# Participation of Distributed Energy Resource Aggregations in Markets Operated by Regional Transmission Organizations and Independent System Operators > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2020-20973 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** October 21, 2020 - **Citation:** 85 FR 67094 ## Text DEPARTMENT OF ENERGY Federal Energy Regulatory Commission 18 CFR Part 35 [Docket No. RM18-9-000; Order No. 2222] Participation of Distributed Energy Resource Aggregations in Markets Operated by Regional Transmission Organizations and Independent System Operators AGENCY: Federal Energy Regulatory Commission. ACTION: Final rule. SUMMARY: The Federal Energy Regulatory Commission (Commission) is amending its regulations to remove barriers to the participation of distributed energy resource aggregations in the capacity, energy, and ancillary service markets operated by Regional Transmission Organizations and Independent System Operators (RTO/ISO). DATES: This rule is effective December 21, 2020. Each RTO/ISO must file the tariff changes needed to implement the requirements of this final rule by September 17, 2021. FOR FURTHER INFORMATION CONTACT: David Kathan (Technical Information), Office of Energy Policy and Innovation, Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, (202) 502-6404 Karin Herzfeld (Legal Information), Office of General Counsel—Energy Markets, Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, (202) 502-8459 SUPPLEMENTARY INFORMATION: Table of Contents Paragraph Nos. I. Introduction 1 II. Procedural History 10 III. Need for Reform 16 A. Comments 19 B. Commission Determination 26 IV. Discussion 31 A. Commission Jurisdiction 31 1. Scope of Final Rule 31 a. Comments 32 b. Commission Determination 38 2. Opt-Out 45 a. Comments 47 b. Commission Determination 56 3. Interconnection 68 a. Comments and Data Request Responses 70 b. Commission Determination 90 B. Definitions of Distributed Energy Resource and Distributed Energy Resource Aggregator 105 1. NOPR Proposal 105 2. Comments 106 3. Commission Determination 114 C. Eligibility To Participate in RTO/ISO Markets Through a Distributed Energy Resource Aggregator 119 1. Participation Model 119 a. NOPR Proposal 119 b. Comments 120 c. Commission Determination 129 2. Types of Technologies 133 a. NOPR Proposal 133 b. Comments 135 c. Commission Determination 141 3. Double Counting of Services 147 a. NOPR Proposal 147 b. Comments 148 c. Commission Determination 159 4. Minimum and Maximum Size of Aggregation 165 a. NOPR Proposal 165 b. Comments 167 c. Commission Determination 171 5. Minimum and Maximum Capacity Requirements for Distributed Energy Resources Participating in an Aggregation 175 a. NOPR Proposal 175 b. Comments 176 c. Commission Determination 179 6. Single Resource Aggregation 182 a. NOPR Proposal 182 b. Comments 183 c. Commission Determination 185 D. Locational Requirements 187 a. NOPR Proposal 187 b. Comments 191 c. Commission Determination 204 E. Distribution Factors and Bidding Parameters 208 a. NOPR Proposal 208 b. Comments 210 c. Commission Determination 225 F. Information and Data Requirements 230 a. NOPR Proposal 230 b. Comments 231 c. Commission Determination 236 G. Metering and Telemetry System Requirements 241 a. NOPR Proposal 241 b. Comments 246 c. Commission Determination 262 H. Coordination Between the RTO/ISO, Aggregator, and Distribution Utility 272 1. Market Rules on Coordination 272 a. NOPR Proposal 272 b. Comments 274 c. Commission Determination 278 2. Role of Distribution Utilities 281 a. NOPR Proposal 281 b. Comments 282 c. Commission Determination 292 3. Ongoing Operational Coordination 300 a. NOPR Proposal 300 b. Comments 302 c. Commission Determination 310 4. Role of Relevant Electric Retail Regulatory Authorities 314 a. NOPR Proposal 314 b. Comments 315 c. Commission Determination 322 5. Coordination Frameworks 325 a. NOPR Proposal 325 b. Comments 326 c. Commission Determination 330 I. Modifications to List of Resources in Aggregation 332 a. NOPR Proposal 332 b. Comments 333 c. Commission Determination 335 J. Market Participation Agreements 339 1. NOPR Proposal 339 2. Comments 342 3. Commission Determination 352 K. Compliance 357 1. Comments 358 2. Commission Determination 360 L. Issues Beyond the Scope of This Rulemaking 362 1. Comments 362 2. Commission Determination 363 V. Information Collection Statement 364 A. Summary of this IC B. Discussion 366 VI. Environmental Analysis 369 VII. Regulatory Flexibility Act Certification 370 VIII. Document Availability 375 IX. Effective Date and Congressional Notification 378 Appendix A: Abbreviated Names of Commenters I. Introduction 1. In this final rule, the Federal Energy Regulatory Commission (Commission) is adopting reforms to remove barriers to the participation of distributed energy resource 1 aggregations in the Regional Transmission Organization (RTO) and Independent System Operator (ISO) markets (RTO/ISO markets). 2 For the reasons discussed below, we find that existing RTO/ISO market rules are unjust and unreasonable in light of barriers that they present to the participation of distributed energy resource aggregations in the RTO/ISO markets, which reduce competition and fail to ensure just and reasonable rates. Therefore, pursuant to the Commission's authority under Federal Power Act (FPA) section 206, 3 the Commission modifies § 35.28 4 of its regulations to require each RTO/ISO to revise its tariff to ensure that its market rules facilitate the participation of distributed energy resource aggregations, as discussed further below. 1 We define a distributed energy resource as any resource located on the distribution system, any subsystem thereof or behind a customer meter. These resources may include, but are not limited to, electric storage resources, distributed generation, demand response, energy efficiency, thermal storage, and electric vehicles and their supply equipment. See infra P 114. 2 For purposes of this final rule, we define RTO/ISO markets as the capacity, energy, and ancillary services markets operated by the RTOs and ISOs. We note that, in the Notice of Proposed Rulemaking (NOPR) in this proceeding, the Commission used “organized wholesale electric markets” and included that term in the proposed regulatory text. See Electric Storage Participation in Markets Operated by Regional Transmission Organizations & Independent System Operators, Notice of Proposed Rulemaking, 81 FR 86522, 157 FERC ¶ 61,121 (2016) (NOPR). We find that using “RTO/ISO markets” is sufficient to describe the markets at issue in this final rule and therefore will no longer use “organized wholesale electric markets” here or include that term in the regulatory text. 3 16 U.S.C. 824e. 4 18 CFR 35.28 (2020). 2. As the Commission explained in the NOPR, barriers to the participation of new technologies, such as many types of distributed energy resources, in the RTO/ISO markets can emerge when the rules governing participation in those markets are designed for traditional resources and in effect limit the services that emerging technologies can provide. 5 For example, the Commission noted in the NOPR that, as a general matter, distributed energy resources tend to be too small to meet the minimum size requirements to participate in the RTO/ISO markets on a stand-alone basis, and may be unable to meet certain qualification and performance requirements because of the operational constraints they may have as small resources. 6 The Commission further stated that existing participation models 7 for aggregated resources, including distributed energy resources, often require those resources to participate in the RTO/ISO markets as demand response, which limits their operations and the services that they are eligible to provide. 8 5 See NOPR, 157 FERC ¶ 61,121 at P 2. 6 See id. PP 13, 105. 7 In addition to tariff provisions that apply to all market participants, the RTOs/ISOs create tariff provisions for specific types of resources when those resources have unique physical and operational characteristics or other attributes that warrant distinctive treatment from other market participants. The tariff provisions that are created for a particular type of resource are what we refer to in this final rule as a participation model. 8 NOPR, 157 FERC ¶ 61,121 at P 106. Demand response means a reduction in the consumption of electric energy by customers from their expected consumption in response to an increase in the price of electric energy or to incentive payments designed to induce lower consumption of electric energy. 18 CFR 35.28(b)(4). 3. Where such barriers exist, resources that are technically capable of providing some services on their own or through aggregation are precluded from competing with resources that are already participating in the RTO/ISO markets. 9 These restrictions on competition can reduce the efficiency of the RTO/ISO markets, potentially leading an RTO/ISO to dispatch more expensive resources to meet its system needs. By removing barriers to the participation of distributed energy resource aggregations in the RTO/ISO markets, this final rule will enhance competition and, in turn, help to ensure that the RTO/ISO markets produce just and reasonable rates. 9 In Order No. 841, the Commission clarified that “technically capable” of providing a service means meeting all of the technical, operational, and/or performance requirements that are necessary to reliably provide that service. Electric Storage Participation in Markets Operated by Regional Transmission Organizations & Independent System Operators, Order No. 841, 83 FR 9580, 162 FERC ¶ 61,127, at P 78 (2018), order on reh'g, Order No. 841-A, 84 FR 23902, 167 FERC ¶ 61,154 (2019), aff'd sub nom. Nat'l Ass'n of Regulatory Util. Comm'rs v. FERC, 964 F.3d 1177 (D.C. Cir. 2020). . 4. Facilitating distributed energy resource participation in RTO/ISO markets will provide a variety of benefits to those markets. Integrating these resources' capabilities into RTO/ISO planning and operations will help the RTOs/ISOs account for the impacts of these resources on installed capacity requirements and day-ahead energy demand, thereby reducing uncertainty in load forecasts and reducing the risk of over procurement of resources and the associated costs. 10 These resources are able to locate where price signals indicate that new capacity is most needed, potentially helping to alleviate congestion and congestion costs during peak load conditions and to reduce costs related to transmitting energy into persistently high-priced load pockets. 11 Indeed, in the NOPR, the Commission noted certain valuable characteristics that distributed energy resources can offer, including their ability to co-locate with load and provide associated benefits. Additionally, their relatively short development lead time allows distributed energy resources to respond rapidly to near-term generation or transmission reliability-related requirements, further improving their ability to enhance reliability and reduce system costs. 10 NOPR, 157 FERC ¶ 61,121 at P 129. 11 Id. P 130. 5. The rules that we adopt in this final rule will help enable the participation of distributed energy resources in the RTO/ISO markets by providing a means for these resources to, in the aggregate, satisfy minimum size and performance requirements that they may not meet on a stand-alone basis. 12 The Commission in the NOPR noted that distributed energy resource aggregations can help to address the commercial and transactional barriers to distributed energy resource participation in the RTO/ISO markets, such as sharing the significant costs of participating in those markets, including the costs of the necessary metering, telemetry, and communication equipment. 13 12 See id. PP 105, 125. 13 Id. P 126. 6. To address barriers to the participation of distributed energy resource aggregations in the RTO/ISO markets, we require each RTO/ISO to revise its tariff to establish distributed energy resource aggregators as a type of market participant that can register distributed energy resource aggregations under one or more participation models in the RTO/ISO tariff that accommodate the physical and operational characteristics of each distributed energy resource aggregation. 7. Generally, we are adopting the specific reforms proposed in the NOPR, but with certain revisions based on the record in this proceeding, including input from the Commission technical conference convened April 10-11, 2018, responses to a post-technical conference notice, and responses to the Commission's September 5, 2019 Data Requests to RTOs/ISOs on policies and procedures that affect the interconnection of distributed energy resources. In particular, certain proposals in the NOPR have been altered in this final rule to better address the needs of different stakeholders, facilitate solutions to potential technical challenges, and to reflect the substantial efforts that have already been undertaken by some RTOs/ISOs to incorporate distributed energy resources into their markets, by providing for greater regional flexibility with respect to a number of proposed requirements. 8. For each RTO/ISO, the tariff provisions addressing distributed energy resource aggregations must (1) allow distributed energy resource aggregations to participate directly in RTO/ISO markets and establish distributed energy resource aggregators as a type of market participant; (2) allow distributed energy resource aggregators to register distributed energy resource aggregations under one or more participation models that accommodate the physical and operational characteristics of the distributed energy resource aggregations; (3) establish a minimum size requirement for distributed energy resource aggregations that does not exceed 100 kW; (4) address locational requirements for distributed energy resource aggregations; (5) address distribution factors and bidding parameters for distributed energy resource aggregations; (6) address information and data requirements for distributed energy resource aggregations; (7) address metering and telemetry requirements for distributed energy resource aggregations; (8) address coordination between the RTO/ISO, the distributed energy resource aggregator, the distribution utility, and the relevant electric retail regulatory authorities; (9) address modifications to the list of resources in a distributed energy resource aggregation; and (10) address market participation agreements for distributed energy resource aggregators. Additionally, each RTO/ISO must accept bids from a distributed energy resource aggregator if its aggregation includes distributed energy resources that are customers of utilities that distributed more than 4 million megawatt-hours in the previous fiscal year. An RTO/ISO must not accept bids from a distributed energy resource aggregator if its aggregation includes distributed energy resources that are customers of utilities that distributed 4 million megawatt-hours or less in the previous fiscal year, unless the relevant electric retail regulatory authority permits such customers to be bid into RTO/ISO markets by a distributed energy resource aggregator. 