135 FERC ¶ 61,240 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Chapter I 

[Docket Nos. RM11-24-000 and AD10-13-000] 

Third-Party Provision of Ancillary Services; Accounting and Financial Reporting for 

New Electric Storage Technologies 

(June 16, 2011) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Notice of Inquiry. 

SUMMARY: In this Notice of Inquiry (NOI), the Commission seeks comment on two 

sets of separate, but related issues. First, we seek comment on ways in which we can 

facilitate the development of robust competitive markets for the provision of ancillary 

services from all resource types. Second, the Commission is interested in issues unique 

to storage devices in light of the role they can play in providing multiple services, 

including ancillary services. As demonstrated by recent cases that have come before the 

Commission, there is growing interest in rate flexibility by both purchasers and sellers of 

ancillary services. A variety of resources are poised to provide ancillary services but may 

be frustrated from doing so by certain aspects of the Commission’s market-based rate 

policies coupled with a lack of access to the information that could help satisfy the 

requirements of those policies. Those with an obligation to purchase ancillary services 

have raised concerns with the availability of those services. In reviewing ways to foster a 
Docket Nos. RM11-24-000 and AD10-13-000 - 2 - 

more robust ancillary services market, the Commission identified certain issues regarding 

the use of electric storage as an ancillary service resource that warranted consideration. 

Over time, those issues expanded into more global questions as to the role that electric 

storage may play in a competitive market, including how electric storage should be 

compensated for the full range of services it provides under the Federal Power Act, and 

transparency issues regarding the Commission’s current accounting and reporting 

requirements as applied to electric storage.. . As such, the Commission seeks comment 

on: (1) existing restrictions on third-party provision of ancillary services, irrespective of 

the technologies used for such provision; and (2) the adequacy of current accounting and 

reporting requirements as they pertain to the oversight of jurisdictional entities using 

electric storage devices. 

DATES: Comments are due 60 days after publication in the FEDERAL REGISTER.

ADDRESSES: You may submit comments, identified by docket number and in 

accordance with the requirements posted on the Commission’s web site, 

http://www.ferc.gov. Comments may be submitted by any of the following methods: 

 Agency Web Site: Documents created electronically using word processing 

software should be filed in native applications or print-to-PDF format and not in a 

scanned format, at http://www.ferc.gov/docs-filing/efiling.asp. 

 Mail/Hand Delivery: Commenters unable to file comments electronically must 

mail or hand deliver an original and copy of their comments to: Federal Energy 

Regulatory Commission, Secretary of the Commission, 888 First Street, NE, 

Washington, DC 20426. These requirements can be found on the Commission’s 
Docket Nos. RM11-24-000 and AD10-13-000 - 3 - 

web site, see, e.g., the “Quick Reference Guide for Paper Submissions,” available 

at http://www.ferc.gov/docs-filing/efiling.asp, or via phone from Online Support at 

(202) 502-6652 or toll-free at 1-866-208-3676. 

Instructions: For detailed instructions on submitting comments and additional 

information on the rulemaking process, see the Comment Procedures Section of this 

document 

FOR FURTHER INFORMATION CONTACT: 

Rahim Amerkhail (Technical Information) 

Office of Energy Policy and Innovation 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

(202) 502-8266 

Christopher Handy (Accounting Information) 

Office of Enforcement 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

(202) 502-6496 

Eric Winterbauer (Legal Information) 

Office of General Counsel 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

(202) 502-8329 

SUPPLEMENTARY INFORMATION:
135 FERC ¶ 61,240 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Third-Party Provision of Ancillary Services; Accounting 

and Financial Reporting for New Electric Storage 

Technologies 

Docket Nos. RM11-24-000 

AD10-13-000 

NOTICE OF INQUIRY 

(June 16, 2011) 

1. In this Notice of Inquiry (NOI), the Commission seeks comment on two sets of 

separate, but related issues. First, we seek comment on ways in which we can facilitate 

the development of robust competitive markets for the provision of ancillary services 

from all resource types. Second, the Commission is interested in issues unique to storage 

devices in light of the role they can play in providing multiple services, including 

ancillary services. As demonstrated by recent cases that have come before the 

Commission, there is growing interest in rate flexibility by both purchasers and sellers of 

ancillary services. A variety of resources are poised to provide ancillary services but may 

be frustrated from doing so by certain aspects of the Commission’s market-based rate 

policies coupled with a lack of access to the information that could help satisfy the 

requirements of those policies. Those with an obligation to purchase ancillary services 

have raised concerns with the availability of those services. In reviewing ways to foster a 

more robust ancillary services market, the Commission identified certain issues regarding 

the use of electric storage as an ancillary service resource that warranted consideration. 
Docket Nos. RM11-24-000 and AD10-13-000 - 2 - 

Over time, those issues expanded into more global questions as to the role that electric 

storage may play in a competitive market, including how electric storage should be 

compensated for the full range of services it provides under the Federal Power Act, and 

transparency issues regarding the Commission’s current accounting and reporting 

requirements as applied to electric storage. As such, the Commission seeks comment on: 

(1) existing restrictions on third-party provision of ancillary services, irrespective of the 

technologies used for such provision; and (2) the adequacy of current accounting and 

reporting requirements as they pertain to the oversight of jurisdictional entities using 

electric storage devices. 

2. More specifically, the Commission is interested in obtaining comments on: 

(1) whether revising or replacing the restriction set forth in Avista Corp. (referred to as 

the Avista restriction),1

 which prohibits third-party market-based sales of ancillary 

services to transmission providers seeking to meet their ancillary service obligations 

under the Open Access Transmission Tariff (OATT), absent a market study showing lack 

of market power, would help to facilitate the provision of ancillary services, and if 

so, how to balance that goal with the need to ensure just and reasonable rates; and 

 1 Avista Corp., 87 FERC ¶ 61,223 (Avista), order on reh’g, 89 FERC ¶ 61,136 

(Avista Rehearing Order) (1999). 
Docket Nos. RM11-24-000 and AD10-13-000 - 3 - 

(2) whether revising the current accounting and reporting requirements as they pertain to 

regulatory oversight of jurisdictional entities using storage technologies is necessary.2

 

Related to the first inquiry, the Commission also seeks comment on whether the various 

cost-based compensation methods for frequency regulation that exist in regions outside of 

the current organized markets could be adjusted to address the same speed and accuracy 

issues identified in the recently-issued Frequency Regulation Notice of Proposed 

Rulemaking for organized wholesale energy markets.3

 

I. Background

3. The Commission has initiated numerous actions over the last several decades to 

foster the development of competitive wholesale energy markets by ensuring nondiscriminatory access and comparable treatment of resources in jurisdictional wholesale 

markets.4

 The Commission most recently proposed to require all independent system 

 

(continued...) 

2

 These as well as several other issues were the subject of a Commission staff 

Notice of Request for Comment (Storage RFC) issued June 11, 2010. This proceeding 

focuses primarily on issues associated with the pricing of ancillary services and 

accounting and reporting requirements. 

3 Frequency Regulation Compensation in the Organized Wholesale Power 

Markets, 76 FR 11177 (Mar. 1, 2011), Notice of Proposed Rulemaking, FERC Stats. & 

Regs. ¶ 32,672 (2011) (Frequency Regulation NOPR). 

4 See, e.g., Promoting Wholesale Competition Through Open Access NonDiscriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by 

Public Utilities and Transmitting Utilities, Order No. 888, FERC Stats. & Regs. ¶ 31,036, 

at 31,781 (1996), order on reh’g, Order No. 888-A, FERC Stats. & Regs. ¶ 31,048, order 

on reh’g, Order No. 888-B, 81 FERC ¶ 61,248 (1997), order on reh’g, Order No. 888-C, 

82 FERC ¶ 61,046 (1998), aff’d in relevant part sub nom. Transmission Access Policy 

Study Group v. FERC, 225 F.3d 667 (D.C. Cir. 2000), aff’d sub nom. New York v. FERC, 

535 U.S. 1 (2002); Market-Based Rates for Wholesale Sales of Electric Energy, Capacity 
Docket Nos. RM11-24-000 and AD10-13-000 - 4 - 

operators (ISO) and regional transmission organizations (RTO) to compensate resources 

that provide frequency regulation in a manner that reflects the resource’s performance in 

order to remedy undue discrimination.5

 

4. As a result of many of these actions, there has been entry not only of competitive 

generation but also new technologies like electric storage that can provide many of the 

same services as generation and even transmission. The Commission remains interested 

in the continued development of competitive markets for all services and in this inquiry 

considers the development of a more robust ancillary services market and issues unique 

to storage devices in light of the role they can play in providing multiple services, 

including ancillary services. We also note that the role electric storage and other new 

market entrants play in competitive markets is still evolving. With that evolution, the 

Commission must continue to assess the full value those resources provide to competitive 

markets and to ensure just and reasonable rates. 

