
such bidding parameters or other mechanisms do not impose barriers to
the participation of electric storage resources in its markets.
5. Summary of Physical and Operational Characteristics of Electric
Storage Resources
    236. For ease of reference, the following chart summarizes the
physical and operational characteristics of electric storage resources
for which each RTO's/ISO's participation model for electric storage
resources must account:

------------------------------------------------------------------------
   Physical or operational
        characteristic                         Definition
------------------------------------------------------------------------
State of Charge..............  State of Charge represents the amount of
                                energy stored in proportion to the limit
                                on the amount of energy that can be
                                stored, typically expressed as a
                                percentage. It represents the forecasted
                                starting State of Charge for the market
                                interval being offered into.
Maximum State of Charge......  Maximum State of Charge represents a
                                State of Charge value that should not be
                                exceeded (i.e., gone above) when a
                                resource using the participation model
                                for electric storage resources is
                                receiving electric energy from the grid
                                (e.g., 95% State of Charge).
Minimum State of Charge......  Minimum State of Charge represents a
                                State of Charge value that should not be
                                exceeded (i.e., gone below) when a
                                resource using the participation model
                                for electric storage resources is
                                injecting electric energy to the grid
                                (e.g., 5% State of Charge).
Maximum Charge Limit.........  Maximum Charge Limit represents the
                                maximum MW quantity of electric energy
                                that a resource using the participation
                                model for electric storage resources can
                                receive from the grid.
Maximum Discharge Limit......  Maximum Discharge Limit represents the
                                maximum MW quantity that a resource
                                using the participation model for
                                electric storage resources can inject to
                                the grid.
Minimum Charge Time..........  Minimum Charge Time represents the
                                shortest duration that a resource using
                                the participation model for electric
                                storage resources is able to be
                                dispatched by the RTO/ISO to receive
                                electric energy from the grid (e.g., one
                                hour).
Maximum Charge Time..........  Maximum Charge Time represents the
                                maximum duration that a resource using
                                the participation model for electric
                                storage resources is able to be
                                dispatched by the RTO/ISO to receive
                                electric energy from the grid (e.g.,
                                four hours).
Minimum Run Time.............  Minimum Run Time represents the minimum
                                amount of time that a resource using the
                                participation model for electric storage
                                resources is able to inject electric
                                energy to the grid (e.g., one hour).
Maximum Run Time.............  Maximum Run Time represents the maximum
                                amount of time that a resource using the
                                participation model for electric storage
                                resources is able to inject electric
                                energy to the grid (e.g., four hours).
Minimum Discharge Limit......  The minimum MW output level that a
                                resource using the participation model
                                for electric storage resources can
                                inject onto the grid.
Minimum Charge Limit.........  The minimum MW level that a resource
                                using the participation model for
                                electric storage resources can receive
                                from the grid.
Discharge Ramp Rate..........  The speed at which a resource using the
                                participation model for electric storage
                                resources can move from zero output to
                                its Maximum Discharge Limit.
Charge Ramp Rate.............  The speed at which a resource using the
                                participation model for electric storage
                                resources can move from zero output to
                                its Maximum Charge Limit.
------------------------------------------------------------------------

F. State of Charge Management

1. NOPR Proposal
    237. In the NOPR, the Commission proposed to require each RTO/ISO
to allow electric storage resources to self-manage their state of
charge and upper and lower charge limits.\270\ The Commission stated
that an electric storage resource that self-manages its state of charge
is subject to any penalties for deviating from a dispatch schedule to
the extent the resource manages its state of charge by deviating from
the dispatch schedule.\271\ However, the Commission sought comment on
whether there are conditions under which an RTO/ISO should not allow an
electric storage resource to manage its state of charge and upper and
lower charge limits.
---------------------------------------------------------------------------

    \270\ See NOPR at P 69.
    \271\ See id. P 70.
---------------------------------------------------------------------------

2. Comments
    238. Numerous commenters support the NOPR proposal to require each
RTO/ISO to allow electric storage resources to self-manage their state
of charge and upper and lower charge limits.\272\ Some commenters
assert that the proposal will allow for more efficient use of electric
storage resources and will extend their useful lives.\273\ Other
commenters state that permitting an electric storage resource to manage
its state of charge would allow the asset owner to optimize the
operations of its resource.\274\ Tesla/SolarCity point to CAISO's
tariff for Non-Generator Resources to self-manage energy limits and
state-of-charge in real time as a good model.\275\
---------------------------------------------------------------------------

    \272\ See, e.g., Beacon Power Comments at 6; DTE Electric/
Consumers Energy Comments at 4-5; EEI Comments at 10; Energy Storage
Association Comments at 16-17; IRC Comments at 5; Microgrid
Resources Coalition Comments at 7; NESCOE Comments at 11; Pacific
Gas & Electric Comments at 8; Research Scientists Comments at 7-8.
    \273\ See AES Companies Comments at 22; Electric Vehicle R&D
Group Comments at 1.
    \274\ See Avangrid Comments at 6; Energy Storage Association
Comments at 16; Imperial Irrigation District Comments at 10; NRG
Comments at 18; NYPA Comments at 10.
    \275\ See Tesla/SolarCity Comments at 14-15 (citing California
Indep. Sys. Operator Corp., 156 FERC ] 61,110 at P1).
---------------------------------------------------------------------------

    239. Several commenters, however, urge the Commission to go farther
than the NOPR proposal, stating that an electric storage resource
should always, or almost always, be responsible for managing its own
state of charge. Most RTOs/ISOs, PJM Market Monitor, and Xcel Energy
Services argue that the RTO/ISO should not be responsible for managing
an electric storage resource's

state of charge.\276\ For example, IRC argues that the RTOs/ISOs should
only be responsible for following reasonable operating parameters
provided by the electric storage resource owner.\277\ Generally,
commenters state that it would be challenging for the RTO/ISO to manage
a storage resource's state of charge, RTOs/ISOs traditionally do not
manage how resources participate in the market, RTOs/ISOs should not be
put in the position of managing market risk for or making business
judgments on behalf of market participants, and electric storage
resources should manage their own state of charge through their market
offers, updates to market offers, and decisions to remove their
resource from market dispatch.\278\
---------------------------------------------------------------------------

    \276\ See IRC Comments at 5; ISO-NE Comments at 20; PJM Comments
at 10; PJM Market Monitor Comments at 4.
    \277\ See IRC Comments at 5.
    \278\ See AES Companies Comments at 23; PJM Comments at 10; PJM
Market Monitor Comments at 4; Xcel Energy Services Comments at 17-
18.
---------------------------------------------------------------------------

    240. Other commenters argue that, to the extent the Commission
permits an RTO/ISO to manage an electric storage resource's state of
charge, that RTO/ISO should be required to meet certain
conditions.\279\ For example, AES Companies argue the related software
development and administrative costs of RTO/ISO management of a
resource's state of charge should be allocated only to those resources
requesting the state-of-charge management service from the RTO/ISO. In
contrast, Microgrid Resources Coalition contends that, if an RTO/ISO
seeks to manage the state of charge or readiness of an electric storage
resource, it should compensate the resource for that privilege.\280\
NRG asserts that to the extent an RTO/ISO manages an electric storage
resource's state of charge, it will have to include complex bidding
parameters to ensure that the resource could meet any retail
obligations that it has assumed.\281\ MISO Transmission Owners state
that an RTO/ISO that manages an electric storage resource's state of
charge must do so in accordance with the criteria that the resource
owner establishes.\282\
---------------------------------------------------------------------------

    \279\ See AES Companies Comments at 23.
    \280\ See Microgrid Resources Coalition Comments at 7-8.
    \281\ See NRG Comments at 18.
    \282\ See MISO Transmission Owners Comments at 11.
---------------------------------------------------------------------------

    241. Imperial Irrigation District asserts that the RTO/ISO should
manage an electric storage resource's state of charge only if the
resource owner agrees.\283\ Relatedly, NYPA argues that, if an RTO/ISO
is managing an electric storage resource's state of charge, that
resource should be permitted to withdraw from RTO/ISO control without
penalty if it believes it is under-recovering revenues due to the
RTO's/ISO's directives.\284\ NYPA contends that several RTOs/ISOs have
considered or implemented performance incentive structures and
including electric storage resources in those market designs could
provide the proper market incentive for such resources to be available
when they are most needed, instead of having the RTO/ISO manage a
resource's state of charge.
---------------------------------------------------------------------------

    \283\ See Imperial Irrigation District Comments at 10.
    \284\ See NYPA Comments at 10-11.
---------------------------------------------------------------------------

    242. Other commenters suggest that there are certain circumstances
when RTO/ISO state of charge management is beneficial and that each
RTO/ISO should be permitted to manage an electric storage resource's
state of charge in certain circumstances.\285\ SPP asserts that RTOs/
ISOs should manage the state of charge of regulation resources but that
electric storage resources that qualify to provide other services
should manage their own states of charge.\286\ CAISO notes that, under
its existing market rules, it manages the state of charge for some
electric storage resources and allows others to manage their own state
of charge. Specifically, CAISO notes that, for resources that seek to
provide regulation, it can optimize a resource's state of charge,
allowing a resource to offer its full capacity as regulation consistent
with continuous energy requirements for that service. ISO-NE states
that it recognizes that it may be necessary at times for an RTO/ISO to
posture resources, including electric storage resources, to ensure
reliability.
---------------------------------------------------------------------------

    \285\ See CAISO Comments at 10-11; EPRI Comments at 21-22
(citing https://ncreview.org/smart_grid/pjms-frequency-regulation-market-and-the-changing-nature-of-energy-storage-gtm-squared/45256);
ISO-NE Comments at n.23; Research Scientists Comments at 7; SPP
Comments at 11, 12.
    \286\ See SPP Comments at 11, 12.
---------------------------------------------------------------------------