9. As discussed further below in Section IV.K (Compliance), each RTO/ISO must file the tariff changes needed to implement the requirements of this final rule within 270 days of the publication date of this final rule in the Federal Register . II. Procedural History 10. This final rule arises out of the same Commission inquiry that led to Order No. 841, 14 in which the Commission amended its regulations under the FPA to remove barriers to the participation of electric storage resources in RTO/ISO markets. The Commission commenced that inquiry by hosting a panel to discuss electric storage resources at its November 19, 2015, open meeting. Subsequently, on April 11, 2016, Commission staff issued data requests to each of the six RTOs/ISOs seeking information about the rules in the RTO/ISO markets that affect the participation of electric storage resources. Concurrently, Commission staff issued a request for comments, seeking information from interested persons on whether barriers exist to the participation of electric storage resources in the RTO/ISO markets that may potentially lead to unjust and unreasonable wholesale rates. In addition to the responses from the RTOs/ISOs, Commission staff received 44 comments. Many of the responses and comments discussed types of distributed energy resources and general market participation issues beyond concerns specific to electric storage resources. 15 14 Order No. 841, 162 FERC ¶ 61,127. 15 See, e.g., CAISO Response (AD16-20) at 2-3; ISO-NE Response (AD16-20) at 6-7, 26-27; PJM Response (AD16-20) at 20-21; Advanced Energy Economy Comments (AD16-20) on RTO/ISO Responses (AD16-20) at 16-18; RES Americas Comments (AD16-20) on RTO/ISO Responses (AD16-20) at 4-5. 11. On November 17, 2016, the Commission issued the NOPR in that proceeding. In addition to its proposed reforms to facilitate the participation of electric storage resources in RTO/ISO markets, the Commission proposed to amend its regulations under the FPA to remove barriers in current RTO/ISO market rules that may prevent new, smaller distributed energy resources that are technically capable of participating in the RTO/ISO markets from doing so. 16 16 NOPR, 157 FERC ¶ 61,121 at PP 103, 124. 12. The Commission received 109 comments on the NOPR from a diverse set of stakeholders. 17 On February 15, 2018, the Commission issued Order No. 841. In that final rule, the Commission noted that more information was necessary to inform its consideration of its NOPR proposals regarding facilitating the participation of distributed energy resource aggregations in RTO/ISO markets and stated that it would continue to explore the proposed distributed energy resource aggregation reforms under Docket No. RM18-9-000. 18 17 See Appendix A for a list of entities that submitted comments and the shortened names used throughout this final rule to describe those entities. 18 Order No. 841, 162 FERC ¶ 61,127 at P 5. The Commission incorporated by reference all comments filed in response to the NOPR in Docket No. RM16-23-000 into Docket No. RM18-9-000 and directed any further comments regarding the proposed distributed energy resource aggregation reforms should be filed henceforth in Docket No. RM18-9-000. 13. The Commission also announced that it would hold a technical conference to gather additional information regarding some distributed energy resource aggregation issues. The technical conference, which was held on April 10-11, 2018, addressed five issues related to this proceeding: Locational requirements, state and local regulator concerns, compensation for multiple services, coordination of distributed energy resource aggregations, and ongoing operational coordination. 19 During the technical conference, more than 50 individuals and entities offered a broad range of perspectives. The Commission issued a notice inviting post-technical conference comments and requesting comments on a number of follow-up questions related to each panel. 20 The Commission received 52 post-technical conference comments from a diverse set of stakeholders. 19 See Supplemental Notice of Technical Conference, Docket Nos. RM18-9-000 and AD18-10-000 (Mar. 29, 2018), https://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=14856384. 20 See Notice Inviting Post-Technical Conference Comments, Docket No. RM18-9-000 (Apr. 27, 2018), https://elibrary.ferc.gov/idmws/common/OpenNat.asp?fileID=14 882250. 14. On September 5, 2019, Commission staff issued data requests to each of the six RTOs/ISOs seeking information regarding their policies and procedures that affect the interconnection of distributed energy resources. In addition to the responses from the RTOs/ISOs, Commission staff received 11 reply comments. 15. Some RTOs/ISOs in recent years have taken steps to facilitate the participation of distributed energy resource aggregations in their markets, and the Commission has approved these proposals. In June 2016 and January 2020, the Commission accepted proposals to allow distributed energy resource aggregations to participate in certain RTO/ISO markets. 21 In addition, RTOs/ISOs have implemented some participation models for distributed energy resource aggregations to participate in their markets, often as demand response resources, with a few exceptions. 22 21 See Cal. Indep. Sys. Operator Corp., 155 FERC ¶ 61,229 (2016); N.Y. Indep. Sys. Operator, Inc., 170 FERC ¶ 61,033 (2020) (NYISO Aggregation Order). 22 E.g., CAISO Data Request Response (2019 RM18-9) at 6 (citing CAISO Tariff, Section 4.17); ISO-NE Data Request Response (2019 RM18-9) at 17-18 (stating that distributed energy resources may participate in wholesale markets as demand resources or Settlement Only Resources). III. Need for Reform 16. In the NOPR, the Commission stated that its proposal is a continuation of efforts pursuant to its authority under the FPA to ensure that the RTO/ISO tariffs and market rules produce just and reasonable rates, terms, and conditions of service. 23 Specifically, the Commission noted that it had observed that market rules designed for traditional resources can create barriers to entry for emerging technologies. The Commission expressed its concern that existing RTO/ISO tariffs impede the participation of distributed energy resources in the RTO/ISO markets by providing limited opportunities for distributed energy resource aggregations. 24 23 NOPR, 157 FERC ¶ 61,121 at P 9 (citing Integration of Variable Energy Resources, Order No. 764, 139 FERC ¶ 61,246, order on reh'g and clarification, Order No. 764-A, 141 FERC ¶ 61,232 (2012), order on clarification and reh'g, Order No. 764-B, 144 FERC ¶ 61,222 (2013); Wholesale Competition in Regions with Organized Electric Markets, Order No. 719, 73 FR 64100 (Oct. 28, 2008), 125 FERC ¶ 61,071 (2008), order on reh'g, Order No. 719-A, 74 FR 37776 (Jul. 29, 2009), 128 FERC ¶ 61,059 (2009), order on reh'g, Order No. 719-B, 129 FERC ¶ 61,252 (2009)). 24 Id. P 13. 17. The Commission acknowledged in the NOPR that distributed energy resources can at times effectively provide the capacity, energy, and ancillary services that are purchased and sold in the RTO/ISO markets. 25 However, the Commission explained that sometimes these resources can be too small to participate in these markets individually. The Commission also noted that current RTO/ISO market rules often limit the services that distributed energy resources are eligible to provide, in many cases only allowing these resources to be used as demand response or load-side resources when they are located behind a customer meter or by imposing prohibitively expensive or otherwise burdensome requirements. 25 See id. 18. The Commission preliminarily found that the barriers to the participation of distributed energy resources through distributed energy resource aggregations in the RTO/ISO markets may, in some cases, unnecessarily restrict competition, which could lead to unjust and unreasonable rates. 26 The Commission stated that effective wholesale competition encourages entry and exit and promotes innovation, incents the efficient operation of resources, and allocates risk appropriately between consumers and producers. Thus, the Commission stated that removing the barriers to participation by distributed energy resource aggregations will enhance the competitiveness, and in turn the efficiency, of RTO/ISO markets and thereby help to ensure just and reasonable and not unduly discriminatory or preferential rates for wholesale electric services. 26 See id. P 14. A. Comments 19. Most commenters, including state entities and RTOs/ISOs, support requiring RTOs/ISOs to remove barriers to the participation of distributed energy resource aggregations in their markets, subject to the Commission's adopting certain modifications to the NOPR proposals and/or allowing for regional flexibility in implementing reforms in any eventual final rule. 27 Among other things, these commenters identify improved competition and reliability as benefits of the proposed reforms and note that they provide a better way to provide price signals to distributed energy resources than current retail programs, 28 which may reduce the cost of meeting power system needs. 29 AWEA notes that participation in wholesale markets allows distributed energy resources to receive real-time information about system needs. 30 Commenters also state that the removal of barriers to, and integration of, distributed energy resource aggregations could spur innovation, and allow these aggregations to serve important roles on the grid. 31 Several commenters emphasize that a distributed energy resource aggregation framework must ensure that aggregated distributed energy resources can provide all the services that they are capable of providing, 32 while competing on a level and technology-neutral playing field with other resources. 33 Some commenters note that distributed energy resources do not currently fit within existing paradigms, which were designed for, and favor, other resources. 34 Others state that for distributed energy resources and distributed energy resource aggregations to fairly participate, they must meet the same technical and commercial requirements as other resources, and pay equally for ancillary services and use of the transmission system. 35 27 See, e.g., Advanced Energy Economy Comments (RM16-23) at 31-32; Connecticut Department of Energy Comments (RM16-23) at 4; IPKeys/Motorola Comments (RM16-23) at 4; Leadership Group Comments (RM16-23) at 2; MISO Comments (RM16-23) at 2; Ohio Commission Comments (RM16-23) at 2-3. 28 AWEA Comments (RM16-23) at 1-2; City of New York Comments (RM16-23) at 3, 5, 7; Maryland and New Jersey Commissions Comments (RM16-23) at 2; Ohio Commission Comments (RM16-23) at 2; Public Interest Organizations Comments (RM16-23) at 5-6. 29 AWEA Comments (RM16-23) at 2. 30 Id. 31 California Energy Storage Alliance Comments (RM16-23) at 4; Microgrid Resources Coalition Comments (RM16-23) at 10; Union of Concerned Scientists Comments (RM16-23) at 9, 15, 17 (noting the lack of participation models for potential market service providers like domestic electric water heaters and distributed solar resources). 32 See, e.g., Advanced Energy Management Comments (2018 RM18-9) at 3; Direct Energy Comments (2018 RM18-9) at 5, 11-13; Energy Storage Association Comments (2018 RM18-9) at 2; Microsoft Comments (2018 RM18-9) at 16-17; NRG Comments (2018 RM18-9) at 5-6. 33 Advanced Energy Economy Comments (2018 RM18-9) at 5; Advanced Energy Management Comments (2018 RM18-9) at 3; Microsoft Comments (2018 RM18-9) at 15-16; NRG Comments (2018 RM18-9) at 3. 34 Fresh Energy/Sierra Club/Union of Concerned Scientists Comments (RM16-23) at 1; Public Interest Organizations Comments (RM16-23) at 5-6. 35 PJM Market Monitor Comments (RM16-23) at 10-11; New York Utility Intervention Unit Comments (RM16-23) at 3. 20. Several commenters assert that existing participation models discriminate against distributed energy resources. For instance, Public Interest Organizations argue that distributed energy resources in PJM are often forced into participating as demand response, or interconnecting as generation, which are cost prohibitive. 36 Stem asserts that CAISO's Non-Generator Resource and Distributed Energy Resource Provider models effectively prevent participation of behind-the-meter resources in CAISO. 37 Advanced Energy Economy contends that, despite the benefits that aggregated distributed energy resources provide, 38 performance penalties for deviation from the characteristics of traditional generation effectively preclude participation in the capacity market. 39 36 Public Interest Organizations Comments (RM16-23) at 19. 37 Stem Comments (RM16-23) at 12, 16. 38 Advanced Energy Economy states that the benefits include the ability to provide a quick response to system emergencies, which gives other resources time to ramp up or procure fuel, the ability of demand response to prevent blackouts during times of peak demand, and the ability to be dispatched granularly to provide support to specific parts of the grid. Advanced Energy Economy Comments (RM16-23) at 42-43. 39 Id. (arguing that PJM's capacity performance construct and ISO-NE's pay-for-performance construct both effectively require indefinite run times to avoid performance penalties that can amount to more than a year's worth of capacity revenue). 21. Some commenters state that distributed energy resource aggregation integration can be accomplished in a reliable and cost-effective manner. 40 Other commenters argue that allowing distributed energy resource aggregations to participate in wholesale markets will create new opportunities and enhance the reliability and resilience of the grid, leading to benefits such as savings and efficiency. 41 Advanced Energy Buyers suggest that allowing distributed energy resources to participate in RTO/ISO markets will also provide such resources with additional revenue streams, making them more economic and candidates for greater investment, and provide additional benefit to the grid as a result of increased market activity. 42 Commenters also note that the pairing of dispatchable resources with non-dispatchable resources in an aggregation could create a portfolio that overall could be dispatchable to the bulk power system. 43 Other commenters assert that, if distributed energy resources are not able to participate in wholesale markets, it could result in system overbuild, inaccurate wholesale price formation, and lack of visibility into system conditions. 