 

and Ancillary Services by Public Utilities, Order No. 697, FERC Stats. & Regs. ¶ 31,252, 

clarified, 121 FERC ¶ 61,260 (2007), order on reh’g, Order No. 697-A, FERC Stats. & 

Regs. ¶ 31,268, clarified, 124 FERC ¶ 61,055, order on reh’g, Order No. 697-B, FERC 

Stats. & Regs. ¶ 31,285 (2008), order on reh’g, Order No. 697-C, FERC Stats. & Regs. 

¶ 31,291 (2009), order on reh’g, Order No. 697-D, FERC Stats. & Regs. ¶ 31,305 (2010); 

Preventing Undue Discrimination and Preference in Transmission Service, Order 

No. 890, FERC Stats. & Regs. ¶ 31,241, order on reh’g, Order No. 890-A, FERC Stats. 

& Regs. ¶ 31,261 (2007), order on reh’g, Order No. 890-B, 123 FERC ¶ 61,299 (2008),

order on reh’g, Order No. 890-C, 126 FERC ¶ 61,228 (2009), order on reh’g, Order 

No. 890-D, 129 FERC ¶ 61,126 (2009); Wholesale Competition in Regions with 

Organized Electric Markets, Order No. 719, FERC Stats. & Regs. ¶ 31,281 (2008); 

order on reh’g, Order No. 719-A, FERC Stats. & Regs. ¶ 31,292 (2009); order on reh’g, 

Order No. 719-B, 129 FERC ¶ 61,252 (2009). 

5 See supra note 3. 
Docket Nos. RM11-24-000 and AD10-13-000 - 5 - 

5. In addition to the Commission’s generic initiatives to further the development of 

competitive wholesale markets, the Commission has taken action on a case-by-case basis 

to remove barriers to the entry of new technologies. In certain areas of the country where 

FERC jurisdictional tariffs included provisions largely designed for thermal resources, 

and as such presented barriers to the participation of other technologies like electric 

storage, the Commission has accepted a variety of proposed reforms. For example, 

Midwest Independent Transmission System Operator (Midwest ISO) and New York 

Independent System Operator, Inc. (NYISO) both have tariff provisions for managing the 

energy level of limited energy storage resources (LESRs) providing regulation service.6

 

Also under its tariff, NYISO has begun dispatching LESRs first and all other resources 

on a pro-rata basis.7

 PJM Interconnection, L.L.C. (PJM) has tariff provisions excluding 

most of the energy used for charging several types of energy storage devices from its 

definition of station power load.8

 In 2010, the California Independent System Operator 

Corporation (CAISO) revised the technical requirements for participation in its ancillary 

 6 See Midwest Indep. Trans. Sys. Operator, Inc., 129 FERC ¶ 61,303 (2009); 

New York Indep. Sys. Operator, Inc., 127 FERC ¶ 61,135 (2009). 

7 See, e.g., New York Indep. Sys. Operator, Inc., 127 FERC ¶ 61,135, at P 7 

(2009). 

8 See PJM Interconnection, L.L.C., 132 FERC ¶ 61,203 (2010). 
Docket Nos. RM11-24-000 and AD10-13-000 - 6 - 

services market to allow non-generator resources to be treated on a comparable basis to 

generation resources.9

 

6. The Commission has also addressed specific proposals for flexibility of the 

Commission’s policies and/or regulations. With regard to the Commission’s Avista

policy, WSPP recently requested waiver of the Avista restriction in order to allow marketbased rate sales of ancillary services under proposed WSPP master sales agreement 

Schedules D and E for those sellers that have market-based rate authorization for energy 

but have not performed market studies for ancillary services or proposed any alternative 

mitigation measure to ensure just and reasonable ancillary service rates.10 

7. The Commission has also entertained energy storage proposals by individual 

developers, some of which seek treatment only as competitive wholesale suppliers, and 

some of which seek treatment as transmission facilities. When faced with various 

proposals to use energy storage technologies for jurisdictional purposes, the Commission 

has analyzed the intended use and capability of storage proposals on a case-by-case 

basis.11 Where applicants have sought transmission rate recovery for storage 

assets, the Commission has also reviewed whether the proposal would result in: 

 9 See California Independent System Operator Corporation, 132 FERC ¶ 61,211, 

at P 26 (2010). 

10 WSPP Inc., 134 FERC ¶ 61,169 (2011) (WSPP). 

11 See, e.g., Western Grid Development, LLC, 130 FERC ¶ 61,056, reh’g denied, 

133 FERC ¶ 61,029 (2010) (Western Grid) and Nevada Hydro Co., 122 FERC ¶ 61,272 

(2008) (Nevada Hydro). 
Docket Nos. RM11-24-000 and AD10-13-000 - 7 - 

(1) cross-subsidization of any competitive market sales by transmission customers; 

(2) inappropriate competitive impacts if one type of market participant were permitted to 

receive jurisdictional transmission ratebase treatment while other market participants are 

completely at risk in the market; and (3) a level of control in the operation of a storage 

facility by the RTO or ISO that could jeopardize its independence from market 

participants. These issues arise when a storage project seeks cost-based transmission rate 

authorization and proposes to participate in competitive wholesale energy and ancillary 

service markets. In contrast, where a storage project proposes only to participate in one 

or more competitive wholesale energy and ancillary service markets, these issues do not 

arise because there will be no associated cost-based transmission rate for the same 

storage asset. 

8. In light of the growing interest in electric storage, Commission staff in June 2010 

issued the Storage RFC to seek comment on a variety of issues including: alternatives for 

categorizing and compensating storage services, including how best to develop rate 

policies that accommodate the flexibility of storage; whether the Avista restriction, which 

prohibits third-party provision of ancillary services at market-based rates to transmission 

providers seeking to meet their own ancillary services requirements, can pose an undue 

barrier to the development of storage facilities and other resources capable of providing 

ancillary services; and accounting and financial reporting matters as they relate to 

recovery of costs for electric storage technologies, noting that the Commission’s 

accounting and financial reporting requirements currently do not contain specific 
Docket Nos. RM11-24-000 and AD10-13-000 - 8 - 

accounting12 and related reporting requirements13 for new storage technologies. The 

Storage RFC noted that storage facilities are physically capable of providing a variety of 

services, including transmission service to unbundled transmission customers, enhancing 

the value of generation output sold at wholesale, and providing ancillary services.14

9. As a result of the information developed thus far through these various efforts, the 

Commission’s inquiry in this proceeding considers, among other things, the application 

of the Avista policy. We believe that markets for ancillary services may not be 

developing in all regions of the country. This may be due in part to the nature of 

ancillary services and the lack of transparent information on the capability of individual 

resources to provide the various services, thus hindering sellers’ ability in some regions 

of the country to perform market power studies to demonstrate the lack of market power. 

This coupled with a growing need for ancillary services to support grid functions in the 

face of potential changes in the portfolio of generation resources, entry of new 

technologies seeking to provide the services, and the growing interest of sellers and 

 12 Uniform System of Accounts Prescribed for Public Utilities and Licensees 

Subject to the Provisions of the Federal Power Act (USofA), 18 CFR Part 101. 

13 Statements and Reports (Schedules), 18 CFR Part 141. 

14 The Storage RFC also sought comment regarding rate treatment alternatives for 

electric storage technologies depending on the intended use or capability of the facility; 

possible business models for storage, including stand-alone storage; and new ancillary 

services products. The Commission will continue to review various proposals relevant to 

these issues on a case-by-case basis and does not seek further comment on these matters 

here. 
Docket Nos. RM11-24-000 and AD10-13-000 - 9 - 

transmission providers to have flexibility in meeting ancillary services needs prompts this 

inquiry. 