    243. EPRI states that it may be appropriate for the RTO/ISO to
manage a storage resource's state of charge to ensure that sufficient
regulating capability is available from the resource, noting that this
has already occurred in some RTOs/ISOs. EPRI adds that RTO/ISO
management of state of charge could lead to more efficient and more
reliable operations and better mitigation of day-ahead forecast
uncertainty because the RTO/ISO has better knowledge of system
conditions. Research Scientists argue that, while it may be technically
challenging to achieve, in principle, the RTO/ISO is in the best
position to manage energy storage scheduling and state of charge in
order to minimize system costs.
    244. EEI and Exelon assert that, if an electric storage resource is
used to address reliability-related transmission needs or relieve
congestion as a transmission asset, the RTO/ISO must have functional
control over dispatch, including the timing and amount of energy that
may be injected into or withdrawn from the transmission system and the
amount of energy that must be made available for injection or
withdrawal at the direction of the RTO/ISO to fulfill the resource's
transmission function.\287\ Exelon states that the RTO/ISO could
release control of the electric storage resource when it is not needed
for such services, noting that the RTO/ISO may still have to determine
the level of energy to be available at all times from resources that
provide blackstart service. In contrast, AES Companies claim that,
because advanced software is used to optimize a lithium array's life,
state of charge should still be managed by the owner of a storage
resource used as a transmission asset under the RTO's/ISO's functional
control.\288\
---------------------------------------------------------------------------

    \287\ See EEI Comments at 11; Exelon Comments at 8-9, n.4.
    \288\ See AES Companies Comments at 21.
---------------------------------------------------------------------------

    245. EEI and Xcel Energy Services suggest that, given the lack of
clarity about the proposal for state of charge management, a technical
conference may be warranted to better explain the state of charge
management concept and better ascertain the issues that need to be
evaluated in determining how state of charge should be managed.\289\
EEI states that this technical conference should address the management
of multiple payment streams for electric storage resources that are
both receiving cost-based rates and participating in the RTO/ISO
markets because such a resource must be able to fulfill both the
obligations that it assumes in the market and as a transmission asset.
MISO also argues that further study is needed to comprehend the
reliability and economic outcomes of different approaches to state-of-
charge management for electric storage resources, noting that it must
have an effective way to ensure that an electric storage resource
managing its state of charge has enough stored energy to allow it to
provide the services that it clears the market to provide.\290\
---------------------------------------------------------------------------

    \289\ See EEI Comments at 10-11; Xcel Energy Services Comments
at 18.
    \290\ See MISO Comments at 15-16.
---------------------------------------------------------------------------

    246. Altametric and Bonneville assert that an RTO/ISO may need to
directly manage the state of charge and upper and lower charge limits
of electric storage resources during an abnormal

condition or system emergency to preserve system reliability.\291\
Bonneville encourages the Commission to allow the RTOs/ISOs to identify
these reliability-based conditions. City of New York contends that,
while there may be limited circumstances under which an RTO/ISO is
better suited than the asset owner to manage an electric storage
resource's state of charge and upper and lower charge limits, the scope
of an RTO's/ISO's authority to do so should be established consistent
with their limited experience with such resources, while changing over
time as they gain additional experience.\292\
---------------------------------------------------------------------------

    \291\ See Altametric Comments at 6; Bonneville Comments at 5.
    \292\ See City of New York Comments at 7.
---------------------------------------------------------------------------

    247. Some commenters argue that the Commission should require each
RTO/ISO to offer state-of-charge management to electric storage
resources.\293\ NYISO Indicated Transmission Owners state that, because
electric storage resources can be used to support local or bulk
electric system reliability, the Commission should ensure that electric
storage resource owners can voluntarily elect to cede control of their
resources' state of charge to either an RTO/ISO or distribution
utility. Dominion stresses the importance of pumped-hydro resources'
ability to opt for PJM to optimize their pumping and dispatch in the
day-ahead market when these facilities provide PJM with their starting
and ending storage levels for the day, along with other resource-
specific operating parameters and suggests expanding this ability to
other electric storage resources.
---------------------------------------------------------------------------

    \293\ See Dominion Comments at 5; NYISO Indicated Transmission
Owners Comments at 6.
---------------------------------------------------------------------------

    248. To enable them to provide their full capabilities to the
market in a continual manner, Energy Storage Association asks the
Commission require each RTO/ISO to allow an electric storage resource
to opt to have the RTO/ISO manage its state of charge.\294\ Energy
Storage Association contends that, at a minimum, an active state-of-
charge management mechanism should be available for electric storage
resources providing services that need operational decisions faster
than bidding intervals (e.g., frequency regulation) and state of charge
cannot be predicted or managed through bidding alone. Energy Storage
Association notes that CAISO, MISO, and NYISO offer state of charge
management for electric storage resources providing frequency
regulation service and argues that these practices should be expanded
to all RTOs/ISOs and be available for resources of any duration, not
just short-duration storage resources providing frequency regulation.
---------------------------------------------------------------------------

    \294\ See Energy Storage Association Comments at 6, 17, n.24.
---------------------------------------------------------------------------

    249. Xcel Energy Services contends that issues associated with
managing state of charge may impact opportunity costs included in
offers and raise concerns regarding economic withholding of resources
from the market and market monitors may need to develop new monitoring
tools and exhibit flexibility in evaluating offer opportunity costs
when evaluating behavior of storage resources in the market.\295\ R
Street Institute posits that economic withholding may be difficult to
detect, given that electric storage resources' offers reflect their
opportunity costs (rather than physical marginal costs) and that these
resources will likely supply energy when prices are high and the market
is most vulnerable to the exercise of market power.\296\ R Street
Institute explains that physical withholding detection will prove
challenging due to the complexity and heterogeneity of physical
characteristics of electric storage resources. Therefore, R Street
Institute asks the Commission to seek comment on how electric storage
resources may engage in economic or physical withholding.
---------------------------------------------------------------------------

    \295\ See Xcel Energy Services Comments at 18, n.27.
    \296\ See R Street Institute Comments at 6.
---------------------------------------------------------------------------

    250. With respect to the Commission's statement in the NOPR that an
electric storage resource that self-manages its state of charge is
subject to any penalties for deviating from a dispatch schedule to the
extent the resource manages its state of charge by doing so, several
commenters agree that, if an electric storage resource self-manages its
state of charge and does not perform when obligated to do so, the
resource should incur non-performance penalties.\297\ EPRI asserts that
potential penalties will help incentivize energy storage resources that
self-manage their state of charge to ensure that their state-of-charge
constraints are met. EPRI adds, however, that the RTO/ISO may not have
sufficient information about whether an electric storage resource that
is providing spinning/synchronized reserve can meet its obligation to
provide energy unless the RTO/ISO must call on that resource, making it
more difficult to penalize such a resource for noncompliance unless an
event has occurred.
---------------------------------------------------------------------------

    \297\ See, e.g., Energy Storage Association Comments at 17; EPRI
Comments at 23; ISO-NE Comments at 20; Ohio Commission Comments at
7; Xcel Energy Services Comments at 22.
---------------------------------------------------------------------------

3. Commission Determination
    251. Upon consideration of the comments, we agree with commenters
that resource owners/operators using the participation model for
electric storage resources must be able to manage the state of charge
of their resources. Consistent with the NOPR, we find that each RTO/ISO
must permit electric storage resources to manage their state of charge
because it allows these resources to optimize their operations to
provide all of the wholesale services that they are technically capable
of providing, similar to the operational flexibility that traditional
generation resources have to manage the wholesale services that they
offer. We find that, while the RTOs/ISOs may be in a better position to
effectively manage the state of charge for a resource using the
participation model for electric storage resources that, for example,
exclusively provides frequency regulation service, some electric
storage resources may be able to provide multiple services or services
to another entity outside of the RTO/ISO markets.
    252. We therefore agree with commenters that resources using the
participation model for electric storage resources must have the
ability to self-manage their state of charge and it is often desirable
to allow them to do so. Providing this flexibility will allow resource
owners/operators to ensure their own Minimum and Maximum States of
Charge are not violated,\298\ which will help prevent excessive wear
and tear on the resource and help maintain its technical capabilities
to provide services in the RTO/ISO markets. Additionally, depending on
the telemetry rules adopted by each RTO/ISO, ensuring that a resource
owner/operator is able to manage its own state of charge may also limit
the need for the RTO/ISO to telemeter the resource in real time to
ensure that the Minimum and Maximum States of Charge are not violated.
For these reasons, we find that a sufficient record exists in this
proceeding to make these determinations without the need for additional
process or a technical conference, as some commenters propose.
---------------------------------------------------------------------------

    \298\ See supra P 215. Consistent with the changes in
terminology adopted in the State of Charge, Upper and Lower Charge
Limits, and Maximum Charge and Discharge Rates section, we are using
the terms Maximum State of Charge and Minimum State of Charge
instead of Upper Charge Limit and Lower Charge Limit.
---------------------------------------------------------------------------

    253. Therefore, we require each RTO/ISO to allow resources using
the participation model for electric storage resources to self-manage
their state of

charge. We also find here that a resource using the participation model
for electric storage resources that self-manages its state of charge
will be subject to any applicable penalties for deviating from a
dispatch schedule to the extent that the resource deviates from the
dispatch schedule in managing its state of charge.\299\ We also clarify
that, to the extent that the provision of a particular wholesale
service, such as frequency regulation, requires a resource providing
that service to follow a dispatch signal that has the effect of
maintaining the resource's ability to provide the service, an electric
storage resource that is managing its own state of charge would still
be required to follow such a dispatch signal, just as all other
resources providing that same service.
---------------------------------------------------------------------------

    \299\ See NOPR at P 70.
---------------------------------------------------------------------------

    254. Additionally, we clarify that the RTOs/ISOs are not required
as part of this Final Rule to manage the state of charge for resources
using the participation model for electric storage resources.\300\
However, if an RTO/ISO already has a mechanism to manage a resource's
state of charge (such as regulation energy management in CAISO or
pumped-hydro resource operation in PJM), then we require the RTO/ISO to
make the use of such mechanism optional so that an electric storage
resource owner/operator is able to manage its own state of charge if it
elects to do so. Where an electric storage resource has the option to
allow the RTO/ISO to manage its state of charge, we clarify that the
electric storage resource is the default manager of the resource's
state of charge.
---------------------------------------------------------------------------