44 40 Advanced Energy Economy Comments (2018 RM18-9) at 5. 41 See, e.g., Advanced Energy Buyers Comments (2018 RM18-9) at 3; CAISO Comments (2018 RM18-9) at 1; Direct Energy Comments (2018 RM18-9) at 11-13; NRG Comments (2018 RM18-9) at 5-6; Tesla Comments (2018 RM18-9) at 3. 42 Advanced Energy Buyers Comments (2018 RM18-9) at 5. 43 NYISO Indicated Transmission Owners Comments (2018 RM18-9) at 4. 44 Id.; Microsoft Comments (2018 RM18-9) at 13. 22. Certain United States senators express support for the proposed rule which, they state, would help develop frameworks for how renewables can aggregate together to more effectively participate in energy markets, and provide useful guidance on how to better integrate these resources with existing energy providers. In addition, these United States senators maintain that the rulemaking comes at a critical time for renewable energy because renewables led the way in 2016 for new additions onto the energy grid. 45 These United States senators, as well as members of the United States House of Representatives, urge the Commission to adopt a final rule that provides all distributed energy resources with the opportunity to participate in RTO/ISO markets, noting that the changes proposed in the NOPR will help improve the reliability and resilience of the bulk power system by providing operators with new local tools to manage unanticipated events and potentially lower costs for customers. They state that renewable energy provided 10% of electricity generation in 2018 due to state and federal policies as well as consumer interest in choosing cost-competitive technologies. 46 45 September 22, 2017 Letter to Chairman Neil Chatterjee from United States Senators Sheldon Whitehouse, Cory A. Booker, Edward J. Markey, Ron Wyden, Elizabeth Warren and Bernard Sanders (filed Sept. 25, 2017) (September 22 Letter); see also May 23, 2018 Letter to Chairman Kevin McIntyre from United States Senators Sheldon Whitehouse, Edward J. Markey, Martin Heinrich, Jeanne Shaheen, Richard Blumenthal, Margaret Wood Hassan, Angus S. King, Jr., Dianne Feinstein, Bernard Sanders, Catherine Cortez Masto, Jack Reed, Ron Wyden, Jeff Merkley, Kamala D. Harris, Cory A. Booker, and Brian Schatz (filed May 23, 2018) (discussing 2016 estimates from the Energy Information Administration that distributed energy resources accounted for about two percent of the installed generation capacity in the United States). In response to the September 22 Letter, Chairman Chatterjee stated that the Commission has a role in fostering resource neutral, non-discriminatory policies with respect to the wholesale markets, including removing barriers to the participation of distributed energy resources in the wholesale markets. Chairman's Response to September 22 Letter (filed Oct. 5, 2017). 46 February 11, 2019 Letter to Chairman Neil Chatterjee from United States Congress members Peter Welch, Mike Levin, Mike Quigley, Paul D. Tonko, Daniel W. Lipinski, Jerry McNerney, James R. Langevin, Kathy Castor, Raul M. Grijalva, Mark Pocan, Donald S. Beyer Jr., Matt Cartwright, Nanette Diaz Barragán, Sean Casten, Jamie Raskin, James P. McGovern, and Mike Doyle (filed Feb. 11, 2019); February 11, 2019 Letter to Chairman Neil Chatterjee from United States Senators Sheldon Whitehouse, Edward J. Markey, Cory A. Booker, Catherine Cortez Masto, Martin Heinrich, Brian Schatz, Ron Wyden, Jeffrey A. Merkley, Kamala D. Harris, Richard Blumenthal, Jack Reed, Angus S. King, Jr., Tina Smith, Jacky Rosen, Margaret Wood Hassan, Jeanne Shaheen, Dianne Feinstein, and Bernard Sanders (filed Feb. 21, 2019). 23. Mensah asserts that one of the biggest limitations that needs to be addressed is the ability of behind-the-meter distributed energy resources to inject onto the grid. 47 Tesla requests the Commission extend to distributed energy resource aggregations the finding in Order No. 841 that existing tariffs do not recognize the operational characteristics of electric storage resources and limit their participation in the markets. 48 Tesla urges the Commission to require that RTO/ISO tariffs allow distributed energy resources, including those resources physically located behind an end-use customer meter, to employ their full operational range by injecting energy onto the grid in order to provide any wholesale service through participation in distributed energy resource aggregations. 49 47 Mensah Comments (RM16-23) at 3. 48 Tesla Comments (2018 RM18-9) at 7. 49 Id. at 1, 7. 24. Some commenters argue that the Commission needs to provide general guidance on distributed energy resource aggregation, with straightforward rules, clearly defined responsibilities, and data-driven market signals. 50 They explain that distributed energy resource aggregations must have transparent and predictable parameters for participation that are not overly restrictive and do not contain undue administrative delay. 51 Microsoft suggests that the Commission provide “directional guidance” to RTOs/ISOs to remove barriers. 52 50 Advanced Energy Buyers Comments (2018 RM18-9) at 2; Advanced Energy Economy Comments (2018 RM18-9) at 5. 51 Advanced Energy Buyers Comments (2018 RM18-9) at 5. 52 Microsoft Comments (2018 RM18-9) at 13. 25. In contrast, EEI states that the Commission should defer to regional stakeholder processes and coordination with state-jurisdictional entities to formulate the detailed provisions required to implement distributed energy resource aggregation participation in the wholesale market. 53 APPA states that the evidence is thin to show that there is a great demand for distributed energy resource aggregation programs or that such programs will bring meaningful benefits to consumers in the RTO/ISO regions. 54 53 EEI Comments (2018 RM18-9) at 3. 54 APPA Comments (2018 RM18-9) at 10. B. Commission Determination 26. For the reasons discussed below, in this final rule, we affirm the preliminary finding in the NOPR that existing RTO/ISO market rules are unjust and unreasonable because they present barriers to the participation of distributed energy resource aggregations in the RTO/ISO markets, and such barriers reduce competition and fail to ensure just and reasonable rates. Specifically, current RTO/ISO market rules present barriers that prevent certain distributed energy resources that are technically capable of participating in the RTO/ISO markets on their own or through aggregation from doing so. 55 Permitting distributed energy resource aggregations to participate in the RTO/ISO markets may allow these resources, in the aggregate, to meet certain qualification and performance requirements, particularly if the operational characteristics of different distributed energy resources in a distributed energy resource aggregation complement each other. 56 The reforms adopted in this final rule will remove the barriers that qualification and performance requirements currently pose to the participation of distributed energy resources in the RTO/ISO markets. 57 55 See NOPR, 157 FERC ¶ 61,121 at P 124. 56 See id. P 125. 57 See infra section IV.C.4 (Minimum and Maximum Size of Aggregation) (agreeing with commenters that a minimum size requirement not to exceed 100 kW will help improve competition in the RTO/ISO markets and avoid confusion about appropriate minimum size requirements for distributed energy resource aggregations under existing or new participation models); Section IV.C.6 (Single Resource Aggregation) (explaining that a consistent minimum size requirement will minimize barriers in the event that an individual distributed energy resource ceases to participant in RTO/ISO markets as a single qualifying distributed energy resource aggregation). 27. The reforms adopted in this final rule are timely, as there has been significant development of distributed energy technologies and deployment of distributed energy resources in recent years. Moreover, this development has generated discussions on the potential for such resources—including new distributed energy resources that are smaller, interconnected at lower voltages, and geographically dispersed—to provide grid services through participation in RTO/ISO markets. Wider scale use of distributed energy resources is enabled by increased deployment of, and improvements in, metering, telemetry, and communication technologies. Aggregations of new and existing distributed energy resources can provide new cost-effective sources of energy and grid services and enhance competition in wholesale markets as new market participants. 28. Individual distributed energy resources often do not meet the minimum size requirements to participate in the RTO/ISO markets under existing participation models and often cannot satisfy all the performance requirements of the various participation models due to their small size. In order to participate in RTO/ISO markets, distributed energy resources tend to participate in RTO/ISO demand response programs. While these demand response programs have helped reduce barriers to load curtailment resources, they often limit the operations of some types of distributed energy resources, such as electric storage or distributed generation, as well as the services that they are eligible to provide. 58 58 For example, when participating through demand response programs, distributed energy resources generally can only operate to reduce customer demand at the meter, and any injection/generation cannot exceed customer demand. Consequently, these resources are prevented from injecting additional electricity into the grid to make sales of electricity in RTO/ISO markets. 29. We find that adopting the reforms described below will enhance the competitiveness, and in turn the efficiency, of RTO/ISO markets and thereby help to ensure just and reasonable and not unduly discriminatory or preferential rates for wholesale electric services. 59 Further, the reforms required by this final rule will help the RTOs/ISOs account for the impacts of distributed energy resources on installed capacity requirements and day-ahead energy demand, thereby reducing uncertainty in load forecasts and the risk of over procurement of resources and the associated costs, and provide numerous other benefits. 60 Accordingly, as discussed further below, we adopt the NOPR proposal to add § 35.28(g)(12)(i) to the Commission's regulations and require each RTO/ISO to have tariff provisions that allow distributed energy resource aggregations to participate directly in RTO/ISO markets. 61 While we agree with commenters that there are operational, technological, and cost implications that must be evaluated and addressed, as explained below, we find that the record in this proceeding provides sufficient basis for taking action to require the implementation of the generic requirements discussed herein. 59 See infra Section IV.C.1 (Participation Model); Section IV.C.2 (Types of Technologies); Section IV.C.3 (Double Counting of Services); Section IV.H.2 (Role of Distribution Utilities); Section IV.J (Market Participation Agreements). 60 See infra Section IV.C.4 (Minimum and Maximum Size of Aggregation); Section IV.D (Locational Requirements). 61 In addition, we adopt the proposal to add sections 35.28(b)(10) and (11) to the Commission's regulations incorporating the definitions for distributed energy resource and distributed energy resource aggregator. 30. To the extent that an RTO/ISO proposes to comply with any or all of the requirements in this final rule using its currently effective requirements for distributed energy resources, it must demonstrate on compliance that its existing approach meets the requirements in this final rule. IV. Discussion A. Commission Jurisdiction 1. Scope of Final Rule 31. In the NOPR, the Commission stated that it was proposing reforms pursuant to its legal authority under section 206 of the FPA to ensure that the RTO/ISO tariffs are just and reasonable and not unduly discriminatory or preferential. 62 62 NOPR, 157 FERC ¶ 61,121 at P 1. a. Comments 32. Several commenters assert that the basis for the Commission's jurisdiction is straightforward because sales from distributed energy resource aggregators into wholesale markets are sales at wholesale in interstate commerce. 63 Other commenters question the Commission's authority to implement the proposed reforms, seek clarification of the NOPR's scope, or ask the Commission to respect existing federal, state, and local jurisdictional boundaries. 64 63 See, e.g., Sunrun Comments (2018 RM18-9) at 3-4 (citing 16 U.S.C. 824(b)(1)); Connecticut State Entities Comments (RM16-23) at 7; Stem Comments (2018 RM18-9) at 3. 64 See, e.g., APPA/NRECA Comments (RM16-23) at 18-20; MISO Transmission Owners Comments (RM16-23) at 17-18; NESCOE Comments (RM16-23) at 16; TAPS Comments (RM16-23) at 4-5; Xcel Energy Services Comments (RM16-23) at 6-9, 23-24. 33. Stem asserts that the Commission should clarify that it has jurisdiction over participation in the wholesale markets and the associated transactions, while relevant electric retail regulatory authorities 65 have jurisdiction over the physical dispatch and the resulting electrical activity on the distribution system. 66 Connecticut State Entities argue that, while the management of the impacts of new generation on the distribution system remains with the states, the comprehensive and effective integration of these emerging technologies into the wholesale markets rests with the Commission. 67 65 The term “relevant electric retail regulatory authority” means the entity that establishes the retail electric prices and any retail competition policies for customers, such as the city council for a municipal utility, the governing board of a cooperative utility, or the state public utility commission. See Order No. 719, 125 FERC ¶ 61,071 at P 158. 66 Stem Comments (2018 RM18-9) at 3. 67 Connecticut State Entities Comments (RM16-23) at 7. 34. Harvard Environmental Policy Initiative argues that the Commission's proposal to assert jurisdiction over a distributed energy resource aggregator's sale of sink-related services to RTOs/ISOs would fall under the Commission's jurisdiction under the test applied by the U.S. Supreme Court in FERC v. Electric Power Supply Ass'n, 68 and that the Commission has authority under FPA section 206 to require RTOs/ISOs to enable the participation of distributed energy resource aggregators. 69 Harvard Environmental Policy Initiative further contends that a company's distribution system investments, even if motivated by a Commission rule, are not evidence that the Commission has overstepped its legal authority, and that, even if a change in state law were necessary to allow consumers to participate, the NOPR does not force states to do anything and does not require states to facilitate the development of distributed energy resources. 