Document ID: FERC-2021-0349-0001
Agency: ferc
Document Type: Notice
Title: Participation of Aggregators of Retail Demand Response Customers: Markets Operated by Regional Transmission Organizations and Independent System Operators
Posted Date: 2021-03-25T04:00Z

[Federal Register Volume 86, Number 56 (Thursday, March 25, 2021)]
[Notices]
[Pages 15933-15940]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-06106]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. RM21-14-000]

Participation of Aggregators of Retail Demand Response Customers 
in Markets Operated by Regional Transmission Organizations and 
Independent System Operators

AGENCY: Federal Energy Regulatory Commission.

ACTION: Notice of inquiry.

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SUMMARY: In this Notice of Inquiry, the Federal Energy Regulatory 
Commission seeks comment on whether to revise its regulations that 
require a Regional Transmission Organization or Independent System 
Operator not to accept bids from an aggregator of retail customers that 
aggregates the demand response of the customers of utilities that 
distributed more than 4 million megawatt-hours in the previous fiscal 
year, where the relevant electric retail

[[Page 15934]]

regulatory authority prohibits such customers' demand response to be 
bid into organized markets by an aggregator of retail customers.

DATES: Initial Comments are due June 23, 2021, and Reply Comments are 
due July 23, 2021.

ADDRESSES: Comments, identified by docket number, may be filed in the 
following ways:
     Electronic Filing through http://www.ferc.gov. Documents 
created electronically using word processing software should be filed 
in native applications or print-to-PDF format and not in a scanned 
format.
     Mail/Hand Delivery: Those unable to file electronically 
may mail comments via the U.S. Postal Service to: Federal Energy 
Regulatory Commission, Secretary of the Commission, 888 First Street 
NE, Washington, DC 20426. Hand-delivered comments or comments sent via 
any other carrier should be delivered to: Federal Energy Regulatory 
Commission, 12225 Wilkins Avenue, Rockville, MD 20852.
     Instructions: For detailed instructions on submitting 
comments, see the Comment Procedures Section of this document.

FOR FURTHER INFORMATION CONTACT: 
Joseph Baumann (Technical Information), Office of Energy Policy and 
Innovation, Federal Energy Regulatory Commission, 888 First Street NE, 
Washington, DC 20426, (202) 502-8373
Christopher Chaulk (Legal Information), Office of the General Counsel--
Energy Markets, Federal Energy Regulatory Commission, 888 First Street 
NE, Washington, DC 20426, (202) 502-6720

SUPPLEMENTARY INFORMATION: 
    1. In this Notice of Inquiry (NOI), the Federal Energy Regulatory 
Commission (Commission) seeks comment on whether to revise its 
regulations that require a Regional Transmission Organization (RTO) or 
Independent System Operator (ISO) (RTO/ISO) not to accept bids from an 
aggregator of retail customers (ARC) that aggregates the demand 
response of the customers of utilities that distributed more than four 
million megawatt-hours (MWh) in the previous fiscal year, where the 
relevant electric retail regulatory authority (RERRA) prohibits such 
customers' demand response to be bid into organized markets by an ARC 
(Demand Response Opt-Out).\1\
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    \1\ See 18 CFR 35.28(g)(1)(iii). The Commission is not seeking 
comment on the portion of this regulatory text requiring the RTO/ISO 
not to accept bids from an ARC that aggregates the demand response 
of the customers of utilities that distributed four million MWh or 
less in the previous fiscal year, unless the relevant electric 
retail regulatory authority permits such customers' demand response 
to be bid into organized markets by an ARC (Small Utility Opt-In).
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    2. It has been over a decade since the Commission established the 
Demand Response Opt-Out in Order Nos. 719 and 719-A.\2\ In that time, 
there have been significant legal, policy, and technological 
developments that may warrant reconsideration of the Demand Response 
Opt-Out. In light of those developments and the records compiled in 
various proceedings before the Commission, we seek comment on the 
potential impacts of removing the Demand Response Opt-Out from the 
Commission's regulations. We also seek comment on other changes 
relating to demand response since the Commission established the Demand 
Response Opt-Out.
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    \2\ Wholesale Competition in Regions with Organized Electric 
Markets, Order No. 719, 125 FERC ] 61,071 (2008), order on reh'g, 
Order No. 719-A, 128 FERC ] 61,059, order on reh'g, Order No. 719-B, 
129 FERC ] 61,252 (2009).
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I. Background

