DER Aggregations in RTO/ISO Markets: An Update on FERC Order No. 2222 Compliance and Implementation
In September of 2020, the Federal Energy Regulatory Commission (“FERC” or “Commission”) issued Order No. 2222, requiring Regional Transmission Organizations (“RTOs”) and Independent System Operators (“ISOs”) to adopt rules allowing aggregations of distributed energy resources (“DERs”) to participate in the RTO/ISO-administered wholesale electricity markets. Now, a year-and-a-half later, the compliance process for each RTO and ISO is ongoing, the proposed implementation timelines for the market rules vary widely, and numerous legal and technical challenges remain to be resolved. Below is an overview of the current status of RTO/ISO efforts to implement Order No. 2222, certain related industry activities, and various implementation challenges that have come to the fore through those market design efforts.
FERC issued Order No. 2222 to “remove barriers” to DER aggregations’ participation in RTO/ISO markets, and to help ensure that the RTO/ISO markets produce just and reasonable rates as required by the Federal Power Act. Under FERC’s definition, DERs are “any resource located on the distribution system, any subsystem thereof or behind a customer meter,” examples of which include “electric storage resources, distributed generation, demand response, energy efficiency, thermal storage, and electric vehicles and their supply equipment.”
Order No. 2222 required each RTO/ISO—the California ISO (“CAISO”), ISO New England (“ISO-NE”), Midcontinent ISO (“MISO”), New York ISO (“NYISO”), PJM Interconnection (“PJM”), and Southwest Power Pool (“SPP”)—to revise its tariff to establish rules to accommodate the market participation of DER aggregations. Among other things, FERC required each RTO/ISO to establish DER aggregators as a category of market participant and to set a minimum size requirement for DER aggregations that does not exceed 100 kW. Under the revised tariffs, aggregators will be able to register their resources under one or more participation models that accommodate the physical and operational characteristics of each DER aggregation. In response to several requests for rehearing, FERC subsequently issued Order Nos. 2222-A and 2222-B, in which it modified aspects of Order No. 2222, as discussed in relevant part below.
Compliance filings to implement Order No. 2222 were originally due July 19, 2021, but four of the RTOs/ISOs – i.e., ISO-NE, PJM, MISO, SPP – requested deadline extensions, as further discussed below. CAISO and NYISO each timely filed their Order No. 2222 compliance filings on July 19, 2021, as each already had DER aggregation rules in effect that arguably satisfied aspects of Order No. 2222 and, therefore, fewer tariff changes were necessary to put forth their compliance proposals. Although few protests were filed in response to CAISO and NYISO’s initial compliance filings, FERC issued deficiency letters in response to both filings, posing extensive questions to CAISO and NYISO about how their proposals satisfied various aspects of Order No. 2222. Both ISOs submitted responses to the deficiency letters, but FERC has not yet acted on those ISOs’ still-pending compliance filings. PJM and ISO-NE were the next to submit their compliance proposals, in February 2022. FERC also has not yet acted on those pending compliance filings. MISO and SPP are slated to submit their compliance proposals next month, in April 2022.
Although all of the RTO/ISOs’ compliance filings will soon be before the agency, the RTOs and ISOs are proposing vastly different implementation timelines (i.e., tariff effective dates) for their DER aggregation market rules. The current timeline for each RTO/ISO’s compliance and implementation process is as follows:
CAISO – (Docket No. ER21-2455) CAISO submitted its compliance filing on July 19, 2021. FERC issued a deficiency letter on October 1, 2021, and CAISO filed its response on November 2, 2021. For the proposed tariff sections pertaining to heterogeneous DER aggregations (e., DER aggregations consisting of more than one type of DER technology), CAISO requested an effective date of no later than November 1, 2022, to facilitate related software changes. For all other proposed tariff changes, CAISO requested an effective date contemporaneous with FERC’s approval of those tariff changes.