70 68 Harvard Environmental Policy Initiative Comments (RM16-23) at 3 (citing FERC v. Electric Power Supply Ass'n, 136 S. Ct. 760, 776 (2016) ( EPSA )). 69 Id. at 4-5. 70 Id. at 9, 12. 35. In contrast, some commenters question the Commission's authority to impose the proposed reforms or seek clarification of federal and state jurisdictional boundaries. 71 APPA/NRECA interpret the NOPR to be limited to reforms to the RTO/ISO tariff rules governing RTO/ISO markets and they urge the Commission not to expand the scope of the NOPR beyond RTO/ISO markets and to preserve state and local authority over retail sales, generation facilities, and local distribution facilities. 72 TAPS similarly asserts that any final rule should be limited to (1) the treatment by RTOs/ISOs of energy and ancillary services from distributed energy resources after those resources have already been delivered to the RTO's/ISO's markets; and (2) assuring that any such participation of distributed energy resource aggregations in RTO/ISO markets is compatible with the safe and reliable operation of the distribution system, as well as relevant electric retail regulatory authority and distribution utility tariffs, rules, and requirements. 73 FirstEnergy argues that any rules adopted by the Commission must preserve state jurisdictional authority over distribution-level resources. 74 Similarly, the Maryland and New Jersey Commissions ask the Commission to confirm that state decisions on distribution system design, resource interconnection access, operations, and costs will not be viewed as a barrier to wholesale competition or subject to Commission review. 75 MISO Transmission Owners assert that any final rule must not disturb a state's jurisdiction over retail electricity sales and retail distribution service, including state regulation of retail rates, net metering programs, and participation in wholesale markets by resources located behind a retail distribution service meter. 76 71 See EEI Comments (RM16-23) at 25; Icetec Comments (2018 RM18-9) at 1-2; Maryland and New Jersey Commissions Comments (RM16-23) at 2-3; Massachusetts Commission Comments (RM16-23) at 10; Stem Comments (2018 RM18-9) at 3. 72 APPA/NRECA Comments (RM16-23) at 18-20. 73 TAPS Comments (RM16-23) at 9. 74 FirstEnergy Comments (2019 RM18-9) at 5 n.13. 75 Maryland and New Jersey Commissions Comments (RM16-23) at 3. 76 MISO Transmission Owners Comments (RM16-23) at 5-6. 36. The Maryland and New Jersey Commissions ask the Commission to enunciate clear federal and state jurisdictional lines pertaining to both the distribution system and distributed energy resources, whether in front of or behind the meter. 77 The Massachusetts Commission and EEI ask the Commission to clarify whether distribution system-connected and behind-the-meter distributed energy resources that participate in wholesale markets are Commission-jurisdictional facilities. 78 EEI notes that the Commission has exclusive jurisdiction over sales for resale under the FPA. 79 The Harvard Environmental Policy Initiative states that EEI confuses Commission jurisdiction over energy sales with state jurisdiction over generation facilities and argues that states will retain authority over the resources themselves. 80 77 Maryland and New Jersey Commissions Comments (RM16-23) at 2. 78 Massachusetts Commission Comments (RM16-23) at 11. 79 EEI Comments (RM16-23) at 23-24 (citing 16 U.S.C. 824o(a)(1)). 80 Harvard Environmental Policy Initiative Comments (RM16-23) at 12. 37. Icetec asks the Commission either to (1) clarify that retail customers transmitting power from distributed energy resources behind their retail service point to their retail point of interconnection are not considered public utilities subject to Open Access Transmission Tariff (OATT) and Open Access Same-Time Information System (OASIS) requirements, or (2) require RTOs/ISOs to include a pro forma request for waiver of those requirements in distributed energy resource participation agreements. 81 The Harvard Environmental Policy Initiative states that the Commission should establish a jurisdictional line that distinguishes between sales by distributed energy resource aggregators and sales by individual distributed energy resources by determining that an energy sale from an individual distributed energy resource is not a “wholesale sale in interstate commerce” but is instead “any other sale” under FPA section 201 and therefore not subject to Commission regulation. 82 81 Icetec Comments (2018 RM18-9) at 9. 82 Harvard Environmental Policy Initiative Comments (RM16-23) at 13 (quoting 16 U.S.C. 824(b)(1)). b. Commission Determination 38. FPA section 201 authorizes the Commission to regulate the transmission of electric energy in interstate commerce and the wholesale sale of electric energy in interstate commerce, as well as all facilities used for such transmission or sale of electric energy. 83 FPA section 201 also defines a public utility as a person who owns or operates facilities subject to the jurisdiction of the Commission. 84 FPA sections 205 85 and 206 86 provide the Commission with jurisdiction over all rates and charges made, demanded, or received by any public utility for or in connection with the transmission or sale of electric energy subject to the Commission's jurisdiction. Those sections also provide the Commission with jurisdiction over all rules, regulations, practices, or contracts affecting jurisdictional rates, charges, or classifications. 83 16 U.S.C. 824. 84 Id. 824(e). 85 Id. 824d. 86 Id. 824e. 39. The Commission's authority to issue regulations pertaining to distributed energy resource aggregations stems from both the Commission's jurisdiction over the wholesale sales by distributed energy resource aggregators into RTO/ISO markets and from its jurisdiction over practices affecting wholesale rates. 87 87 See Nat'l Ass'n of Regulatory Util. Comm'rs v. FERC, 964 F.3d at 1186 (“FERC bears the responsibility of regulating the wholesale market, which encompasses `both wholesale rates and the panoply of rules and practices affecting them.' ”) (quoting EPSA, 136 S. Ct. at 773). 40. First, we find that the sales of electric energy by distributed energy resource aggregators for purposes of participating in an RTO/ISO market are wholesale sales subject to the Commission's jurisdiction. In Order No. 841, the Commission observed that an electric storage resource that injects electric energy back to the grid for purposes of participating in an RTO/ISO market engages in a sale of electric energy at wholesale in interstate commerce. 88 Similarly, to the extent that a distributed energy resource aggregator's transaction in RTO/ISO markets entails the injection of electric energy onto the grid and a sale of that energy for resale in wholesale electric markets, we find that the Commission has jurisdiction over such wholesale sales. 89 88 Order No. 841, 162 FERC ¶ 61,127 at P 30. 89 See EnergyConnect, Inc., 130 FERC ¶ 61,031, at P 29 (2010). We note that injections of electric energy to the grid do not necessarily trigger the Commission's jurisdiction. See Sun Edison LLC, 129 FERC ¶ 61,146 (2009), reh'g granted on other grounds, 131 FERC ¶ 61,213 (2010) (the Commission's jurisdiction would arise only when a facility operating under a state net metering program produces more power than it consumes over the relevant netting period); MidAmerican Energy Co., 94 FERC ¶ 61,340 (2001). 41. Second, we find that RTO/ISO market rules governing sales in RTO/ISO markets by distributed energy resource aggregators from demand resources ( e.g., demand response and energy efficiency) are practices affecting wholesale rates. This finding aligns with the decision of the U.S. Supreme Court in EPSA, which interpreted the FPA as providing the Commission with jurisdiction over the participation in RTO/ISO markets of demand response resources: A type of non-traditional resource that, by definition, is located behind a customer meter and generally is located on the distribution system. 90 First, the Court found that the Commission's regulation of demand response participation in wholesale markets met the “affecting” standard in FPA sections 205 and 206 “with room to spare.” 91 Second, the Court found that the Commission's regulation of demand response resources did not regulate retail sales in violation of FPA section 201(b). 92 These holdings apply equally to RTO/ISO market rules governing sales in RTO/ISO markets by distributed energy resource aggregators from demand resources. 90 See Order No. 841-A, 167 FERC ¶ 61,154 at P 33 (citing EPSA, 136 S. Ct. 760; 18 CFR 35.28(b)(4)). 91 EPSA, 136 S. Ct. at 774 (referring to the Commission's jurisdiction under FPA sections 205 and 206 to regulate practices affecting jurisdictional rates). 92 Id. at 784. 42. We clarify that, to the extent a distributed energy resource aggregator makes sales of electric energy into RTO/ISO markets, it will be considered a public utility subject to the Commission's jurisdiction. 93 Such distributed energy resource aggregators must fulfill certain responsibilities set forth in the FPA and the Commission's rules and regulations. 94 If a distributed energy resource aggregator (1) aggregates only demand resources; or (2) aggregates only customers in a net metering program that are not net sellers, that distributed energy resource aggregator would not become a public utility. 95 93 See EnergyConnect, Inc., 130 FERC ¶ 61,031 at P 29 (finding an aggregator of retail customers to be a public utility under FPA section 201(e) because its agreements to make sales of balancing energy for resale in RTO/ISO markets would constitute jurisdictional facilities under FPA section 201(b)). 94 Examples of such responsibilities include filing rates under FPA section 205 (potentially including obtaining market-based rate authority); filing Electric Quarterly Reports; submitting FPA sections 203 and 204 filings related to corporate mergers and other activities; and fulfilling FPA section 301 accounting obligations and FPA section 305(b) interlocking directorate obligations. See 16 U.S.C. 824b, 824c, 824d, 825, 825d(b). 95 See EnergyConnect, Inc., 130 FERC ¶ 61,031 at P 30 (finding that “where an entity is only engaged in the provision of demand response services, and makes no sales of electric energy for resale, that entity would not own or operate facilities that are subject to the Commission's jurisdiction and would not be a public utility that is required to have a rate on file with the Commission”); Sun Edison LLC, 129 FERC ¶ 61,146 (the Commission's jurisdiction would arise only when a facility operating under a state net metering program produces more power than it consumes over the relevant netting period); MidAmerican Energy Co., 94 FERC ¶ 61,340. 43. We further clarify that we are only exercising jurisdiction in this final rule over the sales by distributed energy resource aggregators into the RTO/ISO markets. Hence, an individual distributed energy resource's participation in a distributed energy resource aggregation would not cause that individual resource to become subject to requirements applicable to Commission-jurisdictional public utilities. 44. As the Commission stated in Order Nos. 841 and 841-A, the Commission recognizes a vital role for state and local regulators with respect to retail services and matters related to the distribution system, including design, operations, power quality, reliability, and system costs. 96 As in Order No. 841, we reiterate that nothing in this final rule preempts the right of states and local authorities to regulate the safety and reliability of the distribution system and that all distributed energy resources must comply with any applicable interconnection and operating requirements. 97 96 Order No. 841, 162 FERC ¶ 61,127 at P 36; Order No. 841-A, 167 FERC ¶ 61,154 at P 42. 97 See Order No. 841-A, 167 FERC ¶ 61,154 at P 46. 2. Opt-Out 45. In the NOPR, the Commission proposed to require each RTO/ISO to revise its tariff as necessary to accommodate the participation of distributed energy resource aggregations in RTO/ISO markets. 98 In the NOPR, the Commission stated that, to the extent existing rules or regulations explicitly prohibit certain technologies from participating in RTO/ISO markets, it did not intend to overturn those rules or regulations. 99 However, the Commission did not propose a mechanism by which relevant electric retail regulatory authorities could authorize or prohibit the participation of distributed energy resources or distributed energy resource aggregators in RTO/ISO markets. The Commission also explained that, because the individual resources in distributed energy resource aggregations likely will fall under the purview of multiple organizations ( e.g., the RTO/ISO, state regulatory commissions, relevant distribution utilities, and local regulatory authorities), the proposed market participation agreements 100 for distributed energy resource aggregators must require that the aggregator attest that its distributed energy resource aggregation is compliant with the tariffs and operating procedures of the distribution utilities and the rules and regulations of any other relevant regulatory authority. 101 The Commission stated that this may include any laws or regulations of the relevant electric retail regulatory authority that do not permit demand response resources to participate in RTO/ISO markets as the Commission considered in Order No. 719. 102 98 NOPR, 157 FERC ¶ 61,121 at P 124. 99 Id. P 133. 100 See Section IV.J (Market Participation Agreements) below for more discussion of market participation agreements. 101 NOPR, 157 FERC ¶ 61,121 at P 157. 102 Id. P 157 n.238 (citing Order No. 719, 125 FERC ¶ 61,071 at P 154). 46. After the technical conference, the Commission sought comments on whether states could require distributed energy resources to choose to participate in either an RTO/ISO market or retail compensation program, but not allow participation in both. 103 The Commission also sought comments on the benefits and drawbacks of such an approach. 103 Notice Inviting Post-Technical Conference Comments at 6. a. Comments 47. As described above, 104 numerous commenters question the Commission's authority to require RTOs/ISOs to accommodate the participation of distributed energy resource aggregations in RTO/ISO markets. They believe that, to mitigate their jurisdictional concerns, relevant electric retail regulatory authorities and/or distribution utilities must be allowed to either authorize or prohibit the participation of distributed energy resources and/or distributed energy resource aggregators in the RTO/ISO markets ( i.e., to opt in or opt out, respectively). 