10. We note that there are numerous issues embedded within these broad categories of 

inquiry and we encourage comment from all interested stakeholders. We further note, 

however, that we will continue to address additional matters regarding rate treatment and 

products for electric storage on a case-by-case basis. 

II. Discussion

A. Third-Party Provision of Ancillary Services and the Avista Restriction

11. The Commission, in Order No. 888,15 contemplated the idea of third parties (i.e., 

parties other than a transmission provider supplying ancillary services pursuant to its 

OATT obligation) providing ancillary services on other than a cost-of-service basis if 

such pricing was supported, on a case-by-case basis, by analyses that demonstrated that 

the seller lacks market power. The Commission in Order No. 888 and later in Ocean 

Vista16 offered guidance as to what should be included in a market power study for 

ancillary services, stating that the guidance was offered for two purposes: (1) to ensure 

 15 Promoting Wholesale Competition Through Open Access Non-Discriminatory 

Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities 

and Transmitting Utilities, Order No. 888, FERC Stats. & Regs. ¶ 31,036, at 31,781 

(1996), order on reh’g, Order No. 888-A, FERC Stats. & Regs. ¶ 31,048, order on reh’g, 

Order No. 888-B, 81 FERC ¶ 61,248 (1997), order on reh’g, Order No. 888-C, 82 FERC 

¶ 61,046 (1998), aff’d in relevant part sub nom. Transmission Access Policy Study Group 

v. FERC, 225 F.3d 667 (D.C. Cir. 2000), aff’d sub nom. New York v. FERC, 535 U.S. 1 

(2002). 

16 Ocean Vista Power Generation, L.L.C., 82 FERC ¶ 61,114 (1998) (Ocean 

Vista). 
Docket Nos. RM11-24-000 and AD10-13-000 - 10 - 

that sellers of ancillary services do not exercise market power; and (2) to further the goal 

of promoting competition in ancillary service markets. 

12. In Avista, the Commission discussed in detail the data problems associated with 

performing a market power study and adopted a policy allowing third-party ancillary 

service providers that could not perform a market power study to sell certain ancillary 

services at market-based rates with certain restrictions.17 Specifically, the Commission 

allowed a market participant with market-based rate authorization to sell ancillary 

services at market-based rates to transmission customers that would otherwise purchase 

ancillary services from a public utility transmission provider. However, the Commission 

prohibited sales of ancillary services at market-based rates by a third-party supplier in the 

following situations: (1) sales to an RTO or an ISO, which has no ability to self-supply 

ancillary services but instead depends on third parties;18 (2) to address affiliate abuse 

concerns, sales to a traditional, franchised public utility affiliated with the third-party 

supplier, or sales where the underlying transmission service is on the system of the public 

utility affiliated with the third-party supplier;19 and (3) sales to a public utility that is 

 17 The authorization in Avista extended to the following four ancillary services: 

Regulation Service, Energy Imbalance Service, Spinning Reserves, and Supplemental 

Reserves. 

18 Subsequently, as the Commission recognized in Order No. 697, most RTOs and 

ISOs developed formal ancillary service markets and performed associated market power 

studies, thus rendering this component of the Avista policy largely superfluous. See 

Order No. 697, FERC Stats. & Regs. ¶ 31,252 at n.1194 and P 1069.

19 We are not aware of any need to revise this second component of the Avista

policy. 
Docket Nos. RM11-24-000 and AD10-13-000 - 11 - 

purchasing ancillary services to satisfy its own OATT requirements to offer ancillary 

services to its own customers.20 The Commission further stated that it was open to 

considering requests to make ancillary services sales at market-based rates in such 

circumstances on a case-by-case basis.21 

13. In the Avista Rehearing Order, the Commission clarified that although Avista 

prohibits third-party ancillary services suppliers from selling to transmission providers in 

order for transmission providers to meet their own ancillary service requirements, a 

transmission provider could purchase from a third-party supplier to permit it to offer 

third-party ancillary services off of its system.22 The Commission explained: 

 20 Avista, 87 FERC ¶ 61,223 at n.12. 

21 Id. The Commission has granted waiver of the Avista restrictions on a case-bycase basis. See, e.g., NorthWestern Corp. and Powerex Corp., 121 FERC ¶ 61,204 

(2007) (granting Powerex limited waiver of the prohibition against making sales of 

ancillary services at market-based rates to public utilities that are purchasing such 

services to satisfy their own OATT requirements to offer ancillary services to their 

customers and accepting an agreement between NorthWestern and Powerex following a 

competitive solicitation under which Powerex will sell regulating reserve services to 

NorthWestern at market-based rates for a one-year period); Powerex Corp., 125 FERC 

¶ 61,179 (2008) (granting Powerex limited waiver of the prohibition from making sales 

of ancillary services at market-based rates to public utilities that are purchasing such 

services to satisfy their own OATT requirements to offer ancillary services to their 

customers and conditionally accepting an agreement between NorthWestern and Powerex 

following a competitive solicitation under which Powerex will sell regulating reserve 

services to NorthWestern at market-based rates over a two-year period, subject to 

extension for an additional year); NorthWestern Corp., 125 FERC ¶ 61,178 (2008) 

(accepting an agreement between NorthWestern and Public Utility District No. 2 of 

Grant County, Washington, following a competitive solicitation under which Grant 

County will sell regulating reserve services to NorthWestern at market-based rates over a

two-year period, subject to extension). 

22 Avista Rehearing Order, 89 FERC at 61,391. 
Docket Nos. RM11-24-000 and AD10-13-000 - 12 - 

We are able to grant blanket authority for flexible pricing only because the 

price charged by the third-party supplier is disciplined by the obligation of 

the transmission provider to offer these services under cost-based rates. 

This discipline could be thwarted if the transmission provider could 

substitute purchases under non-cost-based rates for its mandatory service 

obligation.23 

The Commission concluded that the protection of the “backstop of cost-based ancillary 

services from the transmission provider will provide an appropriate and effective 

safeguard against potential anti-competitive behavior.”24 

14. Accordingly, absent market studies showing a lack of market power, Avista placed 

a restriction on third-party market-based sales of ancillary services to utilities seeking to 

meet their OATT obligations. Under the Commission’s Avista policy, third-party sellers 

that want to sell at market-based rates to a transmission provider seeking to meet its 

OATT ancillary service obligations must perform a market power study; third party 

sellers that desire to sell ancillary services at market-based rates to entities other than 

transmission providers may do so without restriction.25 

15. Recently, WSPP requested waiver of the Avista restriction in order to allow 

market-based rate sales of ancillary services under proposed WSPP master sales 

agreement Schedules D and E for those sellers that have market-based rate authorization 

 23 Id. 

24 Avista, 87 FERC ¶ 61,136 at 61,883. 

25 Although there is no restriction on these sales, the transmission provider’s 

OATT rate theoretically serves as a check on prices because potential buyers can always 

resort to OATT service.
Docket Nos. RM11-24-000 and AD10-13-000 - 13 - 

for energy but did not perform market studies for ancillary services or proposed any 

alternative mitigation measure to ensure just and reasonable ancillary service rates.26 In 

support, WSPP stated that the Avista restrictions have foreclosed the development of 

third-party ancillary services markets and relegated transmission providers to provide 

their own reserves through self-supply.27 WSPP also argued that there are two 

reasons why market power studies are feasible in RTO/ISO regions but not elsewhere: 

(1) centralized RTO/ISO markets and related access to data ease the way for performance 

of studies; and (2) RTO/ISOs have ready staffs and funds through which studies are 

feasible.28 The Commission rejected WSPP’s request as it related to sales by a thirdparty supplier to satisfy the purchasing transmission provider’s own OATT requirements 

to offer ancillary services to its customers. The Commission explained that: 

(w)hile the Commission wishes to foster entry into ancillary service 

markets, we also must guard against potential anticompetitive behavior by 

third-party suppliers who may have market power. We cannot simply 

assume that no anticompetitive behavior would occur were we to grant 

WSPP’s request. 29

The Commission noted, however, that it remains open to new approaches to selling 

reserve services at market-based rates and encouraged WSPP to submit a revised 

proposal that addresses the Commission’s concerns. 