    \300\ We note that, while the RTOs/ISOs must permit resources to
manage their own state of charge, the RTOs/ISOs may provide an
option for the RTO/ISO to manage an electric storage resource's
state of charge for any particular service or circumstance as they
deem appropriate in their markets with consent of the electric
storage resource.
---------------------------------------------------------------------------

    255. In response to the concerns about the ability of the RTOs/ISOs
to use electric storage resources to address any reliability challenges
and to know that the resources have an adequate state of charge to
perform the service to which they have committed, we note that the RTO/
ISO should be able to dispatch a resources using the participation
model for electric storage resources in the same manner as any other
market participant. Nothing in this Final Rule precludes an RTO/ISO
from establishing telemetry or other communication requirements
necessary to determine the capabilities of the electric storage
resource in real time. We believe that this flexibility will ensure
sufficient visibility of a resource using the participation model for
electric storage resources to safeguard operational reliability and
market integrity. We reiterate that self-managing electric storage
resources, just like all market participants, are subject to any non-
performance penalties in the RTO/ISO tariff, thus incentivizing them to
ensure that they have sufficient energy available to meet their
obligations.
    256. As for commenters' concerns about economic and physical
withholding, we agree that the energy limitations of electric storage
resources will need to be factored into their market offers and that
misrepresenting those limitations could constitute manipulation if an
electric storage resource has an obligation to participate in an RTO/
ISO market. However, as discussed in the Ability to De-Rate Capacity to
Meet Minimum Run-Time Requirements section above, in this Final Rule,
we require each RTO/ISO to demonstrate how its existing market rules
provide a means for energy-limited resources, including electric
storage resources, to provide capacity.\301\ This may include ways for
energy-limited resources, such as electric storage resources, to
represent their energy limitations through their offer prices, which,
if allowed by the RTO/ISO, would not constitute economic withholding.
Also, as discussed above, we find that electric storage resources de-
rating to provide capacity or other services are not engaging in
physical withholding if they are de-rating to meet minimum run-time
requirements.
---------------------------------------------------------------------------

    \301\ See supra P 100.
---------------------------------------------------------------------------

    257. However, there may still be concerns that electric storage
resources managing their own state of charge could be doing so
inconsistent with the physical and operational characteristics of the
resource, which may create a need to ensure those resources are not
withholding services or otherwise violating its dispatch in a way
inconsistent with its physical capabilities. Therefore, we note that,
as with other resources, market monitors have the ability to review the
bids from electric storage resources to detect economic or physical
withholding. Additionally, if an RTO/ISO determines that additional
rules are needed to ensure electric storage resources are not managing
their state of charge in a way that could manipulate market outcomes
through withholding, then the RTO/ISO could propose such rules in
response to this Final Rule or through a separate FPA section 205
filing.\302\
---------------------------------------------------------------------------

    \302\ See 16 U.S.C. 824d.
---------------------------------------------------------------------------

G. Minimum Size Requirement

1. NOPR Proposal
    258. In the NOPR, the Commission proposed to require each RTO/ISO
to revise its tariff to include a participation model for electric
storage resources that establishes a minimum size requirement for
participation in the RTO/ISO markets that does not exceed 100 kW.\303\
---------------------------------------------------------------------------

    \303\ See NOPR at P 94. The Commission used the term ``minimum
size requirement'' to collectively describe minimum capacity
requirements to qualify to use a given participation model,
``minimum offer requirements'' for offers to sell services in the
RTO/ISO markets, and ``minimum bid requirements'' for bids to buy
energy in these markets. Id. n.148.
---------------------------------------------------------------------------

2. Comments
    259. Several commenters agree with the proposed 100 kW minimum size
requirement for electric storage resources.\304\ Many of these
commenters argue that there is no justification for the minimum size
requirement to be any higher. Minnesota Energy Storage Alliance asserts
that large minimum size requirements have and continue to pose a
barrier to electric storage resource development in Minnesota.\305\
Energy Storage Association and Tesla/SolarCity note that most or all of
the RTOs/ISOs currently allow at least some type of resource to
participate in their markets at a size of 100 kW, including PJM, which
allows participation by 100 kW electric storage resources.\306\
Massachusetts State Entities and NESCOE state that the proposal would
be technically feasible in ISO-NE and will not compromise the
efficiency of market dispatch.\307\ Massachusetts State Entities note
that the 100kV threshold is consistent with the results of a pilot
program in which ISO-NE reduced the minimum size requirement to
participate in its frequency regulation market to 100 kW and found that
resources smaller than one MW were technically capable of providing the
service. However, Tesla/SolarCity request that the Commission clarify
that the 100 kW minimum size requirement applies not only to individual
electric storage resources but also can be met through the aggregation
of smaller electric storage resources.
---------------------------------------------------------------------------

    \304\ See, e.g., Avangrid Comments at 8; Energy Storage
Association Comments at 23; Massachusetts State Entities Comments at
16-17; NYISO Comments at 10; PJM Market Monitor Comments at 9;
Tesla/SolarCity Comments at 17-18.
    \305\ See Minnesota Energy Storage Alliance Comments at 3-4.
    \306\ See Energy Storage Association Comments at 7, 23-24;
Tesla/SolarCity Comments at 17-18.
    \307\ See NESCOE Comments at 12.
---------------------------------------------------------------------------

    260. Energy Storage Association asserts that electric storage
resources less than 1 MW in size can provide the same services and the
same flexibility,

reliability, and cost reduction benefits as larger electric storage
resources.\308\ NYISO Indicated Transmission Owners do not oppose the
NOPR proposal.\309\
---------------------------------------------------------------------------

    \308\ See Energy Storage Association Comments at 24.
    \309\ See NYISO Indicated Transmission Owners Comments at 7.
---------------------------------------------------------------------------

    261. Other commenters support the concept of a minimum size
requirement but have reservations about the 100 kW value that the
Commission proposed in the NOPR.\310\ Eagle Crest agrees that a minimum
size requirement is appropriate but takes no position with respect to
what that requirement should be. Relatedly, Public Interest
Organizations and R Street Institute contend that lowering the minimum
size requirement will reduce barriers to the participation of electric
storage resources but state that the NOPR proposal does not address the
arbitrariness of choosing a particular minimum size. R Street Institute
argues that no economic rational justifies the RTOs/ISOs adopting
different minimum size requirements. While R Street Institute states
that the NOPR correctly identifies the need to balance the benefits of
lowering minimum size requirements with the ability of market clearing
software to model and dispatch smaller resources, it argues that it is
unclear how the NOPR proposal balances these benefits and costs. While
the National Hydropower Association notes that it is concerned with
market participation limitations based on project size, it believes
that the NOPR proposal is compatible with existing and future pumped-
hydro resources interconnected to the transmission system.
---------------------------------------------------------------------------

    \310\ See Eagle Crest Comments at 7; National Hydropower
Association Comments at 9, n.9; Public Interest Organizations
Comments at 18; R Street Institute Comments at 7.
---------------------------------------------------------------------------

    262. Other commenters oppose the NOPR proposal.\311\ CAISO explains
that it requires resources to have a capacity of at least 500 kW to
participate in its energy and ancillary service markets, while initial
offer segments must be no less than 100 kW/kWh. While CAISO agrees with
the Commission that its software could model or dispatch a resource
with a capacity of 100 kW, CAISO is concerned that the 100 kW minimum
size requirement would also apply to distributed energy resources and
requiring CAISO to clear congestion on its grid with thousands of
resources with capacities in the range of 100 kW will reduce the
efficiency and performance of its market software. Therefore, CAISO
asks the Commission to allow each RTO/ISO to set its minimum size
requirement up to 500 kW for installed capacity, with a minimum offer
requirement of up to 100 kW/kWh offered into the market and for the
initial offer segment. CAISO states that a 500 kW minimum size
requirement is consistent with the minimum size requirement that it
applies to generators. CAISO further states that the Commission could
direct each RTO/ISO to explain how electric storage resources smaller
than 500 kW may participate in their markets (e.g., through aggregation
models or as demand response resources).
---------------------------------------------------------------------------

    \311\ See CAISO Comments at 16-19; ISO-NE Comments at 23.
---------------------------------------------------------------------------

    263. ISO-NE argues that imposing a 100 kW minimum size requirement
could force it to change the minimum size requirement for all resources
in its markets due to its product-based market design. ISO-NE asks the
Commission to permit ISO-NE to work with transmission organizations and
utility distribution companies in the regions to set minimum size
requirements. ISO-NE contends that it must assess whether such an
outcome would increase the costs or time needed for implementation.
ISO-NE asserts that the proposed 100 kW minimum size requirement might
increase costs and the time needed for implementation for the region's
transmission organizations and distribution utilities because smaller
resources are more likely to be interconnected to the distribution
system and these transmission organizations and distribution utilities
would have to install metering and adopt accounting procedures to
measure the consumption and output of these resources.
    264. AES Companies, EEI, MISO Transmission Owners, Pacific Gas &
Electric, and SoCal Edison argue that the Commission should allow each
RTO/ISO to establish its own minimum size requirements for electric
storage resources based on its unique circumstances.\312\ EEI argues
that it could allow so many electric storage resources to participate
in the RTO/ISO markets that the RTOs/ISOs will be unable to evaluate
these resources, distribution utilities will be unable to model these
resources and implement infrastructure upgrades, and the implementation
costs incurred to facilitate their participation will exceed the
benefits of that participation. While AES Companies support the concept
of a minimum size requirement, they contend that 100 kW is
significantly below the minimum size requirement for many distribution
utilities and may be challenging for some of the RTOs/ISOs to implement
(given their diverse operating characteristics and supporting software
systems). Likewise, MISO Transmission Owners state that 100 kW is very
low, especially for distribution utilities. Pacific Gas & Electric
contends that the Commission should allow each RTO/ISO to establish
different minimum size requirements for the different services that
electric storage resources can provide (e.g., energy or ancillary
services) and the different participation models that they can use to
participate in the RTO/ISO market. Pacific Gas & Electric asserts that
the appropriate minimum size requirement(s) may be based on the
opportunities for aggregation of electric storage resources.
---------------------------------------------------------------------------