105 Thus, they specifically request that the Commission adopt an opt-out/opt-in provision similar to that established in Order No. 719 to allow relevant electric retail regulatory authorities to decide whether distributed energy resources may participate in aggregations in RTO/ISO markets. 106 104 See supra Section IV.A.1 (Scope of Final Rule). 105 See, e.g., APPA/NRECA Comments (RM16-23) at 21-22; DTE Electric/Consumers Energy Comments (RM16-23) at 7; MISO Transmission Owners Comments (RM16-23) at 6; NARUC Comments (RM16-23) at 4-5; TAPS Comments (RM16-23) at 10, 16-17. 106 See, e.g., AES Companies Comments (RM16-23) at 31; Kansas Commission Comments (2018 RM18-9) at 4; NRECA Comments (2018 RM18-9) at 6-7, 27-28; Organization of MISO States Comments (RM16-23) at 4-5; Southern Companies Comments (2018 RM18-9) at 3-4 (citing Order No. 719, 125 FERC ¶ 61,071; Order No. 719-A, 128 FERC ¶ 61,059); see discussion of opt-out/opt-in infra PP 59, 64. 48. Some of these commenters contend that the Commission would be exceeding its statutory authority if the final rule does not include an opt-out. 107 They argue that the Commission may determine how distributed energy resources participate in RTO/ISO markets, but whether they participate is the exclusive province of the states. 108 APPA points to the existing opt-out for demand response resources established in Order No. 719 to argue that the applicability of relevant electric retail regulatory authority should not turn on the wholesale participation model selected by the aggregator. 109 APPA asserts that the authority of relevant electric retail regulators over the terms and conditions of interconnection to the distribution system includes the authority to limit the manner in which a distributed energy resource uses the distribution system. 110 APPA argues that an opt-out is consistent with the NOPR's proposal that market participation agreements include an attestation that an aggregation is compliant with distribution utility tariffs and the rules and regulations of any other relevant regulatory authority. APPA further argues that an opt-out conforms with the requirement in Order No. 841 that an electric storage resource must be “contractually permitted” to inject electric energy back onto the grid ( e.g., per the interconnection agreement between an electric storage resource that is interconnected on a distribution system or behind the meter and the distribution utility to which it is interconnected). 111 Xcel Energy Services argues that, to the extent distributed energy resource participation in RTO/ISO markets does occur, the applicable state has the authority to establish the parameters of the participation model, not the RTO/ISO. 112 Xcel Energy Services asserts that the Commission should not usurp the states' authority to address inappropriate arbitrage between retail and wholesale consumption. 113 107 Kansas Commission Comments (2018 RM18-9) at 3; NARUC Comments (2018 RM18-9) at 2-3; see APPA Comments (2018 RM18-9) at 15. 108 Kansas Commission Comments (2018 RM18-9) at 2-3; NARUC Comments (2018 RM18-9) at 2-3. 109 APPA Comments (2018 RM18-9) at 17-18. 110 Id. at 15-16 (noting that CAISO's Distributed Energy Resource Provider program requires compliance with applicable distribution utility tariffs and operating procedures, as well as applicable requirements of the relevant electric retail regulatory authority). 111 Id. at 16 (citing NOPR, 157 FERC ¶ 61,121 at P 157; Order No. 841, 162 FERC ¶ 61,127 at P 33). 112 Xcel Energy Services Comments (RM16-23) at 23-24. 113 Id. at 24. 49. Multiple United States senators urge the Commission to preserve the authority of state and local authorities over distribution utilities with respect to distributed energy resource aggregators. They express concern that the final rule could have a negative effect on state and local authorities' ability to regulate retail and distribution service. They argue that, if the Commission authorizes the aggregation of distributed energy resources by entities other than the local distribution utility without authorization by the appropriate state or local regulator, the Commission would break precedent and expand Commission regulation into areas that are jurisdictional to state and localities under the FPA. They maintain that the relevant electric retail regulatory authority is best positioned to decide whether to authorize third-party distributed energy resource aggregators to transact with retail customers. 114 114 May 7, 2019 Letter to Chairman Neil Chatterjee from United States Senators John Hoeven, Kevin Cramer, John Barrasso, John Boozman, Lisa Murkowski, Michael B. Enzi, Joni K. Ernst, Roger F. Wicker, Shelley Moore Capito, Chuck Grassley, M. Michael Rounds, Steve Daines, John Thune, Thom Tillis, Mike Crapo, Cindy Hyde-Smith, Roy Blunt, James E. Risch, James Lankford, Deb Fischer, James M. Inhofe, and Bill Cassidy. In response to this letter, the Chairman noted that he asked state regulators participating at the April 2018 technical conference to discuss whether and why they view as important in the context of this rulemaking the type of flexibility that the Commission has provided to relevant electric retail regulatory authorities with respect to participation of demand response resources in wholesale electric markets. The Chairman also stated that he recognizes the important role of state and local regulators with respect to reliability and resilience, particularly with respect to the distribution system. Chairman's Response to May 7, 2019 Letter (filed June 4, 2019). 50. Those commenters advocating for an opt-out also generally express concerns about the cost, and operational and reliability impacts, of distributed energy resource aggregations on distribution utilities and the distribution system. 115 With regard to cost impacts, some commenters suggest that costs borne by small utilities and their customer bases may outweigh the benefits of distributed energy resource aggregation participation in RTO/ISO markets, and that small to medium-sized distribution utilities may not have the resources needed to coordinate with distributed energy resource aggregators and RTOs/ISOs. 116 In addition, NRECA argues that opt-out/opt-in provisions would lessen the compliance burden on smaller entities and would be consistent with the deference to relevant electric retail regulatory authorities included in IEEE 1547. 117 NRECA also raises concerns that distributed energy resource aggregators may “cherry-pick” the more lucrative resources in a system, undermining reliability and the ability of utilities to develop and invest in their own integrated distributed energy resources portfolio. 118 Organization of MISO States suggests that even a temporary opt-out would allow for safe and reliable implementation with minimal disruption to the distribution system. 119 115 See, e.g., Vice Chairman Place Comments (2018 RM18-9) at 2-3; EEI Comments (2018 RM18-9) at 19-20; Eversource Comments (2018 RM18-9) at 12-13; NRECA Comments (2018 RM18-9) at 7-10, 12; see also AMP Comments (2019 RM18-9) at 1. 116 APPA Comments (2018 RM18-9) at 7 (asserting that rate design challenges can be particularly acute for small to medium-sized distribution utilities), 9-10 (asserting that monitoring and responding to system impacts associated with distributed energy resource aggregation activity could be particularly difficult for small and medium-sized utilities); APPA/NRECA Comments (RM16-23) at 39 (asserting that the costs of installing new meters or new communication technology to capture wholesale market transactions would burden smaller distribution utilities in particular); NRECA Comments (2018 RM18-9) at 14 (asserting that smaller distribution cooperatives may not have staff or resources needed to conduct ongoing operational coordination with RTOs/ISOs and distributed energy resource aggregators), 26 (asserting that the considerable amount of funding required to potentially benefit a small number of customers imposes too large of a burden on small utilities); TAPS Comments (RM16-23) at 15-16 (asserting that, particularly for a small utility, the costs of ongoing coordination, metering, settlements, and rate-unbundling needed to support sales to RTO/ISO markets by distributed energy resources may far exceed the potential efficiency benefits from their participation in RTO/ISO markets). 117 NRECA Comments (2018 RM18-9) at 27-28. IEEE-1547 is a standard of the Institute of Electrical and Electronics Engineers (IEEE) that provides a set of criteria and requirements for the interconnection of distributed energy resources. 118 Id. at 22-23. 119 Organization of MISO States Comments (2018 RM18-9) at 5-6. 51. Some commenters argue that, to relieve smaller entities of cost and coordination burdens, the Commission should at a minimum establish an express opt-in requirement for small distribution utilities similar to the one the Commission adopted in Order No. 719. 120 NRECA asserts that the distributed energy resource aggregation proposals would be costly for small cooperatives in rural, remote communities. 121 NRECA and TAPS recommend that the Commission require express permission from the relevant electric retail regulatory authority before the RTO/ISO may accept bids from distributed energy resource aggregations located on the system of a utility that distributes 4 million MWh or less, employing the same size threshold as the small utility opt-in allowed in Order No. 719-A. 122 120 APPA Comments (2018 RM18-9) at 19-20; TAPS Comments (RM16-23) at 16; TAPS Comments (2018 RM18-9) at 19-21. 121 NRECA Comments (2019 RM18-9) at 4-5. 122 Id.; TAPS Comments (RM16-23) at 16-17; TAPS Comments (2018 RM18-9) at 19 & n.27. 52. In contrast, other commenters caution against adopting the Order No. 719 construct. 123 Many of those commenters argue that an opt-out is not necessary because the Commission has exclusive jurisdiction over sales from distributed energy resource aggregators into RTO/ISO markets. 124 Moreover, several commenters argue that the responsibility for integrating emerging technologies into RTO/ISO markets rests with the Commission (while the states are responsible for managing the impacts on the distribution system) and that the Order No. 719 opt-out provision has effectively prevented the development of demand response in the Midwest and led to higher wholesale rates. 125 In addition, some commenters argue that providing states with an opt-out would be inconsistent with the Commission's denial of such an opt-out from electric storage participation in Order No. 841. 126 123 See, e.g., Advanced Energy Buyers Comments (2018 RM18-9) at 6; Advanced Energy Management Comments (2018 RM18-9) at 7-8, 10-11; Icetec Comments (2018 RM18-9) at 10-11; SEIA Comments (2018 RM18-9) at 8; Stem Comments (2018 RM18-9) at 4-6. 124 See, e.g., Advanced Energy Economy Comments (2018 RM18-9) at 18; Energy Storage Association Comments (2018 RM18-9) at 5; Icetec Comments (2018 RM18-9) at 11; Stem Comments (2018 RM18-9) at 4-5 (arguing that the FPA does not permit a state to use its jurisdiction over generation or local distribution facilities to prevent distributed energy resources or distributed energy resource aggregators from accessing Commission-jurisdictional markets); Sunrun Comments (2018 RM18-9) at 3-4 (arguing that whether wholesale sales originate from facilities on the transmission system, the distribution system, or behind the meter is immaterial to the Commission's jurisdiction and that FPA section 201(b) distinguishes between authority to regulate transactions and authority to regulate facilities). 125 Advanced Energy Economy Comments (RM16-23) at 44-45; Connecticut State Entities Comments (RM16-23) at 7; Organization of MISO States Comments (RM16-23) at 5 n.3 (noting concerns of Illinois Commission). 126 E.g., Advanced Energy Management Comments (2018 RM18-9) at 7-8 (citing Order No. 841, 162 FERC ¶ 61,127 at P 35). 53. With respect to the Commission's authority, some commenters assert that only the Commission has jurisdiction to determine eligibility for wholesale market participation 127 and that limiting or conditioning wholesale market participation through retail tariffs 128 or distribution interconnection agreements 129 would interfere with that jurisdiction. Advanced Energy Management asserts that because selling injections of electric energy in wholesale markets is governed under the FPA and distributed energy resources are not always behind the meter, there should not be a blanket opt-out available to relevant electric retail regulatory authorities. 130 127 Advanced Energy Economy Comments (2018 RM18-9) at 18 (citing Advanced Energy Econ., 161 FERC ¶ 61,245 (2017) (AEE Declaratory Order), reh'g denied, 163 FERC ¶ 61,030 (2018) (AEE Rehearing Order); Order No. 841, 162 FERC ¶ 61,127 at P 35); Advanced Energy Management Comments (2018 RM18-9) at 18; Icetec Comments (2018 RM18-9) at 11, 16. 128 Advanced Energy Economy Comments (2018 RM18-9) at 18. 129 Icetec Comments (2018 RM18-9) at 11; see Stem Comments (2018 RM18-9) at 15. 130 Advanced Energy Management Comments (RM16-23) at 7. Advanced Energy Management states that there should be no restriction on where distributed energy resource aggregators can recruit customers to participate in the wholesale market. Advanced Energy Management Comments (2018 RM18-9) at 11. 54. However, some commenters recognize that states do have the right to implement retail tariffs that disqualify a resource from participating in the state program if the resource elects to participate in RTO/ISO markets. 131 Several commenters caution that, if the Commission does consider an opt-out, it must be narrowly tailored. 132 Harvard Environmental Policy Initiative points to the Commission's proposed coordination provisions to demonstrate that the Commission will not preempt state authority over distribution system planning or create new authority for the Commission to allow distributed energy resources to connect to a distribution system without a utility's approval or knowledge. 133 131 See Advanced Energy Management Comments (2018 RM18-9) at 11; Stem Comments (2018 RM18-9) at 11; Sunrun Comments (2018 RM18-9) at 8. 132 See Advanced Energy Economy Comments (2018 RM18-9) at 21; Public Interest Organizations Comments (2018 RM18-9) at 8-10 (suggesting a Commission waiver process with a notice and comment period); Stem Comments (2018 RM18-9) at 6 (suggesting, as one basis to restrict distributed energy resource participation, the demonstration of a reliability violation that cannot be resolved through effective distribution system management). 133 Harvard Environmental Policy Initiative Comments (RM16-23) at 12. 55. In response to concerns about the impact of distributed energy resource aggregations on the distribution system, several commenters argue that distributed energy resource aggregation participation in RTO/ISO markets does not introduce additional reliability or cost concerns beyond those that are addressed through the interconnection process. 