 26 WSPP, 134 FERC ¶ 61,169 at P 5. 

27 WSPP, Answer, Docket No. ER10-2295-000, at 4 (Filed December 10, 2010). 

28 Id. at 5. 

29 WSPP, 134 FERC ¶ 61,169 at P 24. 
Docket Nos. RM11-24-000 and AD10-13-000 - 14 - 

16. As indicated both in comments to the Storage RFC and the recent WSPP filing that 

sought waiver of the Avista restrictions, 30 market participants are looking for additional 

flexibility regarding the Avista restrictions, partly because the most significant market for 

ancillary services is likely to be transmission providers seeking to meet their OATT 

ancillary service obligations. Furthermore, NorthWestern indicated in a filing before the 

Commission that it was unable to find sellers of ancillary services when it issued a 

request for proposals, noting that only two offers were able to satisfy the technical 

requirements and time commitments set forth in the request for proposals from the 70 

entities that received the request for proposals.31 Several commenters in response to the 

Storage RFC also argue that experience has proven this restriction to be unnecessary, 

potentially harmful to both load-serving entities and would-be third-party suppliers of 

ancillary services, and a barrier to the use of storage technologies to provide ancillary 

services.32 

17. As the Commission explained in WSPP,33 the prohibition on third-party ancillary 

service sales to transmission providers seeking to meet their own ancillary service 

requirements was designed to address the Commission’s concern that the backstop of 

cost-based ancillary services from the transmission provider would not remain an 

 30 WSPP’s request for waiver was rejected by the Commission. Id. P 27. 

31 See NorthWestern, 121 FERC ¶ 61,204 at P 6 (2007). 

32 See, e.g., AEP August 9, 2010 Comments at 15 and EEI August 9, 2010 

Comments at 9. 

33 WSPP, 134 FERC ¶ 61,169 at P 26. 
Docket Nos. RM11-24-000 and AD10-13-000 - 15 - 

effective safeguard against anti-competitive behavior by third-party sellers, if the 

transmission provider’s OATT rates were allowed to include a pass through of purchases 

under non-cost-based rates from third parties who had not performed a market power 

study. 

18. However, we acknowledge the interest in creating a market for certain ancillary 

services and recognize concerns sellers have about being unable to conduct formal 

market power studies. We therefore request comment on possible ways of modifying the 

Avista restriction while ensuring just and reasonable rates, including comments on 

possible reforms to the Commission’s market power study requirements and ideas for 

alternative mitigation to permit rate flexibility. Specifically, we request comment on the 

following. 

1. Market Power Study

19. Concerns regarding the ability of a seller to perform a market power study for 

ancillary services that were present at the time of Avista appear to remain today for 

sellers in some regions of the country. As such: 

a. Is information on individual generating unit frequency regulation, spinning and 

non-spinning reserve capability publicly available? 

b. If the Commission retains the requirement of a formal market power study as 

described in Order No. 888 and Ocean Vista for third party provision of ancillary 

services to transmission providers, what specific information and tools would be 

useful to the development of these studies? 
Docket Nos. RM11-24-000 and AD10-13-000 - 16 - 

c. What are some of the ways/vehicles that the information above can be made 

publicly available, e.g., Commission reporting requirement or voluntary posting? 

d. If commercial sensitivity is an issue, is there an appropriate time lag for making 

information available? 

e. While market power analyses have been performed within the organized 

wholesale energy markets, are there alternative market power studies, for example 

that use less granular data, or take other steps like appropriate simplifying 

assumptions, that could be used in other regions to establish whether a seller of 

ancillary services has market power? 

2. De Minimis Threshold Below Which Market-Based Rates 

Authorized

20. In lieu of requiring sellers to submit formal market power studies, should the 

Commission establish a measure of de minimis market presence that would justify a grant 

of market based-rate authority? Specifically: 

a. Should the Commission establish a capacity threshold to determine whether an 

entity has market power, so that an entity that owns or controls less than a 

threshold amount of capacity would be presumed to lack market power in the 

market for provision of ancillary services? If so, what would be an appropriate 

level for this threshold? 

b. Alternatively, should the Commission establish a presumption that an entity that 

provides less than a threshold amount of ancillary services over a defined period 
Docket Nos. RM11-24-000 and AD10-13-000 - 17 - 

lacks market power in the relevant market for such services? If yes, what would 

be an appropriate level for this threshold? Over what time period(s) should the 

threshold be established (e.g., annual, hourly, daily)? Would it be appropriate to 

make new generating units or other resources eligible for this exemption based on 

their maximum potential sales of ancillary services? 

c. Should the threshold be set for individual ancillary services or should it be set for 

multiple ancillary services that often are good substitutes (e.g., spinning and 

supplemental reserves)? 

d. Would it be appropriate to vary the threshold across different balancing authority 

areas and/or different regions? 

e. Should entities that receive authorization to provide ancillary services at marketbased rates based on a de minimis presence be subject to a periodic filing 

requirement and/or a “change in status” filing requirement to ensure that they 

continue to meet the threshold? 

3. Alternative Mitigation to Permit Rate Flexibility

21. In lieu of requiring that sellers desiring to make sales to transmission providers 

submit formal market power studies, are there other measures that could be taken to 

allow such sales and yet ensure just and reasonable rates for third-party market-based 

ancillary services? That is, could the Commission replace the Avista restriction with 

some other means of ensuring that the backstop of cost-based ancillary services from the 
Docket Nos. RM11-24-000 and AD10-13-000 - 18 - 

transmission provider will continue to provide an appropriate and effective safeguard 

against potential anti-competitive behavior? 

a. Would ensuring that transmission providers do not automatically pass through the 

price of any non-cost-based third-party purchases that exceed their OATT rate 

permit the backstop of cost-based ancillary services from the transmission 

provider to continue mitigating third-party market power? 

b. Alternatively, would it be appropriate to waive the current third-party sales 

restriction in cases where the purchasing transmission provider voluntarily 

commits not to pass-through the price of non-cost-based third-party purchases that 

exceed its OATT rates to its wholesale and native load retail customers? Would 

such a commitment by the purchasing transmission provider adequately ensure the 

continued value for third-party market power mitigation of the OATT cost-based 

rate backstop, while still permitting third-party sales to transmission providers? 

c. As another alternative, in recognition that new entrants’ costs may be higher than 

those reflected in current OATT rates, we seek comment on an explicit price-cap 

for third-party sales to utilities to serve their OATT ancillary service obligations 

based on the purchasing utility’s Commission-approved OATT rate plus an adder. 

For example, would an OATT-based cost cap set at 105 percent of the purchasing 

utility’s existing OATT rate be appropriate given the potentially higher costs of 
Docket Nos. RM11-24-000 and AD10-13-000 - 19 - 

new entrants?34 Would a cap equal to 105 percent of the purchasing transmission 

provider’s OATT rate generally be high enough to cover the costs of new entrants 

and facilitate a market for ancillary services? If not, how much of an adder would 

be needed to cover the costs of new entrants? If such a new resource margin is 

used, should the Commission limit its use to sales among non-affiliated 

companies? In addition, should a new resource margin be disallowed for sales 

between transmission providers?35 If such a new resource margin is used, should 

the Commission limit its use to times when the purchasing transmission provider 

has to rely on the third party provider? 

 34 A five percent margin might be justified on the basis of our delivered price test 

in market-based rate proceedings, which defines who is in the relevant market by looking 

at generators whose delivered costs of power are within five percent of the market price. 

