Good morning Mr. Chairman and Commissioners.
Item E-1 is a draft order that addresses arguments raised on rehearing and clarification regarding the Commission’s final rule amending its regulations to remove barriers to the participation of distributed energy resource (or DER) aggregations in the capacity, energy, and ancillary service markets operated by Regional Transmission Organizations and Independent System Operators (RTO/ISO markets). The draft order largely affirms Order No. 2222 but sets aside in part the finding that the participation of demand response in DER aggregations is subject to the opt-out and opt-in requirements of Order Nos. 719 and 719-A. The draft order also provides further clarification on the Commission’s interconnection policies pertaining to Qualifying Facilities (or QFs) as well as certain other clarifications.
The Commission’s regulations provide a relevant electric retail regulatory authority with the ability to prevent “an aggregator of retail customers that aggregates the demand response of the customers of utilities” within its borders from participating in RTO/ISO markets. Prior to the DER rulemaking, the Commission has never addressed how this opt-out adopted in Order No. 719 applies to demand response resources that participate in RTO/ISO markets through an aggregation that includes resources other than demand response resources. Upon reconsideration, the draft order declines to extend the Order No. 719 opt-out to heterogeneous DER aggregations. The draft order finds that the opt-out will continue to apply to DER aggregations that are composed solely of demand response resources.
The draft order finds that heterogeneous DER aggregations that include demand response resources do not fall squarely within the Order No. 719 opt-out, as set forth in the Commission’s regulations, because they are not solely aggregations of retail customers. The draft order further finds that extending the Order No. 719 opt-out to demand response resources in heterogeneous DER aggregations would undermine the potential of Order No. 2222 to break down barriers to competition, interfering with the Commission’s responsibility to ensure that wholesale rates are just and reasonable. Specifically, the draft order states that one of the principal advantages of DER aggregations is their ability to take advantage of the different resources’ operational attributes and complementary capabilities, and finds that extending the Order No. 719 opt-out to demand response resources that seek to participate in heterogeneous DER aggregations would thus undermine one of the advantages of Order No. 2222. The draft order finds that ensuring that demand response resources can combine with other forms of DERs has the potential to increase both the number and the variety of DER aggregations, thereby enhancing competition and facilitating these non-traditional resources’ ability to provide a wide range of services in RTO/ISO markets. The draft order further finds that precluding demand response from participating in heterogeneous DER aggregations would undermine the Commission’s goal of ensuring a technology-neutral approach to DER aggregations.
The draft order also clarifies the Commission’s jurisdictional approach to the interconnections of QFs that participate in DER aggregations. The draft order explains that the presence of DER aggregations represents a new circumstance not previously considered in the Commission’s QF interconnection precedent and that Order No. 2222 addresses only DER aggregators’ participation in RTO/ISO markets, which is meaningfully different from a DER’s direct participation in those markets.
The draft order clarifies that the interconnections of QFs that participate in RTO/ISO markets exclusively through DER aggregations will be treated the same under the final rule as the interconnections of non-QF DERs that participate in DER aggregations. This approach helps to avoid a significant increase in the number of distribution-level QF interconnections subject to the Commission’s jurisdiction, which, as the Commission observed in Order No. 2222, could create uncertainty and potentially impose an overwhelming burden on RTOs/ISOs. Thus, due to these concerns and, in recognition of the confluence of local, state, and federal authorities over QF DER interconnections, the draft order clarifies that the Commission declines to exercise its jurisdiction over the interconnections of DERs, including the interconnections of QFs, to distribution facilities for the purpose of participating in RTO/ISO markets exclusively as part of a DER aggregation.
I will now turn it over to Joe Baumann, who will describe Item E-2.
E-2: Removal of Demand Response Opt-Out NOI
Item E-2 is a draft Notice of Inquiry that seeks comment on whether to revise the Commission’s regulations to remove the Demand Response Opt-Out established in Order Nos. 719 and 719-A.
It has been over a decade since the Commission established the Demand Response Opt-Out in Order Nos. 719 and 719-A. In that time, there have been significant policy and technological developments that may warrant reconsideration of the Demand Response Opt-Out.
The Commission seeks comments on three areas: 1) whether and how circumstances relevant to the Demand Response Opt-Out have changed since the issuance of Order Nos. 719 and 719-A; 2) potential benefits of removing the opt-out; and 3) potential resulting burdens from removing the opt-out.
The Commission is not seeking comment on the Commission’s regulations governing the Small Utility Demand Response Opt-In concerning demand response of the customers of utilities that distributed 4 million MWh or less in the previous fiscal year.
Initial comments are due 90 days after publication in the Federal Register, and reply comments are due 30 days later.
We are happy to answer any questions. Thank you.