134 In contrast with commenters that suggest that distributed energy resource aggregations introduce reliability or cost concerns, Advanced Energy Economy argues that an opt-out would limit RTO/ISO visibility into distributed energy resource operations, thereby preventing RTO/ISO operators from using them to maintain reliability and improve resilience, and would limit an RTO's/ISO's ability to efficiently optimize all of the resources available in its region, risking increased costs to consumers. 135 134 See, e.g., Advanced Energy Economy Comments (2018 RM18-9) at 17-18; Advanced Energy Management Comments (2018 RM18-9) at 9-10; Stem Comments (2018 RM18-9) at 9, 15; Sunrun Comments (2018 RM18-9) at 6; see also New Jersey Board Comments (2018 RM18-9) at 4. 135 Advanced Energy Economy Comments (2018 RM18-9) at 15-16. b. Commission Determination 56. We decline to include a mechanism for all relevant electric retail regulatory authorities to prohibit all distributed energy resources from participating in the RTO/ISO markets through distributed energy resource aggregations ( i.e., to opt out). However, we modify the NOPR proposal in recognition of the potential indirect costs borne by smaller utilities due to this final rule. More specifically, and as discussed further below, we add § 35.28(g)(12)(iv) to the Commission's regulations to provide that RTOs/ISOs may not accept bids from distributed energy resource aggregators aggregating customers of small utilities 136 unless the relevant electric retail regulatory authority allows such customers of small utilities to participate in distributed energy resource aggregations ( i.e., to opt in). 136 As discussed below, we will consider small utilities to be those with a total electric output for the preceding fiscal year not exceeding 4 million MWh. 57. We disagree with the suggestion that the Commission is legally required to grant an opt-out that enables all relevant electric retail regulatory authorities to prohibit all distributed energy resources from participating in the RTO/ISO markets through distributed energy resource aggregations. The Commission has exclusive jurisdiction over the wholesale markets and the criteria for participation in those markets, including the wholesale market rules for participation of resources connected at or below distribution-level voltages. 137 As the Commission previously has found, establishing the criteria for participation in RTO/ISO markets, including with respect to resources located on the distribution system or behind the meter, is essential to the Commission's ability to fulfill its statutory responsibility to ensure that wholesale rates are just and reasonable. 138 137 Order No. 841-A, 167 FERC ¶ 61,154 at P 38; Order No. 841, 162 FERC ¶ 61,127 at P 35 (citing EPSA, 136 S. Ct. 760; AEE Declaratory Order, 161 FERC ¶ 61,245 at PP 59-60; see also Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1187 (“FERC has the exclusive authority to determine who may participate in the wholesale markets.”); Nat'l Ass'n of Regulatory Util. Comm'rs v. FERC, 475 F.3d 1277, 1280-82 (D.C. Cir. 2007); Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667, 696 (D.C. Cir. 2000). 138 Order No. 841-A, 167 FERC ¶ 61,154 at P 31; see also id. P 38 (citing AEE Rehearing Order, 163 FERC ¶ 61,030 at P 36). The Supreme Court also has recognized that the Commission extensively regulates the structure and rules of wholesale auctions, in order to ensure that they produce just and reasonable results. See Hughes v. Talen Energy Mktg., LLC, 136 S. Ct. 1288, 1293-94 (2016) ( Hughes ); EPSA, 136 S. Ct. at 769. 58. This final rule addresses rules for participation in RTO/ISO markets by distributed energy resource aggregators. Like the Commission's rules governing demand response and electric storage resource participation in RTO/ISO markets, this final rule “addresses—and addresses only—transactions occurring on the wholesale market.” 139 Thus, we continue to find that the FPA and relevant precedent does not legally compel the Commission to adopt a relevant electric retail regulatory authority opt-out with respect to participation in RTO/ISO markets by all resources interconnected on a distribution system or located behind a retail meter. 140 As the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) recently explained, the Commission has jurisdiction to decide which entities may participate in wholesale markets, which means that a relevant electric retail regulatory authority cannot broadly prohibit the participation in RTO/ISO markets of all distributed energy resources or of all distributed energy resource aggregators as doing so would interfere with the Commission's statutory obligation to ensure that wholesale electricity markets produce just and reasonable rates. 141 139 EPSA, 136 S. Ct. at 776; see also Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1186, 1189 (finding that “Order No. 841 solely targets the manner in which an [electric storage resource] may participate in wholesale markets” and that Order Nos. 841 and 841-A “do nothing more than regulate matters concerning federal transactions”); Order No. 841-A, 167 FERC ¶ 61,154 at P 44. 140 Order No. 841-A, 167 FERC ¶ 61,154 at P 32; see also AEE Declaratory Order, 161 FERC ¶ 61,245 at P 62 (citing EPSA, 136 S. Ct. at 776). 141 See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1187 (“[B]ecause FERC has the exclusive authority to determine who may participate in the wholesale markets, the Supremacy Clause . . . requires that [s]tates not interfere. . . . FERC's statement in Order No. 841-A that [s]tates may not block RTO/ISO market participation `through conditions on the receipt of retail service,' or impose any `condition[ ] aimed directly at the RTO/ISO markets, even if contained in the terms of retail service,' is simply a restatement of the well-established principles of federal preemption.”) (quoting Order No. 841-A, 167 FERC ¶ 61,154 at P 41) (finding that states cannot intrude on the Commission's jurisdiction by prohibiting all consumers from selling into the wholesale market) (citing AEE Rehearing Order, 163 FERC ¶ 61,030 at P 37; AEE Declaratory Order, 161 FERC ¶ 61,245 at P 61); see also Hughes, 136 S. Ct. at 1298 (“States may not seek to achieve ends, however legitimate, through regulatory means that intrude on FERC's authority over interstate wholesale rates . . . .”); Oneok, Inc. v. Learjet, Inc., 575 U.S. 373, 386 (2015) (finding that the proper test for determining whether a state action is preempted is “whether the challenged measures are 'aimed directly at interstate purchasers and wholesalers for resale' or not”) (quoting N. Natural Gas Co. v. State Corp. Comm'n of Kan., 372 U.S. 84, 94 (1963)); Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1187 (similar). 59. As commenters point out, the Commission in Order No. 719 granted relevant electric retail regulatory authorities an opt-out from allowing retail customers to participate directly in wholesale markets through aggregations of demand response resources. 142 As noted above, the Commission was not obligated to provide such an opt-out, but rather did so as an exercise of its discretion. 143 Consistent with that previous exercise of the Commission's discretion, we clarify that this final rule does not affect the ability of relevant electric retail regulatory authorities to prohibit retail customers' demand response from being bid into RTO/ISO markets by aggregators. 144 142 Order No. 719, 125 FERC ¶ 61,071 at PP 154-55. 143 See EPSA, 136 S. Ct. at 779 (describing the opt-out as a “notable solicitude toward the States,” in recognition of “the linkage between wholesale and retail markets and the States' role in overseeing retail sales”); Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1190 (“Local Utility Petitioners correctly acknowledge that EPSA did not condition its holdings on the existence of an opt-out.”). 144 See 18 CFR 35.28(g)(1)(iii). Similarly, we recognize Kentucky's existing right to exclude energy efficiency resources from wholesale market participation. AEE Declaratory Order, 161 FERC ¶ 61,245 at P 66. 60. However, unlike aggregators of demand response, distributed energy resource aggregators are capable of engaging in sales for resale of electricity and those distributed energy resource aggregators making such sales in the RTO/ISO markets are public utilities subject to the Commission's jurisdiction. 145 We recognize that the participation of distributed energy resource aggregators in RTO/ISO markets necessarily has effects on the distribution system, 146 and, as in Order No. 841, we have considered those effects in evaluating whether to exercise our discretion to grant an opt-out. Upon such consideration, we find that the benefits of allowing distributed energy resource aggregators broader access to the wholesale market outweigh the policy considerations in favor of an opt-out. Specifically, we find that the reliability, transparency, and market-related benefits of removing barriers to the participation of distributed energy resource aggregators in RTO/ISO markets are significant. Considering those benefits, 147 we are not persuaded that concerns about potential effects on the distribution system justify adopting an opt-out that could substantially limit that participation. 148 As discussed below, there are several ways that relevant electric retail regulatory authorities may address any such concerns without broadly prohibiting the participation of distributed energy resources or distributed energy resource aggregators in RTO/ISO markets. Therefore, we do not find it appropriate and thus decline to exercise discretion to adopt a broad opt-out with respect to distributed energy resource aggregations in this final rule. 145 See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1190 (citing Order No. 841-A, 167 FERC ¶ 61,154 at PP 51-52 (distinguishing [electric storage resource] participation in wholesale sales from demand response resources participating in wholesale bids)). 146 See Order No. 841-A, 167 FERC ¶ 61,154 at P 56 (citing EPSA, 136 S. Ct. at 776). 147 See, e.g., supra PP 4 (explaining that integrating distributed energy resources' capabilities into RTO/ISO planning and operations will help the RTOs/ISOs account for the impacts of these resources on installed capacity requirements and day-ahead energy demand, thereby reducing uncertainty in load forecasts and reducing the risk of over procurement of resources), 27 (stating that distributed energy resource aggregations can provide new grid services and enhance competition in wholesale markets as new market participants), 29 (finding that the reforms in this final rule will enhance the competitiveness, and in turn the efficiency, of RTO/ISO markets); see, e.g., infra PP 114 (explaining that the revised definition of distributed energy resource adopted in this final rule is technology-neutral, thereby ensuring that any resource that is technically capable of providing wholesale services through aggregation is eligible to do so, which enhances competition in the RTO/ISO markets), 142 (stating that requiring RTOs/ISOs to allow heterogeneous aggregations will further enhance competition in RTO/ISO markets by ensuring that complementary resources, including those with different physical and operational characteristics, can meet qualification and performance requirements), 160, 163 (discussing how the final rule enhances competition and improves reliability by requiring RTOs/ISOs to allow participation of distributed energy resources in both wholesale and retail or multiple wholesale programs), 173 (finding that requiring RTOs/ISOs to establish a minimum size requirement not to exceed 100 kW will remove a barrier to distributed energy resource aggregations, improve competition in RTO/ISO markets, avoid confusion about appropriate requirements, and help ensure just and reasonable rates), 205 (discussing the benefits of single-node and multi-node aggregations). 148 The list of benefits catalogued in the preceding footnote includes many of the same benefits that the D.C. Circuit pointed to when explaining why the Commission's decision not to provide an opt-out in Order No. 841 was not an unreasoned departure from Order No. 719. See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1190 (explaining that the Commission's decision to forgo an opt-out was “neither unexplained nor unsupported” and pointing to the Commission's consideration of the benefits of enabling broad participation of electric storage resources, including on “competition,” “prices,” and the “diversity” of resource types that can participate in RTO/ISO markets). 61. We continue to recognize the important role that state and local authorities play with respect to distributed energy resources and their potential aggregation. This final rule does not curtail that authority. As in Order No. 841, the reforms adopted in this final rule do not preclude or limit state or local regulation of: Retail rates; distribution system planning, distribution system operations, or distribution system reliability; distributed energy resource facility siting; and interconnection of resources to the distribution system that are not subject to Commission jurisdiction, as discussed further below. 149 In addition, and again as recognized in Order No. 841, under a relevant electric retail regulatory authority's jurisdiction over its retail programs, such a regulatory authority is able to condition a distributed energy resource's participation in a retail distributed energy resource program on that resource not also participating in the RTO/ISO markets. 150 This should allow a retail regulatory authority to address any specific concerns. 149 See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1188 (noting that the similar decision in “Order No. 841 does not `usurp[ ] state power' ” and pointing to the fact that “States retain their authority to impose safety and reliability requirements without interference from FERC, and [electric storage resources] must still obtain all requisite permits, agreements, and other documentation necessary to participate in federal wholesale markets”) (quoting EPSA, 136 S. Ct. at 777). 150 See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1188 (“States retain their authority to prohibit local [electric storage resources] from participating in the interstate and intrastate markets simultaneously, meaning [s]tates can force local [electric storage resources] to choose which market they wish to participate in.”); Order No. 841-A, 167 FERC ¶ 61,154 at P 41 (acknowledging that states have the authority to include conditions in their own retail distributed energy resource or retail electric storage resource programs that prohibit any participating resources from also selling into RTO/ISO markets because, in that scenario, the owner of a resource has a choice between participating in the retail market or wholesale market); see also Arkansas Commission Comments (2019 RM18-9) at 2-4. 