    \312\ See EEI Comments at 13-14; AES Companies Comments at 7,
28-29; MISO Transmission Owners Comments at 13-14; Pacific Gas &
Electric Comments at 10-11; SoCal Edison Comments at 15-16.
---------------------------------------------------------------------------

    265. AES Companies, EEI, MISO Transmission Owners, and Pacific Gas
& Electric contend that the minimum size requirement for an electric
storage resource to participate in an RTO/ISO market should take into
account the point at which electric storage resources will interconnect
to the system (i.e., the transmission or distribution system) and how
it will be operated relative to other generation interconnected to the
distribution system.\313\ AES Companies assert that the Commission does
not have the authority to set minimum size requirements for
distribution utilities and the 100 kW proposed minimum size requirement
conflicts with existing state tariffs and operating principles. Thus,
AES Companies and MISO Transmission Owners ask the Commission to allow
each distribution utility (with its retail regulators) and each RTO/ISO
(with its stakeholders) to establish its own minimum size requirement
for distribution-interconnected and behind-the-meter electric storage
resources and transmission-interconnected electric storage resources,
respectively.
---------------------------------------------------------------------------

    \313\ See AES Companies Comments at 7, 28-29; EEI Comments at
14; MISO Transmission Owners Comments at 13; Pacific Gas & Electric
Comments at 11.
---------------------------------------------------------------------------

    266. Alternatively, MISO Transmission Owners state that a one MW
minimum size requirement is more practical and appropriate due to
administrative and settlement burdens on the RTOs/ISOs, while a 500 kW
minimum size requirement may be appropriate for supporting innovation
in immature technologies and markets through pilot projects.\314\ In
contrast, while acknowledging that smaller electric storage resources
can be

aggregated to meet minimum size requirements, SoCal Edison argues that
a one MW minimum size requirement may be too large because electric
storage resources with a capacity of one MW or more that are
interconnected to the distribution system could create operational
challenges for distribution operators.\315\ Altametric recommends a
minimum power output size of 500 kW from no charge to full charge with
a minimum limit of 100 kWh.\316\ Xcel Energy Services contends that
electric storage resources should have to meet the same minimum size
requirements like other, larger resources.\317\
---------------------------------------------------------------------------

    \314\ See MISO Transmission Owners Comments at 13-14.
    \315\ See SoCal Edison Comments at 15.
    \316\ See Altametric Comments at 7.
    \317\ See Xcel Energy Services Comments at 23.
---------------------------------------------------------------------------

    267. A few commenters raise the potential impact of the NOPR
proposal on the software that RTOs/ISOs use to clear their
markets.\318\ MISO claims that a minimum size requirement that is too
small could result in more very small electric storage resources
participating in MISO's markets than its current operational and market
systems and software may be capable of tracking, processing, and
settling. Similarly, Pacific Gas & Electric and Xcel Energy Services
suggest considering whether the market-clearing software is capable of
managing the dispatch of many small resources when determining minimum
size requirements. MISO warns that its market systems may require
significant upgrades to accommodate the potentially large number of
electric storage resources and the multiplicity of variables associated
with their transactions. MISO also claims that its State Estimator
(which it uses to track energy for real-time dispatch and performance
measurement) may not have the ability to estimate the status of 100 kW
resources. Minnesota Energy Storage Alliance states that, while it
defers to the RTOs'/ISOs' comments on the software upgrades needed to
implement the proposed minimum size requirement and the associated
costs, it would like to see MISO modify its markets to allow for the
participation of smaller resources.
---------------------------------------------------------------------------

    \318\ See Minnesota Energy Storage Alliance Comments at 4; MISO
Comments at 8-9; Pacific Gas & Electric Comments at 11; Xcel Energy
Services Comments at 23.
---------------------------------------------------------------------------

    268. MISO Transmission Owners claim that any new rule would
effectively direct investment in software and/or infrastructure
upgrades over other priorities that have been established based on
customer need and that the Commission must balance prioritization of
electric storage resource participation against other important system
improvements and maintenance.\319\ MISO Transmission Owners assert that
this concern is valid and timely because many distribution companies
are implementing large-scale, advanced metering infrastructure
deployment plans. Xcel Energy Services also argues that any
administrative costs that result from the growth in the number of small
resources participating in the RTO/ISO markets should be borne by those
resources.\320\ EPRI suggests further study on two issues: (1) Whether
RTO/ISO market-clearing software will be capable of identifying the
optimal dispatch of resources within existing market timelines when
there are more resources participating in the RTO/ISO markets and (2)
whether small electric storage resources will be dispatched arbitrarily
given that small resources that could reduce total production costs
might not be dispatched, even though they would reduce production
costs, because the market-clearing software has stopped looking for a
better dispatch solution.\321\
---------------------------------------------------------------------------

    \319\ See MISO Transmission Owners Comments at 14.
    \320\ See Xcel Energy Services Comments at 23.
    \321\ See EPRI Comments at 26-27.
---------------------------------------------------------------------------

    269. Finally, Open Access Technology recommends that the Commission
clarify the minimum size of a price-quantity pair that an electric
storage resource can include in its offer because RTO/ISO market rules
generally allow for an offer curve that consists of up to ten price-
quantity pairs (i.e., whether an electric storage resource can submit a
price-quantity pair for less than 100 kW in its offer).\322\
---------------------------------------------------------------------------

    \322\ See Open Access Technology Comments at 3.
---------------------------------------------------------------------------

3. Commission Determination
    270. In this Final Rule, we adopt the NOPR proposal and add section
35.28(g)(9)(i)(D) to the Commission's regulations to require each RTO/
ISO to revise its tariff to include a participation model for electric
storage resources that establishes a minimum size requirement for
participation in the RTO/ISO markets that does not exceed 100 kW. This
minimum size requirement includes all minimum capacity requirements,
minimum offer to sell requirements, and minimum bid to buy requirements
for resources participating in these markets under the participation
model for electric storage resources.
    271. Electric storage resources are generally smaller than
traditional generation resources and are often in the 100 kW to 1 MW
range.\323\ In many cases, existing minimum size requirements were
created prior the emergence of new, smaller resources such as electric
storage resources that are technically capable of participating in the
RTO/ISO markets. We find that RTO/ISO market rules may create barriers
to electric storage resource participation in those markets based on
minimum size requirements that may have been designed for different
types of resources.\324\ Therefore, as discussed below, we conclude
that requiring the RTOs/ISOs to establish a minimum size requirement
not to exceed 100 kW for the participation model for electric storage
resources balances the benefits of increased competition with the
potential need to update RTO/ISO market clearing software to
effectively model and dispatch smaller resources.
---------------------------------------------------------------------------

    \323\ See NOPR at nn.146-147 (citing Sandia Report at 29, Figure
19 (Positioning of Energy Storage Technologies); U.S. Department of
Energy, Grid Energy Storage at 12 (Dec. 2013) (stating that most
storage systems are in the 10 kW to 10 MW range, with the largest
proportion of those resources in the 100 kW to 1 MW range)).
    \324\ See id. P 86.
---------------------------------------------------------------------------

    272. While some commenters argue that RTO/ISO modeling and dispatch
software may be unable to accommodate a large number of smaller
resources, the record shows that all RTOs/ISOs are already
accommodating the participation of smaller resources in their markets.
For example, the record shows that all RTOs/ISOs already have the
modeling and dispatch software capabilities to accommodate the
participation of resources that are as small as 100 kW. Specifically,
both PJM and SPP have a minimum size requirement of 100 kW for all
resources, and all of the RTOs/ISOs have at least one participation
model that allows resources as small as 100 kW to participate in their
markets.\325\ In response to ISO-NE's claim that its product-based
market design does not permit such size requirements, we point to
varying minimum size requirements for existing participation models in
ISO-NE (e.g., 1 MW for generators and 100 kW for demand response).
---------------------------------------------------------------------------

    \325\ See CAISO Data Request Response at 10-11; ISO-NE Data
Request Response at 13-14; MISO Data Request Response at 10; NYISO
Data Request Response at 9; PJM Data Request Response at 10; SPP
Data Request Response at 5.
---------------------------------------------------------------------------

    273. Further, we are not persuaded by commenters who argue that
different minimum size requirements may be needed based on the service
being provided, the location and concentration of electric storage
resources, or where the electric storage resources are interconnected.
Commenters have failed to demonstrate how minimum size requirements
should be varied based on the manner in which electric storage
resources are operated or based on the location of these resources.
Additionally, in response to

commenters that suggest that the Commission does not have the authority
to set minimum size requirements for distribution utilities, we clarify
that we are not setting minimum size requirements for distribution
utilities in this Final Rule. Rather, we are requiring each RTO/ISO to
establish a minimum size requirement for resources participating in its
markets. Therefore, we find that minimum size requirements do not need
to be resource-specific or location-specific. We note that existing
participation models in the RTOs/ISOs have standard minimum size
requirements for all resources that elect to use them.
    274. Moreover, in response to concerns about potential impacts on
the distribution systems and related costs, we note that numerous 100
kW minimum size requirements already exist, and there are resources
located on the distribution system that are already participating in
the RTO/ISO markets. Establishing a standard minimum size requirement
for resources using the participation model for electric storage
resources may potentially result in more resources on the distribution
systems participating in the RTO/ISO markets. However, it does not
change the responsibilities of the RTOs/ISOs or the distribution
utilities, and it does not change the ability of distribution utilities
to allocate any costs that they incur in operating and maintaining
their respective power systems.
    275. With respect to CAISO's and MISO's concern that they may need
to upgrade their software to manage the potentially large number of
resources using the participation model for electric storage resources
under the proposed minimum size requirement, as discussed in the
Compliance Requirements section,\326\ we find that we are providing the
RTOs/ISOs with adequate time to develop the requisite tariff language
and update their modeling and dispatch software to comply with this
Final Rule and are factoring into the effective date of this Final Rule
the burden of implementing the requirements herein. We are not
persuaded that more than 365 days after the RTOs/ISOs submit their
compliance filings will be necessary to implement the reforms in this
Final Rule. We are also not concerned about the potential availability
of software solutions as multiple RTOs/ISOs already provide a minimum
size requirement of 100 kW for all resources and have not expressed
similar concerns regarding the minimum size requirement. While
establishing a minimum size requirement of 100 kW for the participation
model for electric storage resources will result in some smaller
resources entering the markets in the near term, we do not expect an
immediate influx of these smaller resources or any resulting inability
to model and dispatch them. However, we recognize this finding is based
on the fact that there are currently fewer 100 kW resources than there
may be in the future. Therefore, in the future, we will consider
requests to increase the minimum size requirement to the extent an RTO/
ISO can show that it is experiencing difficulty calculating efficient
market results and there is not a viable software solution for
improving such calculations.
---------------------------------------------------------------------------