35 For purposes of this question, our use of the term transmission provider includes 

sales by its wholesale merchant function. 
Docket Nos. RM11-24-000 and AD10-13-000 - 20 - 

d. We also seek comment on whether the WSPP Agreement36 is an adequate vehicle 

for implementing a cost-based rate cap for ancillary service rates. If such a cap 

were established, should provision of all ancillary services made under the WSPP 

Agreement that remain at or below such cost-justified rate caps be considered just 

and reasonable, with no further mitigation measures needed? We seek comment 

on the following issues with respect to setting a cost-cap in the WSPP Agreement: 

How would such a cost cap be determined? Should such a cap for ancillary 

services be subject to the same requirements as the “up to” cap for power and 

energy in the current WSPP Agreement? Alternatively, could an experimental cap 

be based on the average ancillary service cost of all OATT sellers participating in 

the WSPP Agreement? Would it be sufficient to base an experimental cap on the 

 36 The WSPP Agreement was initially accepted by the Commission on a nonexperimental basis in 1991, and provided for flexible pricing for coordination sales and 

transmission services. See Western Sys. Power Pool, 55 FERC ¶ 61,099, order on reh'g, 

55 FERC ¶ 61,495 (1991), aff'd in relevant part and remanded in part sub nom. 

Environmental Action and Consumer Federation of America v. FERC, 996 F.2d 401, 302 

U.S. App. D.C. 135 (D.C. Cir. 1992), order on remand, 66 FERC ¶ 61,201 (1994). The 

WSPP Agreement as it exists today permits sellers of electric energy to charge either an 

uncapped market-based rate (for public utility sellers, they must have obtained separate 

market-based rate authorization from the Commission to do this), or an "up to" costbased ceiling rate. For sellers without market-based rate authority, the cost-based rate 

under the WSPP Agreement consists of an individual seller’s forecasted incremental cost 

plus an “up to” demand charge based on the average fixed costs of a subset of the original 

parties to the WSPP Agreement, so long as the seller can justify the use of this charge 

based on its own fixed costs. Otherwise, the seller must file a separate stand-alone rate 

schedule that is cost-justified based on the individual seller’s own costs. Currently, there 

are over 300 parties to the WSPP Agreement located throughout the United States and 

Canada, including private, public and governmental entities, financial institutions and 

aggregators, and wholesale and retail customers. 
Docket Nos. RM11-24-000 and AD10-13-000 - 21 - 

costs of a “representative sample” of OATT sellers participating in the WSPP 

Agreement? How would a “representative sample” be determined? Should the 

cap include a new resource margin as described above? If yes, how would an 

appropriate adder be determined? Should a market monitor be established to 

oversee provision of ancillary service under the WSPP Agreement? Should this 

proposal be structured as a temporary pilot program, as were the original WSPP 

service schedules for market-based sales of energy and capacity? 

e. Competitive solicitations can be one way of assuring just and reasonable rates. If 

transmission providers undertook open and transparent competitive solicitations 

would this help to facilitate the provision of ancillary services and ensure just and 

reasonable rates? Could a standardized competitive solicitation process be 

developed for particular regions or markets? 

f. Finally, we seek comments on any other potential methods of mitigation, which 

would ensure that third-party provision of ancillary services at market-based rates 

remain just and reasonable, while facilitating the development of a competitive 

market. 

4. Advancing the Goals of the Frequency Regulation NOPR in all 

Regions

22. In the Frequency Regulation NOPR, we proposed to require all ISOs and RTOs to 

compensate resources that provide frequency regulation in a manner that reflects the 
Docket Nos. RM11-24-000 and AD10-13-000 - 22 - 

resource’s performance in order to remedy undue discrimination.37 In comments in that 

proceeding, NaturEner questioned whether the NOPR proposal can be extended to the 

areas outside of RTOs and ISOs.38 As the Frequency Regulation NOPR notes, outside of 

RTOs and ISOs, transmission providers typically procure frequency regulation resources 

as part of their overall mix of resources, and seek cost recovery for those resources 

through a cost-based rate.39 Assuming a third-party purchase is allowed and passthrough has been permitted as discussed earlier, we seek comment on whether 

transmission providers could compensate the frequency regulation resources they procure 

based on the principles proposed in the Frequency Regulation NOPR, and seek to include 

such costs in their Schedule 3 rates. Accordingly, we seek comment on whether the

of the Frequency Regulation NOPR can be extended to regions outside the organized 

wholesale energy markets. Because these regions largely lack competitive markets for

ancillary services, the Commission seeks comments on different potential frameworks 

under which the speed and accuracy of frequency regulation resources might be 

 goals 

 

appropriately valued. 

37 Frequency Regulation Compensation in the Organized Wholesale Power 

Markets, FERC Stats. & Regs. ¶ 36,672 (2011) (Frequency Regulation NOPR). 

38 See NaturEner, Comments, Docket No. RM11-7-000, at 3-4 (filed May 2, 

2011). 

39 See Frequency Regulation NOPR, 134 FERC ¶ 61,124 at n.8. 
Docket Nos. RM11-24-000 and AD10-13-000 - 23 - 

a. Were we to allow a cost-based cap for frequency regulation service in the WSP

Agreement as described above, how could that cap reflect an individual resource’s

performance? 

b. Should we allow transmission customers that self-supply frequency regulation

service to determine the amount of capacity they procure based on the third-party

resource’s performance capability? For instance, if a transmission customer is 

required to purchase 2 MW of frequency regulation service under pro forma

OATT Schedule 3, should we allow that customer to purchase less capacity if it 

purchases from a resou

P 

rce that responds more quickly and accurately than the 

If 

 amount of capacity the transmission customer is 

c. Is there any other way to extend the goals of the Frequency Regulation NOPR 

resources the transmission provider uses to provide service under Schedule 3? 

so, how should we determine the

required to purchase? 

outside of the ISOs and RTOs? 

B. Accounting and Reporting Requirements for Energy Storage 

Resources

23. The Commission’s accounting and financial reporting requirements for public 40 41

utilities42 are designed to provide information about a reporting entity’s financial 

 

Utility” means any person who owns or operates facilities 

(continued...) 

40 18 CFR Part 101. 

41 18 CFR Part 141. 

42 The term “Public 
Docket Nos. RM11-24-000 and AD10-13-000 - 24 - 

condition and results of operation. This information is important in developing a

monitoring rates, m

nd 

aking policy decisions, and informing the Commission and the public 

unts 

nses must be reported 

re 

- 

 

about the activities of entities that are subject to these accounting and reporting 

requirements.43 

24. Under the Commission’s accounting and reporting requirements, public utilities 

must record and classify electric plant assets in the prescribed primary plant acco

based on the purpose served or use of the asset to produce, transmit, or distribute electric

energy. In addition, public utilities must also record and classify operation and 

maintenance (O&M) expenses related to such plant assets based on the specific activity 

the efforts support. The electric plant assets and related O&M expe

in annual and quarterly FERC Form Nos. 1, 1-F, and 3-Q reports44 that are maintained in 

accordance with the Uniform System of Accounts (USofA).45 

25. The roles of conventional production, transmission, and distribution resources a

well understood and each has established method(s) of accounting, reporting, and cost

subject to the jurisdiction of the Commission under the Federal Power Act. 18 CFR Part 

101 (D

 Applicants for market-based rate authority that do not sell under cost-based rates 

frequen

-F), § 18 CFR 141.2; and FERC 

Form No. 3-Q, Quarterly Financial Report of Electric Utilities, Licensees, and Natural 

Gas Co 3-Q), 18 CFR § 141.400. 

efinition No. 29). 

43

tly seek and typically are granted waiver of many or all of these requirements. 

44 FERC Form No. 1, Annual Report for Major Electric Utilities, Licensees and 

Others (Form No. 1), 18 CFR § 141.1; FERC Form No. 1-F, Annual Report for 

Nonmajor Public Utilities and Licensees (Form No. 1

mpanies (Form No. 

45 18 CFR Part 101. 
Docket Nos. RM11-24-000 and AD10-13-000 - 25 - 

based rate recovery. However, the same is not necessarily true of new energy storage

resources,

e 

ide 

ain 

ether current accounting and reporting requirements 

46 which can operate in ways that resemble production, transmission and/or 

distribution.47 Energy storage resources are generally capable of providing multipl

services with various benefits to the grid. Moreover, while committing not to prov

other services is one method of addressing the Commission’s concerns with crosssubsidization and inappropriate competitive impacts when a storage device seeks 

transmission rate recovery, the Commission remains open to alternative proposals to 

address those concerns. Accordingly, public utilities using energy storage resources 

might seek multiple methods of cost recovery for their investments in, and use of, the 

assets to provide various utility services. Consequently, due to the potential to use cert

storage technologies to provide multiple services and the possibility that a public utility 

could simultaneously recover costs under both cost-based and market-based rates, the 

Commission seeks comment on wh

 46 Pumped storage hydroelectric facilities are also energy storage resources. 

However, like other conventional production assets, the Commission has established 

methods of accounting, reporting and rate recovery associated with operation of pumped 

storage resources. Thus, we do not seek comment on whether the current accounting and 

reporting requirements for pumped storage hydroelectric assets or operations should be 

revised. 