62. As to commenters' concerns regarding cost impacts on the distribution system, we note that, in Order No. 841, with respect to concerns about electric storage resources' use of the distribution system, the Commission observed that, in PJM Interconnection L.L.C., the Commission permitted a distribution utility to assess a wholesale distribution charge to an electric storage resource participating in the PJM markets. Consistent with this precedent, the Commission found 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. 151 Consistent with that conclusion, we find that it may also be appropriate, on a case-by-case basis, for distribution utilities to assess a wholesale distribution charge on distributed energy resource aggregators participating in RTO/ISO markets. 151 Order No. 841, 162 FERC ¶ 61,127 at P 296 (citing PJM Interconnection L.L.C., 149 FERC ¶ 61,185, at P 12 (2014) (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 (2015)). 63. Moreover, we recognize that, where appropriate, the Commission previously has taken steps to address a potential burden imposed by a Commission final rule on smaller entities. For instance, the Commission has distinguished small utilities whose total electric output for the preceding fiscal year did not exceed 4 million MWh 152 for purposes of granting waivers from Order No. 889's 153 standards of conduct for transmission providers 154 and determining whether a specific cooperative should be considered a non-public utility outside the scope of a refund obligation involving the California energy crisis. 155 In Order No. 719-A, the Commission provided an opt-in for small utilities, which requires the relevant electric retail regulatory authority to give affirmative permission for the demand response of customers of utilities that distributed 4 million MWh or less in the previous fiscal year to be bid into RTO/ISO markets by an aggregator of those retail customers. 156 152 The 4 million MWh cutoff stems from the Small Business Size Standards component of the North American Industry Classification System, which previously defined a small utility as one that, including its affiliates, is primarily engaged in the generation, transmission, or distribution of electric energy for sale, and whose total electric output for the preceding fiscal year did not exceed 4 million MWh. 13 CFR 121.201 (2013) (Sector 22, Utilities, North American Industry Classification System (NAICS)). Currently, the number of employees is the basis used to measure whether electric power generation, transmission, and distribution industries are small businesses. 13 CFR 121.201 (2020) (Sector 22, Utilities, NAICS). 153 Open Access Same-Time Information System & Standards of Conduct, Order No. 889, FERC Stats. & Regs. ¶ 31,035 (1996) (cross-referenced at 75 FERC ¶ 61,078), clarified, 76 FERC ¶ 61,009 (1996), order on reh'g, Order No. 889-A, FERC Stats. & Regs. ¶ 31,049 (cross-referenced at 78 FERC ¶ 61,221), reh'g denied, Order No. 889-B, 81 FERC ¶ 61,253 (1997), aff'd in relevant part sub nom. Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667 (D.C. Cir. 2000). 154 See Wolverine Power Supply Coop., 127 FERC ¶ 61,159, at P 15 (2009). 155 See San Diego Gas & Elec. Co. v. Sellers of Energy & Ancillary Servs. in Mkts. Operated by the CAISO, 125 FERC ¶ 61,297, at P 24 (2008). 156 Order No. 719-A, 128 FERC ¶ 61,059 at PP 51, 59-60. 64. Notwithstanding our finding that the benefits of this final rule outweigh the policy considerations in favor of a broad opt-out, we acknowledge that this final rule may place a potentially greater burden on smaller utility systems. 157 Recognizing this potentially greater burden on small utility systems, we will exercise our discretion to include in this final rule an opt-in mechanism for small utilities similar to that provided in Order No. 719-A. Specifically, we determine that customers of utilities that distributed 4 million MWh or less in the previous fiscal year may not participate in distributed energy resource aggregations unless the relevant electric retail regulatory authority affirmatively allows such customers to participate in distributed energy resource aggregations. 157 See supra P 50 (citing APPA Comments (2018 RM18-9) at 7, 9-10; APPA/NRECA Comments (RM16-23) at 39; NRECA Comments (2018 RM18-9) at 14, 26-28; TAPS Comments (RM16-23) at 15-16). 65. We therefore direct each RTO/ISO to amend its market rules as necessary to (1) accept bids from a distributed energy resource aggregator if its aggregation includes distributed energy resources that are customers of utilities that distributed more than 4 million MWh in the previous fiscal year, and (2) not accept bids from distributed energy resource aggregators if its aggregation includes distributed energy resources that are customers of utilities that distributed 4 million MWh or less in the previous fiscal year, unless the relevant electric retail regulatory authority permits such customers to be bid into RTO/ISO markets by a distributed energy resource aggregator. We conclude that this opt-in mechanism appropriately balances the benefits that distributed energy resource aggregation can provide to RTO/ISO markets with a recognition of the burdens that such aggregation may create for small utilities in particular. Accordingly, we find that adopting this mechanism helps to ensure that any “negative effects” of this final rule are “outweighed by the benefits,” 158 listed above, 159 that it provides to RTO/ISO markets. 158 Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1190. 159 See supra n.147. 66. On compliance, we require each RTO/ISO to explain how it will implement this small utility opt-in. We note that an RTO/ISO may choose to implement this requirement in a similar manner as it currently implements the small utility opt-in provision under Order No. 719-A. 67. Although the Small Business Administration (SBA) no longer defines small utilities based on total electric output for the preceding fiscal year of 4 million MWh or less, 160 we use this standard for purposes of this final rule, as it is consistent with the Commission's use of this standard for the opt-in adopted in Order No. 719-A, 161 and is supported by commenters asking the Commission to include an opt-in as part of this rule. 162 160 The SBA now defines small utilities based on the number of employees. 13 CFR 121.201 (establishing a threshold of 1,000 employees for electric power distribution utilities). 161 Order No. 719-A, 128 FERC ¶ 61,059 at PP 51, 59-60. 162 NRECA Comments (2019 RM18-9) at 4-5; TAPS Comments (RM16-23) at 16-17; TAPS Comments (2018 RM18-9) at 19 & n.27. 3. Interconnection 68. The NOPR did not propose any changes to RTO/ISO policies and procedures for the interconnection of distributed energy resources. However, the Commission stated that comments demonstrated that current RTO/ISO market rules often limit the services that distributed energy resources are eligible to provide, including by imposing prohibitively expensive or otherwise burdensome interconnection requirements. 163 The Commission also recognized that RTO/ISO demand response models often prohibit distributed energy resources from injecting power back onto the grid in part because they are not studied in the interconnection process. 164 163 See NOPR, 157 FERC ¶ 61,121 at P 13 & n.30 (citing Energy Storage Association's comment that interconnection processes can pose prohibitively high transaction costs for the small project sizes that characterize behind-the-meter storage, which creates undue burdens on behind-the-meter storage participation in most RTOs/ISOs). 164 See id. P 15 & n.32 (citing PJM's response that demand-side resources are not studied by PJM through the generation interconnection process and are not allowed to inject energy beyond the customer's meter and onto the distribution or transmission system). 69. On September 5, 2019, Commission staff issued data requests to each of the six RTOs/ISOs seeking information regarding their policies and procedures that affect the interconnection of distributed energy resources. The RTOs/ISOs filed their responses in October 2019, and several commenters subsequently submitted reply comments. a. Comments and Data Request Responses 70. Several commenters state that any final rule should make clear that the interconnection of resources on a state-jurisdictional distribution system remains the responsibility of the distribution utilities and the states. 165 The Maryland and New Jersey Commissions seek confirmation that state jurisdiction would remain unchanged as to the siting and costs associated with interconnecting resources to the distribution system, and would apply to all resources, including distributed energy resources, having or seeking interconnection or access to the wholesale market. 166 The Maryland and New Jersey Commissions request that the Commission confirm that, in the context of interconnection requests for wholesale market access, states will continue to have discretion to review distribution utility company tariffs to justify how costs are allocated or how the resources and their proposed interconnection locations benefit ultimate ratepayers. 167 The Massachusetts Commission makes similar arguments. 168 165 See, e.g., IRC Comments (RM16-23) at 9-10; Massachusetts Municipal Electric Comments (RM16-23) at 4; Massachusetts State Entities Comments (2019 RM18-9) at 11; NESCOE Comments (RM16-23) at 16; TAPS Comments (RM16-23) at 15. 166 Maryland and New Jersey Commissions Comments (RM16-23) at 2-3. 167 Id. at 3. 168 Massachusetts Commission Comments (RM16-23) at 11. 71. In order to avoid uncertainty and litigation, Duke Energy and EEI ask for additional clarity with respect to state-versus-Commission jurisdiction affecting interconnection, distribution planning, and investments to enable distributed energy resource aggregation. 169 TAPS asks that any final rule make clear that, absent proper application of a Commission-jurisdictional Generator Interconnection Agreement, the Commission does not seek to alter or preempt local and state rules governing interconnection to the distribution system. 170 Furthermore, TAPS asserts that, given the limited circumstances in which the Commission has the authority to require interconnection to, or deliveries over, distribution facilities, the NOPR appropriately does not attempt to establish new rules or requirements governing the details of interconnection of distributed energy resources. 171 169 Duke Energy Comments (RM16-23) at 4; EEI Comments (RM16-23) at 25. 170 TAPS Comments (RM16-23) at 15. 171 Id. at 5-9. 72. As to their own interconnection procedures and experience with distributed energy resources, ISO-NE, NYISO, and PJM's data request responses reference Order Nos. 2003 and 2006 and indicate that they apply the jurisdictional test for dual-use facilities established in those orders. 172 As explained in more detail below, Order Nos. 2003 and 2006 established what some RTOs/ISOs have labeled the “first use” test, under which the first interconnection to a distribution facility for the purpose of making wholesale sales is not subject to Commission jurisdiction, but triggers jurisdiction for any subsequent wholesale interconnection requests to the same distribution facility. 173 MISO explains that no distributed energy resources have requested to interconnect to distribution facilities subject to the MISO tariff but indicates that it would apply the jurisdictional test in Order Nos. 2003 and 2006 in processing subsequent interconnection requests to such facilities. 174 SPP states that it would consider an interconnection to be Commission jurisdictional only if the relevant distribution facilities were under SPP's functional control, and SPP's data request response appears to indicate that, even after the first wholesale use, such distribution facilities would not be subject to its tariff. 175 CAISO states that, if a distributed energy resource plans to participate in CAISO's markets, the interconnection is Commission jurisdictional pursuant to the utility distribution company's Wholesale Distribution Access Tariff. 176 172 ISO-NE Data Request Response (2019 RM18-9) at 3-4, 9-10; NYISO Data Request Response (2019 RM18-9) at 1-2; PJM Data Request Response (2019 RM18-9) at 2, 5. 173 Standardization of Generator Interconnection Agreements & Procedures, Order No. 2003, 104 FERC ¶ 61,103, at P 804 (2003), order on reh'g, Order No. 2003-A, 106 FERC ¶ 61,220, order on reh'g, Order No. 2003-B, 109 FERC ¶ 61,287 (2004), order on reh'g, Order No. 2003-C, 111 FERC ¶ 61,401 (2005), aff'd sub nom. Nat'l Ass'n of Regulatory Util. Comm'rs v. FERC, 475 F.3d 1277 (D.C. Cir. 2007), cert. denied, 552 U.S. 1230 (2008); Standardization of Small Generator Interconnection Agreements and Procedures, Order No. 2006, 111 FERC ¶ 61,220, order on reh'g, Order No. 2006-A, 113 FERC ¶ 61,195 (2005), order granting clarification, Order No. 2006-B, 116 FERC ¶ 61,046 (2006), corrected, 71 FR 53,965 (Sept. 13, 2006); see also Reform of Generator Interconnection Procedures and Agreements, Order No. 845, 163 FERC ¶ 61,043 (2018), errata notice, 167 FERC ¶ 61,123, order on reh'g, Order No. 845-A, 166 FERC ¶ 61,137 (2019), errata notice, 167 FERC ¶ 61,124, order on reh'g, Order No. 845-B, 168 FERC ¶ 61,092 (2019). We note that Order No. 845 did not make any changes to the “first use” test for distribution interconnection at issue here. 174 See MISO Data Request Response (2019 RM18-9) at 6-7 (“If the [distributed energy resource] interconnection customer intends to connect the [distributed energy resource] unit to facilities listed on [MISO's list of transmission facilities transferred to its functional control] or a distribution facility that provides Wholesale Distribution Service, then the Interconnection Customer is required to follow the Generator Interconnection Procedures (Attachment X) of MISO Tariff. If [the distributed energy resource] is not interconnecting to such facilities, then the interconnection customer is required to follow the interconnection rules of the Host Distribution Provider.”). 175 See SPP Data Request Response (2019 RM18-9) at 2-3, 6 (“Such distribution facilities are not subject to the Tariff in this situation. The Tariff would not apply to non-jurisdictional facilities; however, there might be an obligation for the utility to coordinate with SPP regarding potential impacts to the SPP Transmission System.”). 