    \326\ See infra P 348.
---------------------------------------------------------------------------

    276. In response to Open Access Technology's request for
clarification of the number of allowed price-quantity bid segments for
a 100 kW resource using the participation model for electric storage
resources, we reiterate our requirement that the minimum size
requirement applies to all minimum capacity requirements, minimum offer
to sell requirements, and minimum bid to buy requirements. We note
that, under this requirement, an RTO/ISO could allow offer and/or bid
quantities smaller than 100 kW, as CAISO indicates it does.\327\ An
RTO/ISO could also allow minimum offer and/or bid quantities equal to
100 kW, as PJM indicates it does.\328\ However, this requirement would
not permit an RTO/ISO to require a resource using the electric storage
resource participation model to submit offer and/or bid quantities
larger than 100 kW.
---------------------------------------------------------------------------

    \327\ CAISO states the minimum participation requirement for
electric storage resource energy bids is 10 kW. CAISO Data Request
Response at 16.
    \328\ PJM states the 100 kW is both the minimum capacity
requirement and also the minimum incremental offer amount. PJM Data
Request Response at 10 (citing PJM Tariff, Attachment DD, section
5.6).
---------------------------------------------------------------------------

H. Energy Used To Charge Electric Storage Resources

1. Price for Charging Energy
a. NOPR Proposal
    277. In the NOPR, the Commission stated that it has found that the
sale of energy from the grid that is used to charge electric storage
resources for later resale into the energy or ancillary service markets
constitutes a sale for resale in interstate commerce.\329\ As such, the
Commission stated that the just and reasonable rate for that wholesale
sale of energy used to charge the electric storage resource is the RTO/
ISO market's wholesale price for energy or LMP. The Commission thus
proposed to require each RTO/ISO to revise its tariff to specify that
the sale of energy from the RTO/ISO markets to an electric storage
resource that the resource then resells back to those markets must be
at the wholesale LMP.
---------------------------------------------------------------------------

    \329\ See NOPR at P 100 (citing Norton Energy Storage, L.L.C.,
95 FERC ] 61,476, at 62,701-02 (2001) (Norton Energy Storage); PJM
Interconnection, L.L.C., 132 FERC ] 61,203 (2010)).
---------------------------------------------------------------------------

b. Comments
    278. Many commenters support the NOPR proposal that the sale of
energy from the RTO/ISO markets to an electric storage resource that
the resource then resells back to those markets must be at the
wholesale LMP.\330\ MISO notes that the proposed wholesale LMP
requirement aligns with MISO's current market design for Stored Energy
Resources and Demand Response Resources.\331\ National Hydropower
Association agrees with the NOPR's characterization of charging and
discharging as wholesale transactions,\332\ while NYISO Indicated
Transmission Owners do not oppose the NOPR proposal.\333\
---------------------------------------------------------------------------

    \330\ See, e.g., AES Companies Comments at 6, 8; American
Petroleum Institute Comments at 12; APPA/NRECA Comments at 41;
California Energy Storage Alliance Comments at 8; EEI Comments at
15; ELCON Comments at 6; ISO-NE Comments at 23-24; Mensah Comments
at 2; NextEra Comments at 10; Ohio Commission Comments at 7; TAPS
Comments at 28.
    \331\ See MISO Comments at 9.
    \332\ See National Hydropower Association Comments at 10.
    \333\ See NYISO Indicated Transmission Owners Comments at 7.
---------------------------------------------------------------------------

    279. A few commenters support the NOPR proposal in principle but
condition their support.\334\ ISO-NE agrees with the general principle
of paying LMP for charging energy that is later resold into the
wholesale market; however, ISO-NE notes that implementing the NOPR
proposal may be complicated and will depend on the participation of the
region's transmission organizations and distribution utilities. While
Alevo supports the NOPR proposal, it states that, because electric
storage resources that are participating in ancillary service markets
(such as the market for frequency regulation) are responding to the
grid operator's needs, requiring them to settle energy to provide such
services would be inappropriate and a barrier to their participation.
---------------------------------------------------------------------------

    \334\ See Alevo Comments at 10-11; ISO-NE Comments at 23-24.
---------------------------------------------------------------------------

    280. Other commenters assert that certain electric storage
resources should not be permitted to purchase charging energy at LMP
unless they meet certain

conditions.\335\ According to Avangrid, NRG, and Pacific Gas &
Electric, a behind-the-meter electric storage resource should not be
eligible to pay LMP for its charging energy unless it has implemented
the metering, accounting, and data protocols necessary to distinguish
its wholesale and retail activities. NRG contends that, otherwise, a
behind-the-meter electric storage resource should pay the retail rate
for its charging energy.
---------------------------------------------------------------------------

    \335\ See Avangrid Comments at 9; NRG Comments at 16-17; Pacific
Gas & Electric Comments at 13.
---------------------------------------------------------------------------

    281. Similarly, Xcel Energy Services goes farther, contending that,
given the practical impossibility of determining what charging energy
will be used to provide wholesale services and what charging energy
will be used to provide retail services, the default rate for
distributed electric storage resources should be the retail rate.\336\
Xcel Energy Services further claims that, by paying the wholesale LMP,
a distributed electric storage resource owner can bypass capacity and
infrastructure costs, thus depriving the distribution utility of
revenues to meet its obligation to serve.
---------------------------------------------------------------------------

    \336\ See Xcel Energy Services Comments at 13-14.
---------------------------------------------------------------------------

    282. APPA/NRECA, FirstLight, and TAPS argue that, instead of
requiring RTOs/ISOs and distribution utilities to develop and
administer elaborate metering and accounting schemes, which some argue
may not be possible, storage resources must elect to participate in
either wholesale or retail markets, but not in both.\337\ FirstLight
adds that introducing the ability to toggle between retail and
wholesale rates may create incentives to shift the liability of bad
decisions in the wholesale market to the retail supplier by discharging
to meet retail load.
---------------------------------------------------------------------------

    \337\ See APPA/NRECA Comments at 42; FirstLight Comments at 12;
TAPS Comments at 28.
---------------------------------------------------------------------------

    283. Some commenters ask the Commission to clarify that the
Commission's regulations will not require an electric storage resource
that is participating in an RTO/ISO market to pay the wholesale LMP for
the charging energy that it uses to provide wholesale services.\338\
For example, Energy Storage Association asks the Commission to clarify
that RTOs/ISOs may not compel electric storage resources providing
wholesale services to purchase their charging energy from wholesale
markets because they may be able to charge from a co-located generator.
Similarly, AES Companies state that electric storage resources should
be permitted to purchase charging energy for providing wholesale
services from the wholesale markets and from other sources, such as
generators not registered in an RTO/ISO. AES Companies also assert that
electric storage resources should be permitted to self-supply from
other assets (such as co-located behind-the-meter solar). AES Companies
argue that flexibility in procurement will provide a more competitive
framework for electric storage devices, which would lower cost to
consumers. MISO Transmission Owners contend that requiring electric
storage resources to purchase the charging energy that they use to
provide wholesale services would result in inequitable treatment
because synchronous generators have the opportunity to buy fuels from
many sources.
---------------------------------------------------------------------------

    \338\ See, e.g., AES Companies Comments at 7-9, 30; DER/Storage
Developers Comments at 5; Energy Storage Association Comments at 7,
20; MISO Transmission Owners Comments at 15; Stem Comments at 10-11.
---------------------------------------------------------------------------

    284. While Stem contends that all charging energy that an electric
storage resource located in front of a retail meter is a sale for
resale, it asserts that the only charging energy for a behind-the-meter
electric storage resource that is a sale for resale is charging energy
that it used to net inject energy back onto the grid.\339\ Stem argues
that a behind-the-meter electric storage resource should not have to
pay the wholesale rate for any of its charging energy because the
resource may then have to pay twice for its charging energy if the
local distribution utility does not ``net out'' that charging energy
from the host customer's retail bill.
---------------------------------------------------------------------------

    \339\ See Stem Comments at 11.
---------------------------------------------------------------------------

    285. In contrast, APPA/NRECA ask that the Commission require that
electric storage resources pay wholesale LMP for all charging energy
used to provide wholesale services.\340\ APPA/NRECA argue that,
otherwise, electric storage resources could engage in arbitrage between
the volatile wholesale markets and regulated retail markets, likely
shifting costs to the distribution utility's other customers.
Similarly, NYISO contends that all energy that an electric storage
resource consumes at a wholesale rate must be sold back to the grid at
a wholesale rate.\341\ Stem asks the Commission to clarify that all
energy used to charge front-of-meter electric storage resource is a
sale for resale and thus the resource must pay the wholesale LMP for
energy withdrawn from the grid to charge the resource.\342\
---------------------------------------------------------------------------