47 For example, like a generator, an energy storage resource may be able to act as a 

power marketer, arbitraging differences in peak and off-peak energy prices or selling 

ancillary services; and similar to a transmission asset (e.g., a capacitor) an energy storage 

resource could provide voltage support on the grid, or serve other purposes that support 

transmission service. 
Docket Nos. RM11-24-000 and AD10-13-000 - 26 - 

for activities and costs relating to the operations of new electric energy storage resources 

provide sufficient transparency. 

26. In addition, there are questions concerning the concept of using a storage device to

provide a transmission service and using a storage device to “substitute” for, or defer, a 

certain amount of transmission service. Transmission service is the movement of elec

energy over distance. To the extent that storage devices like capacitor banks and 

batteries are used, for example, to provide reactive support to help move electric energ

over distance, the Commission has found that the cost can be considered part of the cost 

of providing transmission service in those circumstances. The storage device in thi

scenario is “used and useful” to the provision of transmission service, and thus its costs 

may be included in the rates that transmission customers pay. By contrast, the use of

storage for transmission deferral or substitution is arguably different from the provision 

of transmission service subject to our rate jurisdiction. This is bec

tric 

y 

s 

ause, rather than 

rting 

 to 

new electric energy storage resources for cost-of-service rate purposes. 

supporting the movement of electric energy over distance, this concept posits the use of 

storage or other assets to provide electric energy at a given point on the system as a 

replacement for a certain amount of transmission service from elsewhere to that point on

the system. The Commission seeks comment on this distinction. 

27. In the Storage RFC, Staff invited comments on, among other things, accounting 

and reporting modifications to the Commission’s accounting and financial repo

requirements, which might facilitate the development and monitoring of rates related
Docket Nos. RM11-24-000 and AD10-13-000 - 27 - 

28. Numerous comments were received regarding the need for updating the US

and FERC annual reports. Some commenters were supportive of revising the 

Commission’s current accounting and reporting requirements to accommodate new 

electric energy storage resources;

ofA 

.

49 

 received were general in nature. Therefore, the Commission 

seeks specific details accounting 

48 other commenters indicated that revisions are 

unnecessary as the current requirements sufficiently accommodate energy storage

However, most comments

 regarding whether and, if so how, to amend the current 

and reporting requirements to specifically account for and report energy storage 

operations and activities. 

Proposed Accounting and Reporting for Comment 

29. The Commission’s existing accounting requirements stipulate that utility plant 

costs be classified and accounted for in the following functional classifications: Steam 

Production, Nuclear Production, Hydraulic Production, Other Production, Transmission, 

Distribution, Regional Transmission and Market Operation, and General. These 50 plant 

nts. 

 

classifications have associated primary plant accounts as well as O&M expense accou

48 See, e.g., AEP August 9, 2010 Comments at 7; ITC Companies August 9, 2010 

Comments at 14; and M-S-R Public Power Agency and the City of Santa Clara, 

California August 9, 2010 Comments at 13. 

49 See, e.g., NRECA August 6, 2010 Comments at 13; AES Energy Storage, LLC 

August 9, 2010 Comments at 8; and FirstEnergy August 9, 2010 Comments at 6. 

50 In the Form Nos. 1 and 1-F, the Steam, Nuclear, Hydraulic, and Other plant 

functions are grouped as “Production Plant” functions. 
Docket Nos. RM11-24-000 and AD10-13-000 - 28 - 

However, none of the primary plant or O&M expense accounts specifically provides for 

the accounting of costs related to new energy storage resources and operations. 

30. As such, it may be difficult for owners of these technologies to complete their 

ine 

e 

 below, some public utilities will need to purchase or 

es 

 cost 

of 

er a market-based rate or vice-versa. If this occurs, the 

reporting requirements. This in turn would make it difficult for regulators to determ

costs and establish appropriate rates for new energy storage technologies. Therefore, th

Commission is seeking comments on accounting for the costs of energy storage resources

and associated O&M expenses. 

31. In addition, as detailed

internally generate power for use in storage operations. However, the USofA does not 

have specific accounts for recording the cost of power purchased or generating expens

incurred in storage operations. Therefore, we seek comments on the appropriate 

accounting for these items. 

32. Public utilities that receive rate approval to recover cost under more than one

recovery method can potentially earn multiple revenue streams from the provision 

multiple services using a single storage unit or system. This can lead to revenues earned

pursuant to services provided under a cost-based rate subsidizing the cost of a different 

service that is provided und

Commission’s rule against cross-subsidization would be violated and its ability to 

appropriately develop and monitor cost-based rates of energy storage operations would 

be impacted. Therefore the Commission seeks comments on accounting for revenues of 

energy storage operations. 
Docket Nos. RM11-24-000 and AD10-13-000 - 29 - 

33. m Nos. 1 and 1-F as they 

, we 

Lastly, to address our transparency concerns for For

relate to reporting requirements associated with energy storage assets and operations

seek comments on changes to the forms that may be needed to enhance their usefulness

regarding the development and monitoring of cost-based rates. 

1. New and Modified Plant Accounts

34. As we have indicated, the costs of new energy storage technologies are not 

eks 

ieve there may be a number of options to address these issues. For 

ns 

account 

ectricity to meet 

emergency or peak demands. The instructions to Account 363 could be revised to 

expand

explicitly provided for in the existing primary plant accounts. The Commission se

comment on how to provide for financial transparency of these costs, as well as how to 

address issues that may develop in accounting and reporting for storage assets due to the 

potential to use the assets to provide multiple services. 

35. We bel

example, new plant accounts could be added to the production and transmission functio

and an existing plant account could be revised in the distribution function. The 

that could be revised in the distribution function is Account 363, Storage Battery 

Equipment. 

36. The current instructions of Account 363 provide for the inclusion of the cost of 

storage battery equipment used for the purpose of supplying el

 the items includible in the account to recognize the unique operating 
Docket Nos. RM11-24-000 and AD10-13-000 - 30 - 

characteristics of new energy storage technologies which may provide services othe

supplying electricity to 

r than 

meet emergency or peak demands.51 

lant 

 provide examples of new accounts and existing 

unt 

ed to 

d revisions to the instructions of the 

in 

ution, and 

37. We seek comment on these ideas and any alternatives that commenters may 

propose. Specifically: 

a. Should new accounts for energy storage plant and equipment be created and an 

existing account be revised as discussed in the above example, should new 

accounts be created and no existing accounts used, or do the existing primary p

accounts sufficiently provide for energy storage plant and equipment? Please 

elaborate. Also, if applicable,

accounts, including account instructions that could be created or revised to acco

for energy storage resources. 

b. If the Commission were to continue use of existing primary plant accounts for 

energy storage resources, which accounts will provide the transparency need

develop and monitor cost-based rates? Woul

accounts be required to account for energy storage resources? If so, please 

provide insight into what may be required. 

c. Should the cost of new energy storage plant and equipment be recorded with

existing utility plant functional classifications (i.e., transmission, distrib

 

assist with frequency or voltage regulation which, at times, may require it to withdraw

emergency or peak demands. 

51 For example, as a distribution resource recorded in the account the asset could 

electricity from the grid rather than supply it and for purposes other than to meet 
Docket Nos. RM11-24-000 and AD10-13-000 - 31 - 

production) or should a new functional classification be created for energy 

storage? What are the benefits of one approach over the other? If the 

Commission were to create a new classification(s), please comment on the specific 

d or modified for 

rage 

plant accounts and account instructions that would be create

inclusion in the new asset class. 

d. Are there any other accounting issues that relate to accounting for energy sto

plant and equipment that should be considered? If so, provide options to address 

the issues. 

2. Cost of Power Used in Storage Operations

38. Some public utilities operating storage resources may purchase electricity and 

store it to arbitrage the difference between the sales price of on-peak and off-peak 

electricity. In these instances, public utilities will typically purchase and store low cost 

off-peak electricity that they will sell at higher prices during on-peak periods. The 

USofA requires that purchases of power for resale be recorded at cost in Account 555, 

Purchased Power. Thus, this account may sufficiently provide for the recording of the 

cost of electricity stored in storage operations that is sold in wholesale electricity markets.