176 CAISO Data Request Response (2019 RM18-9) at 2-4 (explaining that “each CAISO transmission owner that is [Commission] jurisdictional and operates distribution facilities has a Wholesale Distribution Access Tariff with the express purpose of enabling [distributed energy resources] to interconnect to the distribution grid and still participate in the CAISO wholesale markets”). 73. In response to CAISO's data request response, SoCal Edison clarifies that every SoCal Edison distribution facility with which a new resource seeks interconnection pursuant to the Wholesale Distribution Access Tariff is already subject to an OATT for purposes of making wholesale sales. 177 Pacific Gas & Electric states that the Commission-jurisdictional Wholesale Distribution Access Tariff is not only the primary, but also should be the exclusive, means of interconnecting certain distributed energy resources that wish to export energy for purposes of participating in the wholesale markets. 178 It states that this is important because California's Rule 21, a state-jurisdictional tariff, does not currently provide a methodology to separate wholesale from retail use and thus could allow bypass of retail rates for behind-the-meter distributed energy resources that both consume and export electricity for both retail and wholesale purposes. 179 177 SoCal Edison Comments (2019 RM18-9) at 2. 178 Pacific Gas & Electric Comments (2019 RM18-9) at 4. It states, however, that some wholesale market-participating distributed energy resources interconnect today under California's Rule 21, a state-jurisdictional tariff. For instance, it asserts that Rule 21 applies to Qualifying Facilities (QF) that make net surplus sales under California's net metering program, which are considered qualifying sales under the Public Utilities Regulatory Policy Act (PURPA). 179 Id. at 5. 74. Pacific Gas & Electric notes that CAISO's existing Demand Response Provider participation model allows existing retail loads interconnected under state-approved tariffs to participate in wholesale markets as non-exporting Proxy Demand Response resources without the risk of bypassing retail rates. 180 Pacific Gas & Electric explains that it and CAISO can avoid the risk of retail bypass by requiring any individual distributed energy resources in a distributed energy resource aggregation that had previously interconnected as non-exporting resources under California's Rule 21 and that now wish to export electricity to participate in wholesale markets to seek a new interconnection pursuant to, or to convert their existing interconnection to an agreement under, the Wholesale Distribution Access Tariff. Pacific Gas & Electric states that this framework complies with the Commission's implementation of the jurisdictional boundaries set forth in federal law. 181 180 Id. at 6. 181 Id. at app. A. 75. AMP asserts that some of the RTO/ISO responses erroneously state that a distribution facility becomes Commission jurisdictional when a wholesale sale occurs over that distribution facility. AMP asserts that it is the wholesale transaction, not the distribution line itself, that is subject to the Commission's jurisdiction. 182 AMP also notes that RTO/ISO processes should refer to local jurisdiction and interconnection processes in addition to state processes because decision making is often done at the local level pursuant to local jurisdictional authority separate and distinct from state regulatory authority. 182 AMP Comments (2019 RM18-9) at 2. 76. Several commenters request that the Commission revise its interconnection policy as it applies to distributed energy resources. 183 Advanced Energy Economy states that the Commission could work with relevant electric retail regulatory authorities and distribution utilities to address interconnection requirements through standard interconnection tariffs in those states where distributed energy resources are not classified as QFs under PURPA 184 and for which no retail tariff exists. 185 183 See, e.g., Advanced Energy Economy Comments (2018 RM18-9) at 19-21; Eversource Comments (2018 RM18-9) at 9-10; Icetec Comments (2018 RM18-9) at 2-3, 11. 184 16 U.S.C. 796(17)-(18), 824a-3. 185 Advanced Energy Economy Comments (2018 RM18-9) at 20-21 (asserting that resources in such states have no clear path to interconnection to the distribution system and a limited ability to participate in any wholesale distributed energy resource aggregation program). 77. Eversource argues that, because the participation of distributed energy resources in RTO/ISO markets could convert a previously state-jurisdictional distribution facility into a Commission-jurisdictional distribution facility and potentially necessitate hundreds or thousands of interconnection agreement filings, the Commission should revisit the interconnection agreement filing criteria for distributed energy resources and develop a process that fairly balances the administrative burden on parties with respect for Commission and state jurisdictional lines. 186 Icetec requests that the Commission reinforce the traditional bright line between Commission and state jurisdiction at the transmission-distribution boundary by confirming that relevant electric retail regulatory authorities have sole jurisdiction over the interconnection of resources to the distribution system, while ensuring that that jurisdiction may not be used to discriminatorily restrict or condition distributed energy resource participation in RTO/ISO markets. 187 186 Eversource Comments (2018 RM18-9) at 9-10. 187 Icetec Comments (2018 RM18-9) at 2-3, 11. 78. Advanced Energy Management requests that the Commission recognize the clear distinction between the distribution interconnection process and the wholesale market registration process. 188 Advanced Energy Management states that the Commission has authority over the criteria for wholesale market registration and participation, and that state and local regulators have authority over the criteria for a non-discriminatory distribution interconnection process that ensures that interconnecting distributed energy resources that wish to participate in the wholesale market do not create distribution reliability issues. 189 According to Advanced Energy Management, if a distributed energy resource imposes costs on the grid when it interconnects, regardless of reason, those costs can be recovered as interconnection costs under the authority of state regulators. 190 188 Advanced Energy Management Comments (2018 RM18-9) at 18; Advanced Energy Management Comments (2019 RM18-9) at 3. 189 Advanced Energy Management Comments (2018 RM18-9) at 18-19; Advanced Energy Management Comments (2019 RM18-9) at 3. 190 Advanced Energy Management Comments (2018 RM18-9) at 10. 79. Stem recommends that the Commission initiate a process to revise distribution utilities' interconnection tariffs ( e.g., the Wholesale Distribution Access Tariffs in California) so that (1) individual distributed energy resources, participating through an aggregator, are not required to do more than satisfy the local interconnection requirements in order to offer residual capability through the RTO/ISO markets, and (2) the tariffs accommodate the potential for coordinated dispatch of a distributed energy resource aggregation such as including limitations on aggregated behavior due to distribution system constraints, which would be communicated to the RTO/ISO as a reduced size resource during registration as a market participant. 191 Microgrid Resource Coalition similarly asserts that a responsive distributed energy resource needs to specify its expected modes of operation during the interconnection process by establishing its physical capabilities subject to any residual distribution system constraints, which will establish the limits of its ability to provide services to the grid. 192 191 Stem Comments (2018 RM18-9) at 9-10, 15-16. 192 Microgrid Resources Coalition Comments (2018 RM18-9) at 12. 80. Public Interest Organizations argue that some RTO/ISO tariffs present significant barriers to distributed energy resource interconnection, particularly those that require individual distributed energy resources to complete a wholesale interconnection process. 193 Therefore, Public Interest Organizations propose that distributed energy resource interconnection be solely under retail jurisdiction, and that RTO/ISO purview over distributed energy resource aggregations be limited to market rules, and where cause is shown, for transmission system impacts. 194 193 Public Interest Organizations Comments (2019 RM18-9) at 3. 194 Id. at 3-4. 81. Some commenters contend that PJM's interconnection processes impose significant transaction costs on distributed energy resources. 195 Icetec asserts that every distributed energy resource that wishes to participate in PJM markets, no matter how small, must go through PJM's interconnection queue; that an individual residential owner must file an OATT with the Commission registering the 120 volt wiring in its house as a transmission provider before a third party can apply to interconnect distributed energy resources located behind a residential meter; and that PJM refers most distribution-connected projects to distribution utilities for further study, even if the resource is already interconnected and injecting power under a distribution interconnection tariff. 196 Icetec claims that, in contrast, distribution utilities may operate distributed energy resources attached to their systems without going through RTO/ISO interconnection, which creates partially discriminatory market access by placing merchant distributed energy resource developers at a significant disadvantage relative to incumbent utilities. 197 Icetec requests that the Commission require RTOs/ISOs to accept a distributed energy resource as deliverable to the wholesale transmission system, with further studies limited to the transmission system, when it is properly connected to the distribution system under an arrangement approved by the relevant electric retail regulatory authority. 198 Icetec also asks the Commission to both allow distributed energy resources that deliver to the transmission system at a bus that is primarily load-serving to participate in wholesale markets without further transmission studies and to direct RTOs/ISOs to file tariff revisions setting procedures and timelines for interconnection studies carried out by distribution utilities for interconnection of distributed energy resources intending to participate in RTO/ISO markets. 199 195 Icetec Comments (2018 RM18-9) at 7-9; UofD/Mensah Comments (2019 RM18-9) at 2-5. 196 Icetec Comments (2018 RM18-9) at 7-8. 197 Id. at 8. 198 Id. at 8-9. 199 Id. at 9. 82. UofD/Mensah similarly contend that PJM's existing processes are unjust and unreasonable in light of barriers that they present to small resources that interconnect under state or local jurisdiction. 200 According to UofD/Mensah, PJM imposes a more burdensome market participation process on resources that interconnect under state or local jurisdiction than on resources that interconnect under Commission jurisdiction. 201 Specifically, they contend that PJM's Small Generator Interconnection Procedures use screens based only on the local distribution system rather than studies to assess safety and reliability, require PJM to provide interconnection customers that pass the screens an Interconnection Service Agreement within 15-20 days of the request, and only cost $500—$5,000 depending on the circumstances. They assert, however, that for non-jurisdictional interconnections, each resource must wait up to six months for the queue study process to begin and undergo a Feasibility Study and sometimes a System Impact Study, expected to take three months each, before approval. They assert that UofD was required to provide deposits totaling $27,000 for its 933 kW electric vehicle project, which is nine times the deposit that they would have been charged if the interconnection was Commission jurisdictional. 200 UofD/Mensah Comments (2019 RM18-9) at 2, 4. 201 Id. at 2. 83. UofD/Mensah therefore request that the Commission align the RTO/ISO market participation process requirements for non-Commission-jurisdictional interconnections with the Commission's Small Generator Interconnection Procedures. 202 UofD/Mensah also recommend that the current distributed energy resource interconnection process be improved by permitting a subset of small, behind-the-meter resources that already have state or local interconnection approval to be automatically approved to provide wholesale services. 203 For those resources not automatically approved, UofD/Mensah recommend that the Commission limit the allowable cost and time of existing RTO/ISO processes and allow aggregations to be studied as a group. Finally, after correcting the non-Commission-jurisdictional interconnection process, UofD/Mensah recommend that the Commission consider declining to exercise its authority over the interconnection of distributed energy resources that seek to provide wholesale services or at least clarify the “dual-use doctrine” in specific cases so that developers need not rely on RTOs/ISOs to interpret it. 204 In response to UofD/Mensah, PJM notes that its stakeholder process is currently considering reforms designed to provide a “fast-track” avenue for processing energy-only resources under 2 MW. 205 202 Id. at 4-5. 203 Id. at 5. 204 Id. at 5-6. 205 PJM Reply Comments (2019 RM18-9) at 4. 84. Advanced Energy Economy asserts that the Commission does not need to address interconnection practices in order to issue a final rule, and suggests that, if the Commission is interested in exploring a different approach for interconnection of distributed energy resources, it should do so in a separate proceeding. 206 Advanced Energy Economy also asserts that each of the RTOs/ISOs described processes that are generally consistent with the Commission's long-standing “dual use” policy. 207 206 Advanced Energy Economy Comments (2019 RM18-9) at 1-2, 7-8. 207 Id. at 2-3. 85. Several commenters argue that distribution interconnection requirements should address distribution-level reliability concerns that are raised by the interconnection of distributed energy resources to distribution systems. 208 Vice Chairman Place of the Pennsylvania Public Utilities Commission argues for primacy of a distribution utility's interconnection requirements in determining the eligibility of distributed energy resources to participate in distributed energy resource aggregations, and asserts that distributed energy resource aggregations may necessitate new interconnection requirements or study. 209 Vice Chairman Place asserts that distribution utilities are aut [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2020-20973. Public record. Not legal advice.