    \340\ See APPA/NRECA Comments at 42.
    \341\ See NYISO Comments at 10-11.
    \342\ See Stem Comments at 10.
---------------------------------------------------------------------------

    286. Several commenters raise jurisdictional concerns with respect
to the application of the NOPR proposal's requirement that the sale of
energy from the RTO/ISO markets to an electric storage resource that
the resource then resells back to those markets must be at the
wholesale LMP to electric storage resources interconnected to the
distribution system or located behind a retail customer's meter.
Specifically, commenters argue that applying the NOPR proposal to such
resources raises issues related to regulatory oversight and may
interfere with the exclusive right of state regulators to set retail
rates and terms of service.\343\ EEI asserts that electric storage
resources should charge at the retail rate when seeking to participate
in the retail markets and requests that the Commission indicate that
charging at LMP rates does not confer exclusive jurisdiction over
electric storage resources to the Commission. IRC requests that the
Commission work with the states to address jurisdiction issues given
that it may be unclear whether charging energy will be used to provide
wholesale or retail services when it is being absorbed. MISO
Transmission Owners recommend that any final rule recognize that state
or localities have jurisdiction over rate setting and provide
flexibility in the rates at which an electric storage resource that is
interconnected to a distribution system may buy and sell electricity.
---------------------------------------------------------------------------

    \343\ See, e.g., AES Companies Comments at 7; EEI Comments at
12, 15; IRC Comments at 2-3; MISO Transmission Owners Comments at
15.
---------------------------------------------------------------------------

    287. MISO Transmission Owners further contend that electric storage
resources located behind the meter should pay any retail rate
applicable to them under state law for charging energy.\344\ Pacific
Gas & Electric argues that the local regulatory authority must
determine that an electric storage resource's consumption is not a
retail transaction before that resource is eligible to pay LMP for that
consumption.\345\ AES Companies argue that the Commission does not have
authority to require behind-the-meter resources under state
jurisdiction (outside of retail choice states) to pay LMP.\346\
---------------------------------------------------------------------------

    \344\ See MISO Transmission Owners Comments at 6, 14-15.
    \345\ See Pacific Gas & Electric Comments at 12.
    \346\ See AES Companies Comments at 6, 29.
---------------------------------------------------------------------------

    288. Microgrid Resources Coalition believes that LMP rates are the
more economically efficient result for charging behind-the-meter
resources but agrees that ``retail rates are legally appropriate.''
\347\ Specifically, Microgrid Resources Coalition contends that, in
retail choice jurisdictions, large customers can typically arrange to
pay LMP and a retail supplier could also

agree to pass through to the customer the economic consequences of a
demand bid by the supplier on the customer's behalf. ELCON similarly
states that an electric storage resource should be able to register as
an energy service company in an applicable state and buy energy or
capacity at the prevailing LMPs from an organized market and resell to
direct access retail customers but that, without Commission regulation,
concerns may arise regarding anti-competitive behavior and potential
for double-recovery of costs.\348\
---------------------------------------------------------------------------

    \347\ See Microgrid Resources Coalition Comments at 13.
    \348\ See ELCON Comments at 7.
---------------------------------------------------------------------------

    289. Several commenters address specific components of gross load
for electric storage resources.\349\ California Energy Storage
Alliance, Energy Storage Association, and NextEra request that the
Commission clarify that efficiency losses experienced between charging
and discharging an electric storage resource should be settled at the
wholesale LMP. In addition, California Energy Storage Alliance argues
that loads that are unavoidable to the production or conversion of
energy drawn from the grid or are integral to the optimal production or
conversion of energy drawn from the grid represent efficiency losses
and that these directly integrated loads should be counted as charging
energy to provide wholesale services. Energy Storage Association and
NextEra further state that some electric storage resources have thermal
management components that are integral to, or internalized within, the
storage medium and the sale of the energy that these systems use should
be considered wholesale transactions and thus priced at LMP. EEI
suggests the Commission should discuss the definition of charging
energy at a technical conference to determine whether all ancillary
loads of a battery installation should be considered wholesale or only
the specific load associated with charging the battery.
---------------------------------------------------------------------------

    \349\ See California Energy Storage Alliance Comments at 8-9;
EEI Comments at 12; Energy Storage Association Comments at 7, 19-20,
n.30; NextEra Comments at 10-11.
---------------------------------------------------------------------------

    290. Other commenters disagree that electric storage resources
should pay wholesale LMP for these energy uses.\350\ IRC requests that
the Commission work with states to address the jurisdictional issues
surrounding injection and charging functions (such as energy losses,
thermal regulation, and station power) to avoid future litigation.
California Commission states that the energy consumption of behind-the-
meter electric storage resources that will charge at a wholesale rate
raises jurisdictional issues, particularly since station power is a
retail service. Likewise, Six Cities and Xcel Energy Services assert
that the sale of power purchased to operate generating facilities
(i.e., station power) must be at retail rates. Six Cities argue that
distribution utilities (subject to the oversight of their local
regulatory authorities) should have the flexibility to identify
measures needed to properly distinguish between station power and
charging energy.
---------------------------------------------------------------------------

    \350\ See California Commission Comments at 5; IRC Comments at
2-3 Six Cities Comments at 5 (citing PJM Interconnection, L.L.C., 94
FERC ] 61,251, at 61,891 (2001)); Xcel Energy Services Comments at
12.
---------------------------------------------------------------------------

    291. Several commenters are concerned about the NOPR proposal's
potential financial impacts on distribution utilities.\351\ EEI and
NYISO Indicated Transmission Owners argue that resources located on
distribution systems must pay any applicable charges covered under
state jurisdictional tariffs in order to adequately reflect their use
of, and cost to, state-jurisdictional facilities. Likewise, MISO
Transmission Owners ask the Commission to clarify how utilities and
ratepayers will be compensated for allowing electric storage resources
to use the distribution system to provide wholesale services. TAPS
requests that the Commission clarify that distribution-interconnected
electric storage resources should be subject to distribution utility
tariffs and rates for delivery of energy between the RTO grid and their
point of interconnection to the distribution system. Six Cities request
confirmation that distribution utilities or their local regulatory
authorities retain jurisdiction to determine how to manage the cost,
reliability, operational, and interconnection impacts to the
distribution system of any electric storage resource.\352\
---------------------------------------------------------------------------

    \351\ See EEI Comments at 12, 14, 15; MISO Transmission Owners
Comments at 7, 17; NYISO Indicated Transmission Owners Comments at
7-8; TAPS Comments at 29.
    \352\ See Six Cities Comments at 3-4.
---------------------------------------------------------------------------

    292. As a separate issue, Energy Storage Association and NextEra
suggest that energy stored for re-delivery to the grid should not be
subject to the transmission charges that apply to load.\353\ NextEra
explains that electric storage resources participating in the RTO/ISO
markets are dispatched by the RTO/ISO for a wholesale service and the
withdrawal of energy from the transmission network under RTO/ISO
control is part the wholesale service, particularly with respect to
regulation service. Similarly, NRG asks the Commission to clarify that
an electric storage resource will receive and pay the applicable nodal
LMP, and not the zonal price, for its wholesale transactions.\354\ To
the extent that the Commission finds that any transmission charges
apply to electric storage resources, NextEra states that those charges
should apply only to station power.
---------------------------------------------------------------------------

    \353\ See Energy Storage Association Comments at 7, 20; NextEra
Comments at 11.
    \354\ See NRG Comments at 16.
---------------------------------------------------------------------------

    293. In contrast, Open Access Technology argues that, if the NOPR
assumes that both consumption (when charging) and generation (when
discharging) from an electric storage resource are measured at the
wholesale pricing node upstream of the physical location of the storage
resource in the distribution feeder, then the Commission should make
this assumption explicit given the effect of distribution system losses
on these measurements.\355\ American Petroleum Institute also contends
that the price signals that distribution-interconnected resources
receive for wholesale market participation should account for
congestion, losses, and voltage considerations on the distribution
system, which current market models do not take into account.\356\
---------------------------------------------------------------------------

    \355\ See Open Access Technology Comments at 3.
    \356\ See American Petroleum Institute Comments at 13.
---------------------------------------------------------------------------

c. Commission Determination
    294. In this Final Rule, we adopt the NOPR proposal and add section
35.28(g)(9)(ii) to the Commission's regulations to require that the
sale of electric energy from the RTO/ISO markets to an electric storage
resource that the resource then resells back to those markets be at the
wholesale LMP. The Commission is modifying this provision to apply
regardless of whether the electric storage resource is using the
participation model for electric storage resources or another
participation model to participate in the RTO/ISO markets, as long as
the resource meets the definition of an electric storage resource set
forth in this Final Rule. The Commission has found that the sale of
energy from the grid that is used to charge electric storage resources
for later resale into the energy or ancillary service markets
constitutes a sale for resale in interstate commerce.\357\ As

such, the just and reasonable rate for that wholesale sale of energy
used to charge that electric storage resource is the RTO/ISO market's
wholesale LMP, regardless of whether the electric storage resource uses
the participation model for electric storage resources.
---------------------------------------------------------------------------

    \357\ See Norton Energy Storage, 95 FERC ] 61,476 at 62,701-02
(citations omitted) (``[T]he use of compressed air as a medium for
the storage of energy in an energy storage facility is a new
technology. However, we find that a compressed air energy storage
facility is analogous to a [pumped-hydro resource], in that
compressed air is used in a conversion/storage cycle just as water
is used in a [pumped-hydro resource] in the conversion/storage
cycle. . . . [T]he Commission views the pumping energy not as being
consumed, but rather as being converted and stored, as water in the
upper reservoir, for later re-conversion . . . back to electric
energy. It is this conversion/storage cycle that distinguishes
energy storage facilities, whether [pumped-hydro resources] or
compressed air energy storage facilities, from facilities that
consume electricity (in the form of station power or otherwise). The
fact that pumping energy or compression energy is not consumed means
that the provision of such energy is not a sale for end use that
this Commission cannot regulate. Rather, based on Norton's
representations in its petition, we find that deliveries of
compression energy to the Norton energy storage facility as part of
energy exchange transactions employing the conversion/storage cycle
are wholesale transactions subject to our exclusive authority under
the FPA.''). See also PJM Interconnection, L.L.C., 132 FERC ] 61,203
at 62,053 (``Like pumping energy and compression energy, the energy
used to charge Energy Storage Resources will be stored for later
delivery and not used for operating the electric equipment on the
site of a generation facility or associated buildings as Station
Power is used.'').
---------------------------------------------------------------------------