39. Additionally, Account 555 also provides for the recording of net settlements f

the exchange

 

or 

 of electricity or power. Exchange transactions may involve exchanges such 

as off-peak energy for on-peak energy or transactions under pooling or interconnection 

agreements wherein there is a balancing of debits and credits for energy or capacity. The 

net settlement amount is generally the difference between the cost of power received and 
Docket Nos. RM11-24-000 and AD10-13-000 - 32 - 

the cost of power returned at the respective transaction periods over an agreed upon 

timeframe. 

40. Public utilities engaging in such exchange transactions could be required to record

the net settlement amount in Account 555 consistent with the instructions of the account. 

e 

t 

or 

that 

e netted such that no purchase of energy for resale occurs; only the energy 

Also, consistent with these instructions, distinct purchases and sales that are not exchang

transactions would be recorded as separate purchases and sales. In this case, purchases

made for resale purposes could be recorded in this account; however, if the purchase is 

not made for resale purposes then the transaction may need to be reported in a differen

account. 

41. Electricity used in storage operations will not be purchased for resale or through 

exchange transactions in all instances. For example, electricity may be purchased and 

stored for later use in the provision of transmission services or for other jurisdictional 

non-jurisdictional purposes. Moreover, some RTO tariffs may permit the energy 

storage facilities absorb and return as part of their provision of frequency regulation 

services to b

lost in conversion is purchased as part of station power load, and that purchased power is 

not resold. Since Account 555 does not specifically provide for recording the cost of 

power purchased and consumed while providing this and similar types of energy 

consuming services the account may not be the appropriate account to record the power 

purchases. 
Docket Nos. RM11-24-000 and AD10-13-000 - 33 - 

42. In some cases, depending on the operating characteristics of a storage resource o

the utility services it provides, a public utility may be required to sustain a particular 

of charge on its s

r 

state 

torage device to provide utility service. For example, if a storage device 

te of 

e 

e first 

ld be 

st of 

er 

t 555, Purchased Power, 

is primarily intended to provide reserves, then it needs to maintain an appropriate sta

charge to allow it to discharge the reserved power when needed. In contrast, if a storag

device is primarily intended to provide frequency regulation, which it will do through 

nearly continuous and off-setting charge/discharge operations, then it may not need to 

achieve any one particular beginning state of charge in order to provide the targeted 

utility service. 

43. With respect to energy storage devices that must sustain a particular state of 

charge to provide a particular service, the conversion and storage process charges the 

device so that it reaches the state of charge or capacity necessary for doing work. To 

initially attain and to sustain a particular state of charge where needed, public utilities

may internally generate electricity, purchase it in retail or wholesale markets, or engage 

in exchange transactions with merchant generators or centrally dispatched power pools. 

44. The cost of power purchased to initially attain a specific state of charge at th

installation of the storage assets, prior to the commencement of utility service, cou

considered a base charge and accounted for as such by being included in the total co

the asset. Further, public utilities that must purchase or internally generate power to 

sustain a working state of charge could possibly account for the cost of purchased pow

or generation by recording it in existing accounts such as Accoun
Docket Nos. RM11-24-000 and AD10-13-000 - 34 - 

Account 501, Fuel, or other existing O&M expense accounts, as appropriate. The 

Commission seeks comment on these ideas, as well as alternatives. Specifically: 

a. Should power purchased and stored for resale be recorded in Account 555? 

Would revisions to the instructions of the account be required to account for the 

power purchases; if so, please provide insight into what may be required. Are 

there any alternative methods to account for these costs? 

b. Should power purchased that will not be sold for resale but will instead be 

ld 

isting accounts 

of 

ost 

t and equipment. Are there any alternative methods to 

g O&M expense account, or should a 

consumed during the provision of services such as frequency regulation be 

accounted for in Account 555, or a different existing O&M expense account? 

Please elaborate. Also, should new accounts be created or, alternatively, shou

existing accounts be revised? We welcome examples of new or ex

and instructions that could be created or revised, respectively, to account for 

power purchased for use in storage operations. 

c. We also seek comment on whether power purchased to initially attain a state 

charge should be accounted for as a base charge and included as a component c

of energy storage plan

account for power purchased to initially attain a state of charge? 

d. Should power purchased to sustain a particular state of charge be recorded as an 

expense in Account 555, a different existin

new expense account be created? Please explain in detail and, if applicable, 
Docket Nos. RM11-24-000 and AD10-13-000 - 35 - 

provide examples of existing and new accounts that could be used and related 

account instructions. 

e. y generate 

nts 

g 

e 

How should the cost of fuel, or other direct costs, incurred to internall

power for use in energy storage operations be accounted? What expense accou

should be used to account for the costs? 

f. Are there any other accounting issues that should be considered that relate to

accounting for power purchased or exchanged, and fuel and other direct generatin

costs incurred for energy storage operations? If so, provide options to address th

issues. 

3. Revenues From Providing Energy Storage Services 

45. The USofA currently requires public utilities to record revenues derived from 

electric operations in specific revenue accounts based on the relevant revenue gene

activity. Revenues derived from energy storage operations may invol

rating 

ve the same 

is and 

revenue generating activities embodied in the existing revenue accounts. For example, 

Account 447, Sales for Resale, provides for the recording of revenues from electricity

supplied to other electric utilities or public authorities for resale purposes. Electricity 

from storage operations can be sold for resale in wholesale markets, which would require 

the resulting revenues to be recorded in Account 447, Sales for Resale. Thus, in th

similar instances, it is possible that the existing revenue accounts could be used to 

account for revenues derived from the operations of storage assets. 
Docket Nos. RM11-24-000 and AD10-13-000 - 36 - 

46. However, because a public utility storage operator can potentially recover costs o

operating a storage unit under both cost- and market-based rate co

f 

nstructs, recording 

t 

, where 

 is 

ated 

 We 

e 

ations. Also, if applicable, 

reated. 

enues, sufficiently address revenue transparency 

ed from storage operations to be accounted for in one 

revenues from storage operations in existing revenue accounts may not provide sufficien

transparency of revenues derived from storage operations. As we explained above

a storage device seeks transmission cost-of-service rates, any revenues from other 

services it provides may raise cross-subsidization issues. Thus, adequate transparency

needed to allow the Commission and others to monitor for cross-subsidization in this

regard. 

47. The Commission seeks comment on how to address this issue as it relates to the 

development and monitoring of cost-based rates. Specifically: 

a. Are existing revenue accounts sufficient to capture potential revenues associ

with storage operations or should new accounts be created? If the existing 

accounts are used, would the instructions to the accounts need to be revised? 

welcome examples of revisions to the account instructions, if any, that may b

needed to account for revenues from storage oper

provide examples of new revenue accounts and instructions that could be c

b. Would recording revenues from storage operations in one account, for example 

Account 456, Other Electric Rev

issues? How would this accounting impact transparency as it relates to the 

development and monitoring of cost-based rates? If the Commission were to 

require revenues deriv
Docket Nos. RM11-24-000 and AD10-13-000 - 37 - 

account, what account should be used, why should it be used, and would the 

be 

instructions of the account need to be revised? 

c. Should new revenue accounts be created to record revenues from storage 

operations? Are there examples of accounts and account instructions that could 

created to record the revenues? 

d. Are there any other accounting issues that should be considered that relate to 

accounting for revenues derived from storage operations? If so, provide options to

address the issues. 

4. Operation and Maintenance Expenses

48. Different energy storage technologies have different operating cost structures. For 

e 

ion 

or functions that the asset serves. For example, a battery storage device used exclusively 

for frequency regulation may have a different service life from one used to shift off-peak 

generation to on-peak periods. 

fe of an asset will typically correlate to the rate(s) at which it is 

depreciated for accounting and rate making purposes. It is important to properly capture 

expenses from the use of the assets for cost-of-service rate purposes. The USofA does 

example, flywheels generally have relatively low O&M expenses but higher upfront 

capital costs compared to batteries, which tend to have lower upfront capital costs, but 

higher O&M expenses. These assets also have differing service lives as compared to 

each other and as compared individually to conventional utility assets. Furthermore, th

service life of a storage asset may be impacted by the demands of the particular funct

49. The service li
Docket Nos. RM11-24-000 and AD10-13-000 - 38 - 

not provide specific accounts to record O&M expenses of energy storage operations. 