    295. In response to Alevo's concerns that the requirement may not
be appropriate for electric storage resources that are participating in
ancillary service markets, we reiterate that the sale of electric
energy from the grid that is used to charge an electric storage
resource for later resale into ancillary service markets constitutes a
sale for resale in interstate commerce and therefore the just and
reasonable rate is the wholesale LMP. Electric storage resources that
are participating in RTO/ISO frequency regulation markets are already
settled at wholesale LMP for their net energy at the end of a market
interval, consistent with our requirements for charging energy here.
    296. Additionally, in response to NRG's concern, we clarify that an
electric storage resource's wholesale energy purchases should take
place at the applicable nodal LMP, and not the zonal price. Using the
applicable nodal LMP will prevent any potential arbitrage between nodal
and zonal prices and allows for consistent evaluation of a resource's
impacts on the energy, congestion, and loss components of LMP when it
is both receiving and injecting energy.
    297. We disagree with Energy Storage Association and NextEra that
transmission charges that apply to load should not apply to electric
storage resources. When an electric storage resource is charging to
resell energy at a later time, then its behavior is similar to other
load-serving entities, and we find that applicable transmission charges
should apply. However, it may be possible for different transmission
charges to apply to load resources located at a single node (such as
pumped-hydro resources) that are paying a nodal price for energy and
load resources that are located across multiple nodes (such as load-
serving entities) that are paying a zonal price for energy. Therefore,
to the extent that load resources located at a single node pay
different transmission charges than load resources located across
multiple nodes, then we require each RTO/ISO to apply those
transmission charges for single-node resources to electric storage
resources that are located at a single pricing node, as long as, as
discussed in the next paragraph, they are not being dispatched to
provide an ancillary service by an RTO/ISO.
    298. In response to the concern that transmission charges should
not apply when an electric storage resources is dispatched by an RTO/
ISO, we find that electric storage resources that are dispatched to
consume electricity to provide a service in the RTO/ISO markets (such
as frequency regulation or a downward ramping service) should not pay
the same transmission charges as load during the provision of that
service. We find that this would be consistent with the treatment
afforded traditional generation resources that provide ancillary
services, because they are not charged for their impacts on the
transmission system when they reduce their output to provide a service
such as frequency regulation down. Therefore, we find that electric
storage resources should not be charged transmission charges when they
are dispatched by an RTO/ISO to provide a service because (1) their
physical impacts on the bulk power system are comparable to traditional
generators providing the same service and (2) assessing transmission
charges when they are dispatched to provide a service would create a
disincentive for them to provide the service.
    299. In response to concerns about an electric storage resources
being compelled to purchase all of its energy for future use from the
RTO/ISO markets, we clarify that we impose no such requirement. Our
finding regarding charging energy does not address payment of the
retail rate for energy or charging a device off of co-located
generation resources, as suggested by commenters. Also, while this
finding requires each RTO/ISO to allow electric storage resources to be
able to pay the wholesale LMP for their charging energy, it does not
address whether they can pay some other rate, such as a retail rate or
charging off of co-located generation. Finally, like other market
participants that purchase energy from the RTO/ISO markets, an electric
storage resource that pays the wholesale LMP for charging energy may
enter into bilateral financial transactions to hedge the purchase of
that energy.
    300. We disagree with commenters who argue that the requirement to
pay LMP for charging energy should only apply to electric storage
resources that are interconnected to the transmission system. As
discussed above, this Final Rule applies to electric storage resources
that are capable of receiving electric energy from the grid and storing
it for later injection of electric energy back to the grid,
irrespective of where the resource is interconnected. The sale of
charging energy to an electric storage resource that the resource then
resells into the RTO/ISO markets is a sale for resale in interstate
commerce and thus subject to the Commission's jurisdiction.\358\
---------------------------------------------------------------------------

    \358\ See Norton Energy Storage, 95 FERC ] 61,476 at 62,701-02;
see also PJM Interconnection, L.L.C., 132 FERC ] 61,203 at P 7.
---------------------------------------------------------------------------

    301. With respect to concerns about electric storage resources' use
of the distribution system, we note that, in PJM Interconnection LLC,
the Commission permitted a distribution utility to assess a wholesale
distribution charge to an electric storage resource participating in
the PJM markets.\359\ Consistent with this precedent, we find that it
may be appropriate, on a case-by-case basis, for distribution utilities
to assess a charge on electric storage resources similar to those
assessed to the market participant in that proceeding.
---------------------------------------------------------------------------

    \359\ See PJM Interconnection LLC, 149 FERC ] 61,185 at P 12
(wholesale distribution charge that ComEd will assess to Energy
Vault is a weighted average carrying charge that is applied on a
case-by-case basis, depending on the distribution facilities
expected to be used in providing wholesale distribution service),
order on reh'g, 151 FERC ] 61,231 at PP 16-18.
---------------------------------------------------------------------------

    302. With respect to efficiency losses, consistent with Norton
Energy Storage, we find that efficiency losses are charging energy and
therefore not a component of station power load.\360\ Accordingly, the
charging energy lost to conversion inefficiencies should also be
settled at the wholesale LMP as long as those efficiency losses are an
unavoidable component of the conversion, storage, and discharge process
that is used to resell energy back to the RTO/ISO markets and are not a
component of what an RTO/ISO

considers onsite load. With respect to directly integrated and other
ancillary loads, we provide the RTOs/ISOs flexibility to determine
whether they are a component of charging energy or a component of
station power.
---------------------------------------------------------------------------

    \360\ See Norton Energy Storage, L.L.C., 95 FERC ] 61,476 at
62,702 (stating that ``[t]he fact that pumping energy or compression
energy is not consumed means that the provision of such energy is
not a sale for end use that this Commission cannot regulate.'').
---------------------------------------------------------------------------

2. Metering and Accounting Practices for Charging Energy
a. NOPR Proposal
    303. In the NOPR, the Commission sought comment on whether metering
and accounting practices designed to delineate between wholesale and
retail activities would need to be established in the RTO/ISO tariffs
to facilitate compliance with the proposed requirement that the sale of
energy from the RTO/ISO markets to an electric storage resource that
the resource then resells back to those markets must be at the
wholesale LMP or whether it is possible to determine the end use for
energy used to charge an electric storage resource under existing
requirements.\361\
---------------------------------------------------------------------------

    \361\ See NOPR at P 102.
---------------------------------------------------------------------------

b. Comments
    304. As discussed above, commenters agree that electric storage
resources providing retail services should not charge at the wholesale
rate and discharge to serve a retail customer,\362\ and many commenters
assert that metering and accounting practices designed to delineate
between wholesale and retail activities are necessary to prevent such
an outcome.\363\ Stem contends that the energy used to charge a behind-
the-meter electric storage resource is considered a sale for resale
only up to the amount that is injected onto the grid for wholesale
purposes, which requires each RTO/ISO to establish metering and
accounting practices that separate wholesale from retail activity.\364\
Independent Energy Producers Association argues that the Commission
must address how to distinguish and measure wholesale and retail
activities to ensure transparency in both markets and to prevent
double-counting.\365\ Electric Vehicle R&D Group asks the Commission to
propose different methods for reconciliation of wholesale and retail
activities for behind-the-meter electric storage resources, giving
RTOs/ISOs options from which to choose.\366\
---------------------------------------------------------------------------

    \362\ See, e.g., California Municipals Comments at 4; FirstLight
Comments at 12; PJM Market Monitor Comments at 9; SoCal Edison
Comments at 9, 13; TAPS Comments at 30-31; Tesla/SolarCity Comments
at 19.
    \363\ See, e.g., American Petroleum Institute Comments at 12-13;
Mensah Comments at 2; MISO Comments at 19; Six Cities Comments at 4-
5; SoCal Edison Comments at 9, 13; Tesla/SolarCity Comments at 19.
    \364\ See Stem Comments at 10.
    \365\ See Independent Energy Producers Association Comments at
7.
    \366\ See Electric Vehicle R&D Group Comments at 1-2.
---------------------------------------------------------------------------

    305. Some commenters encourage the Commission to provide
flexibility to the RTOs/ISOs with respect to metering and accounting
practices to distinguish wholesale and retail activities.\367\ Pacific
Gas & Electric recommends that the Commission provide each RTO/ISO with
flexibility to establish hardware and software requirements for
telemetry and metering that account for its system characteristics,
market rules, and utility tariffs. Six Cities contend that distribution
utilities or their local regulatory authorities should retain their own
metering standards and technical requirements for resources
interconnecting to the distribution system and any flexibility that the
Commission provides with respect to metering in the final rule should
not compromise the accuracy of settlements or impose additional costs
on the distribution system.
---------------------------------------------------------------------------

    \367\ See Pacific Gas & Electric Comments at 13; Six Cities
Comments at 3.
---------------------------------------------------------------------------

    306. Minnesota Energy Storage Alliance contends that the Commission
should not adopt explicit metering arrangements but instead should set
forth requirements that metering solutions must meet to adequately
delineate between wholesale and retail activities and allow the
industry to develop those solutions at the lowest cost possible.\368\
Minnesota Energy Storage Alliance states that it is necessary to
establish adequate accounting process to track and verify costs
associated with operating an electric storage resource that can
delineate between wholesale and retail transactions. AES Companies
argue that any criterion for accounting methodologies and data
collection criterion for electric storage resources, including
recognition of state jurisdiction, should be documented in the RTO/ISO
business practice manuals rather than the tariff, so timely changes can
occur as technology and regulation evolve.\369\
---------------------------------------------------------------------------