Therefore, we seek comments on the accounting requirements for O&M expenses. 

a. Are existing O&M expense accounts sufficient to capture costs associated with 

re options on how these issues may be addressed? 

facility 

rovide a different jurisdictional service (e.g., 

transmission voltage support) under cost- and 

ssues 

storage operations? Are there any revisions to existing accounts or account 

instructions that would be required to account for O&M expenses of storage 

operations? 

b. Should new O&M expense accounts be created? If so, provide examples of new 

accounts and account instructions that could be created to account for O&M 

expenses of storage operations. 

c. What accounting issues may arise due to the use of a single storage resource to 

provide services simultaneously under cost- and market-based rate recovery 

constructs? Are the

d. What accounting issues may arise due to the joint ownership of a storage 

by separate independent companies that propose to use their respective ownership 

shares of the facility to each p

wholesale sales of electricity and 

market-based rate recovery mechanisms? Are there options on how these i

may be addressed? 

e. Are there other accounting issues that should be considered that relate to 

accounting for O&M expenses associated with storage operations? If so, provide 

options to address the issues. 
Docket Nos. RM11-24-000 and AD10-13-000 - 39 - 

5. Form Nos. 1 and 1-F 

50. To develop and monitor cost-based rates, the Commission needs access to 

financial data, such as capital and operating costs of relevant land, equipment, and la

as well as nonfinancial data, such as volumes sold. Fo

bor, 

r energy storage resources, cost 

ncial 

rm 

o provide for transparent reporting of costs 

data relating to their unique equipment and processes, which are separate from those for 

traditional production plants and transmission and distribution assets, are also required. 

The Form Nos. 1 and 1-F may need to be amended to accurately capture these fina

and non-financial data. Therefore, the Commission seeks comment on whether the Fo

Nos. 1 and 1-F should be revised and, if they should, how to revise them to include 

information on energy storage plant and operations. 

a. Should the Form Nos. 1 and 1-F be amended to provide the detailed information 

required to monitor energy storage operations and develop cost-of-service rates? 

b. We welcome examples of new schedules that could be created or existing 

schedules that could be revised to report the costs of energy storage plant and 

equipment and O&M expenses. T

included in the accounts, it may be helpful if such schedules included the 

following, among other possible items: (1) primary plant accounts and amounts

included and reported in the general utility plant accounts 101, 103, 106 and 107

for energy storage plant by function; and (2) expense accounts and amounts 

included and reported in the general O&M expense accounts 401 and 402 for 

storage operations by function. 
Docket Nos. RM11-24-000 and AD10-13-000 - 40 - 

c. We also welcome examples of new schedules that could be created or existing 

schedules that could be revised to report the financial and non-financial data of

storage operations. To provide for transparent reporting of this data, it may be 

helpful if such schedules included the following types of financial and no

financial operational data, among other possible items: (1) name and location of 

energy storage plant; (2) Megawatt hours (MWhs) of power purchased, gener

or received in exchange transactions for storage, MWhs of power delivered to th

grid to support p

nated, 

e 

roduction, transmission, or distribution operations, MWhs of 

d 

and (4) revenues from 

s by service provided and revenues from stored energy 

 and 

 No. 3-Q? 

power lost during conversion, storage and discharge of energy by function, an

MWhs of power sold for resale; (3) cost of power purchased for storage 

operations, fuel costs for storage operations associated with self-generated power, 

and other costs associated with self-generated power; 

energy storage operation

sold for resale. 

d. Should the same financial and nonfinancial data of energy storage assets and 

operations required to be reported in Form Nos. 1 and 1-F also be reported to the 

Commission in the Form No. 3-Q? If not, what information on storage assets

operations should be included in the Form

III. Comment Procedures

51. The Commission invites interested persons to submit comments on the matters

issues and specific questions identified in this notice. Comments are due 60 days from 

publication in the FEDERAL REGISTER. Comments must refer to Docket No. RM11-

, 
Docket Nos. RM11-24-000 and AD10-13-000 - 41 - 

24-000, and must include the commenter's name, the organization they represent, if 

applicable, and their address in their comments. 

52. The Commission encourages comments to be filed electronically via the eFiling 

link on the Commission's web site at http://www.ferc.gov. The Commission accep

most standard word processing formats. Documents created electronically us

ts 

ing word 

able to file comments electronically must mail or hand deliver an 

ents to: Federal Energy Regulatory Commission, 

wed, 

ility section 

ts 

bility

processing software should be filed in native applications or print-to-PDF format and not 

in a scanned format. Commenters filing electronically do not need to make a paper 

filing. 

53. Commenters un

original and copy of their comm

Secretary of the Commission, 888 First Street NE, Washington, DC, 20426. 

54. All comments will be placed in the Commission's public files and may be vie

printed, or downloaded remotely as described in the Document Availab

below. Commenters on this proposal are not required to serve copies of their commen

on other commenters. 

IV. Document Availa

55. In addition to publishing the full text of this document in the Federal Register, the 

Commission provides all interested persons an opportunity to view and/or print the 

contents of this document via the Internet through FERC's Home Page 

(http://www.ferc.gov) and in FERC's Public Reference Room during normal business 

hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street, NE, Room 2A, 

Washington DC 20426. 
Docket Nos. RM11-24-000 and AD10-13-000 - 42 - 

56. From FERC's Home Page on the Internet, this information is available on 

eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft 

Word format for viewing, printing, and/or downloading. To access this document in 

eLibrary, type the docket number excluding the last three digits of t

docket number field. 

his document in the 

or eLibrary and the FERC’s website during normal 

 Support at 202-502-6652 (toll free at 1-866-208-3676) 

erconlinesupport@ferc.gov

57. User assistance is available f

business hours from FERC Online

or email at f , or the Public Reference Room at (202) 502-

371, TTY (202) 502-8659. E-mail the Public Reference Room at 

public.referenceroom@ferc.gov

8

. 

List of subjects in 18 CFR Part 40 

By direction of the Commission. 

( S E A L ) 

Nathaniel J. Davis, Sr., 

Deputy Secretary. 
Docket Nos. RM11-24-000 and AD10-13-000 - 43 - 

Appendix 

List of Commenters in Docket No. AD10-13-000 

A123 Systems, Inc. 

AES Energy Storage, LLC (AES Energy Storage) 

American Electric Power Service Corporation (AEP) 

American Public Power Association 

Applied Intellectual Capital 

Arizona Public Service Company 

Beacon Power Corporation 

Brookfield Renewable Power Inc. (Brookfield) 

California Department of Water Resources State Water Project 

California Energy Storage Alliance 

California Independent System Operator Corporation 

California Public Utilities Commission 

Christensen Associates Energy Consulting 

City of Santa Clara, California and the M-S-R Public Power Agency 

The Coalition to Advance Renewable Energy through Bulk Storage (CAREBS) 

Demand Energy 

Duke Energy Corporation 

Edison Electric Institute (EEI) 

Electric Power Supply Association 

Electricity Consumers Resource Council 

Electricity Storage Association 

Energy Cache 

Exelon Corporation (Exelon) 

FirstEnergy Service Company (FirstEnergy) 

General Compression 

Grasslands Renewable Energy LLC 

ITC Companies 

MegaWatt Storage Farms, Inc. 

MidAmerican Energy Holdings Company 

Modesto Irrigation District 

National Alliance for Advanced Technology Batteries (NAATBatt) 

National Electrical Manufacturers Association 

National Grid USA 

National Hydropower Association 

National Rural Electric Cooperative Association (NRECA) 

New York Transmission Owners 

NGK Insulators, Ltd (NGK/TI) 

NSTAR Electric Company 

Ohio Consumers’ Counsel 
Docket Nos. RM11-24-000 and AD10-13-000 - 44 - 

Pacific Gas and Electric Company 

PJM Interconnection, L.L.C. 

Powerex Corp. 

Premium Power Corporation 

Primus Power Corporation 

PSEG Companies 

Public Interest Organizations 

Puget Sound Energy, Inc. 

Riverbank Power Corp. 

San Diego Gas & Electric Company (SDG&E) 

Six Cities CA 

Rodney G. Smith 

Southern California Edison Company (SCE) 

Southern Company Services, Inc. 

Southwest Power Pool, Inc. 

Starwood Energy Group Global, LLC. 

SunEdison 

Symbiotics, LLC 

Transmission Agency of Northern California 

Viridity Energy, Inc. 

Western Grid Development LLC 

Xtreme Power Inc. (Xtreme Power)