    \368\ See Minnesota Energy Storage Alliance Comments at 5-6.
    \369\ See AES Companies Comments at 30-31.
---------------------------------------------------------------------------

    307. Many commenters are concerned, however, that requiring the
establishment of metering and accounting practices designed to
delineate between wholesale and retail activities raises jurisdictional
issues.\370\ CAISO argues that the Commission should permit RTOs/ISOs
to develop the rules governing these practices in collaboration with
their stakeholders to help prevent cross-jurisdictional disputes. MISO
states that it is unclear to what extent MISO's current tariff and
processes can make jurisdictional distinctions between wholesale and
retail activities and that new rules are therefore necessary.
---------------------------------------------------------------------------

    \370\ See CAISO Comments at 20; MISO Comments at 19; PJM
Comments at 7, 13-15.
---------------------------------------------------------------------------

    308. PJM believes that it is important for the Commission, working
with the states, to provide guidance in the final rule on issues
including, but not limited to, the rate treatment for energy used to
charge behind-the-meter electric storage resources and for front-of-the
meter electric storage resources that occasionally serve retail load
through a separate connection to a retail customer and the ability of
RTOs/ISOs to develop requirements associated with metering, visibility,
and dispatchability of distributed electric storage resources. With
respect to the issue of how to account for the energy used to charge an
electric storage resource that is located in front of the retail meter
but occasionally provides retail services, PJM recommends that the RTO/
ISO track what energy is used for retail services (i.e., any net load),
like RTOs/ISOs do today for station power. With respect to the issue of
how to account for energy used to charge a behind-the-meter electric
storage resource, PJM argues that RTOs/ISOs and their stakeholders
should not be put in the position of resolving purely legal and
regulatory issues.
    309. Massachusetts State Entities question whether the NOPR
appropriately addresses states' concerns regarding the ability of
behind-the-meter storage resources to charge at a wholesale rate and
discharge to serve a retail customer to avoid paying a retail
rate.\371\ Massachusetts State Entities and NARUC ask the Commission to
clarify the appropriate metering and accounting practices that can be
used to delineate between wholesale and retail uses.\372\ Massachusetts
State Entities argue that the Commission should clarify whether an
electric storage resource providing both wholesale and retail services
must have separate metering both upstream and downstream of the
resource. Open Access Technology similarly requests that the Commission
clarify whether a storage resource in charging mode is expected to be
separately metered and settled from the load of the premises in

which it is located.\373\ Relatedly, Organization of MISO States
contends that, because state statutes may prohibit retail customers
from purchasing energy directly from the wholesale market, a
distribution-interconnected electric storage resource must have a
separate meter to participate in the wholesale market, unless a single
meter is explicitly allowed by the relevant electric retail regulatory
authority.\374\
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    \371\ See Massachusetts State Entities Comments at 10.
    \372\ See Massachusetts State Entities Comments at 9-10; NARUC
Comments at 7.
    \373\ See Open Access Technology Comments at 2.
    \374\ See Organization of MISO States Comments at 3-4.
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    310. A few commenters emphasize the importance of distribution
utilities to the successful implementation of any metering and
accounting practices.\375\ ISO-NE states that it has no way to ensure
compliance with a requirement that behind-the-meter sales for resale
are metered and reported to ISO-NE for settlement without the
cooperation of each distribution utility. Mensah argues that metering
and accounting practices should be coordinated with the local
distribution utility to avoid any duplicate metering requirements and
to ensure proper accounting is performed based on the collection,
availability, and sharing of metered data points at different intervals
with all parties.
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    \375\ See ISO-NE Comments at 27; Mensah Comments at 2.
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    311. Some commenters are concerned that there may not be a feasible
or practical way to delineate between wholesale and retail activities,
especially when there are multiple devices and retail load behind the
same meter.\376\ MISO Transmission Owners argue that, when an electric
storage resource is located behind a retail customer's electric meter,
it may be impractical, prohibitively expensive, or even impossible to
distinguish between use of the resource (i.e., charging and
discharging) and the customer's other electric loads. FirstLight claims
that an RTO/ISO cannot in practice distinguish between charging energy
that will be used to provide a wholesale service and charging energy
that will be used to provide a retail service, especially given that an
electric storage resource may charge at different times and use its
capacity to provide different services. Avangrid claims that, even if
behind-the-meter retail load, distributed energy resources (including
energy storage), and generation are separately metered, ownership and
reconciliation of the data to produce results suitable for retail
billing and wholesale settlement in a timely manner may be
impractically complex and likely subject to both state and federal
regulation.
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    \376\ See, e.g., Avangrid Comments at 15; FirstLight Comments at
9-12; MISO Transmission Owners Comments at 15-16; NARUC Comments at
7, n.18; TAPS Comments at 28.
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    312. Likewise, TAPS contends that for distribution-interconnected
electric storage resources, even revenue-quality metering, might be
insufficient to distinguish between the wholesale and retail activities
of an electric storage resource behind the same meter as distributed
generation and/or load.\377\ TAPS further states that any accounting
practices would have to track two separate energy level balances, one
for wholesale activities and one for retail activities. According to
TAPS, in each interval, discharge from the retail balance must be
limited to the retail customer's consumption in that interval (or
perhaps sales to the distribution utility) and discharge from the
wholesale balance must be reconciled with sales to the RTO. Given these
complexities, TAPS recommends that electric storage resources should
not be able to provide services at both wholesale and retail.
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    \377\ See TAPS Comments at 31-32.
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    313. SoCal Edison asserts that current net metering configurations
and accounting practices cannot separate which generation is used by
the customer and which is offered for wholesale use and that it is
insufficient to have a policy that prevents mixing wholesale and retail
with instruction to RTOs/ISOs to develop the provisions as
necessary.\378\ Pacific Gas & Electric agrees that the needed metering
and accounting requirements do not exist today, stating that RTOs/ISOs
will have to develop such requirements with their local regulatory
authorities.\379\
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    \378\ See SoCal Edison Comments at 13.
    \379\ See Pacific Gas & Electric Comments at 13.
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    314. According to AES Companies, whether existing metering and
accounting practices will allow an RTO/ISO to distinguish between
wholesale and retail transactions depends on the RTO/ISO, the electric
storage technology in question, and the state jurisdiction.\380\ AES
Companies contend that there are often state-mandated accounting
procedures that involve more than the individual electric storage
resource that render it impossible to separate parasitic load/charging
(station power/state-of-charge management) when behind-the-meter and
distribution-interconnected electric storage resources are selling
excess capacity into the wholesale ancillary services markets. AES
Companies add that, for older electric storage resources or those that
are already in service, the operating software may not provide a
sufficient level of detail to distinguish between wholesale and retail
transactions.
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    \380\ See AES Companies Comments at 30.
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    315. In contrast, several commenters suggest that metering and
accounting practices can be developed to discern between wholesale and
retail activities.\381\ Tesla/SolarCity recommend that the Commission
specify that behind-the-meter resources participating in wholesale
markets have appropriate metering that RTOs/ISOs can use for settlement
purpose to distinguish between wholesale energy uses and retail energy
uses. Tesla/SolarCity point to CAISO's Metering Generation Output for
Proxy Demand Resources as a good example that relies on direct metering
and not synthetic baselines to distinguish between wholesale and retail
applications for behind-the-meter energy storage resources.
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    \381\ See, e.g., Energy Storage Association Comments at 22;
Mensah Comments at 2; Minnesota Energy Storage Alliance Comments at
5-6; Tesla/SolarCity Comments at 19-20.
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    316. CAISO explains its existing metering and accounting practices
can distinguish between wholesale and retail activities.\382\ CAISO
notes that a behind-the-meter resource participating through its Non-
Generator Resource model must separately meter its output and
consumption and report that meter data to CAISO for settlement
purposes, which is settled at the wholesale rate. CAISO adds that this
meter data can be used to adjust the end-use customer meter data to
ensure that it reflects only the end-use load. In contrast, CAISO notes
that a behind-the-meter resource participating under CAISO's Proxy
Demand Resource model only settles with CAISO for intervals in which it
has submitted a bid and received a schedule or dispatch instruction to
discharge energy to reduce load as a demand response resource, such
that its energy consumption for charging is a portion of the end-use
retail load.
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    \382\ See CAISO Comments at 20-21.
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    317. ISO-NE argues that the Commission should require individual
customers or resources that are directly settled in the wholesale
market either as a load or a generator (or both as in the case of
electric storage resource) to directly install revenue-quality interval
metering; otherwise, it will be unclear what energy the rest of the
customers or resources in that meter domain (i.e., defined areas of a
transmission or distribution owner's network for purposes of load
measurement) have consumed.\383\ For behind-the-meter resources, ISO-NE
argues that submetering must be in place so that the distribution
utility can report

information to ISO-NE for settlement purposes and can itself determine
net retail consumption for billing purposes. According to ISO-NE, the
distribution utility must develop the necessary accounting practices
and ensure that the appropriate metering is installed, tested, and
routinely read to ensure that behind-the-meter electric storage
resources are not charged at both the wholesale and retail rate for
their charging energy and are not paid at both the wholesale and retail
rate for discharging. ISO-NE emphasizes that the Commission should not
adopt requirements that could result in a material potential for double
charging or double paying electric storage resources and should
acknowledge that affected distribution utilities must have the
necessary infrastructure, standards, and practices to support wholesale
settlements of behind-the-meter electric storage resources before it
can address these concerns.
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    \383\ See ISO-NE Comments at 24-27, 29.
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    318. ISO-NE contends that an alternative approach to direct
metering is allowing a customer with an electric storage resource or
other distributed energy resource to participate directly in the
wholesale market and be charged or credited at wholesale prices for its
entire net load as measured from its retail delivery point. ISO-NE
argues that the advantage of this approach is that only one meter,
located at the customer's delivery point, is needed to measure net