A. Final Rules on Demand Response Participation in Organized Wholesale 
Electric Markets

    3. As relevant here, in Order Nos. 719 and 719-A the Commission 
directed each RTO/ISO to amend its market rules as necessary to: (1) 
Accept bids from ARCs \3\ that aggregate the demand response of the 
customers of utilities that distributed more than four million MWh in 
the previous fiscal year; and (2) not accept bids from ARCs that 
aggregate the demand response of the customers of utilities that 
distributed more than four million MWh in the previous fiscal year, 
where the RERRA prohibits such customers' demand response to be bid 
into organized markets by an ARC (i.e., the Demand Response Opt-
Out).\4\ The Commission used a four million MWh cut-off to distinguish 
small utilities, which the Commission addressed through additional 
regulations.\5\ The Commission explained that the term RERRA meant 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.\6\
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    \3\ The Commission stated that it would ``use the phrase 
`aggregator of retail customers,' or ARC, to refer to an entity that 
aggregates demand response bids (which are mostly from retail 
loads).'' Id. P 3 n.3.
    \4\ Order No. 719-A, 128 FERC ] 61,059 at P 60; see Order No. 
719, 125 FERC ] 61,071 at P 154.
    \5\ Order No. 719-A, 128 FERC ] 61,059 at PP 59-60.
    \6\ Order No. 719, 125 FERC ] 61,071 at P 158.
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    4. The Commission found that allowing an ARC to act as an 
intermediary for many small retail loads that cannot individually 
participate in the organized markets would improve the competitiveness 
of RTO/ISO markets to fulfill the Commission's statutory mandate to 
ensure supplies of electric energy at just, reasonable, and not unduly 
discriminatory or preferential rates.\7\ The Commission explained that 
aggregating small retail customers into larger pools of resources would 
expand the amount of resources available to the market, increase 
competition, help reduce prices to consumers, and enhance 
reliability.\8\ The Commission also stated that the proposal could 
encourage the development of demand response programs and thus provide 
retail customers more opportunities available through larger 
markets.\9\ Moreover, the Commission noted that experiences with 
existing aggregation programs in some RTOs/ISOs showed that these 
programs had increased demand responsiveness in these regions.\10\ The 
Commission stated that its intent was not to interfere with the 
operation of successful retail demand response programs, place an undue 
burden on state and local retail regulatory entities, or raise new 
jurisdictional concerns.\11\ The Commission further found that this 
action properly balanced the Commission's goal of removing barriers to 
the development of demand response resources in the RTO/ISO markets 
with the interests and concerns of state and local regulatory 
authorities.\12\
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    \7\ Id. P 1.
    \8\ Id. P 154.
    \9\ Id.
    \10\ Id.
    \11\ Id. P 155.
    \12\ Id. P 156.
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    5. Subsequently, in Order No. 745,\13\ the Commission adopted 
revised regulations addressing compensation and cost allocation for 
demand response in RTO/ISO energy markets. On appeal, in EPSA, the 
United States Supreme Court upheld the Commission's jurisdiction over 
the participation of demand response resources in RTO/ISO markets.\14\
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    \13\ Demand Response Compensation in Organized Wholesale Energy 
Markets, Order No. 745, 134 FERC ] 61,187, order on reh'g and 
clarification, Order No. 745-A, 137 FERC ] 61,215 (2011), reh'g 
denied, Order No. 745-B, 138 FERC ] 61,148 (2012), vacated sub nom. 
Elec. Power Supply Ass'n v. FERC, 753 F.3d 216 (D.C. Cir. 2014), 
rev'd & remanded sub nom. FERC v. Elec. Power Supply Ass'n, 136 S. 
Ct. 760 (2016) (EPSA).
    \14\ EPSA, 136 S. Ct. at 773-82.

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[[Page 15935]]

B. Participation in RTO/ISO Markets of Other Resources Located on the 
Distribution System or Behind a Retail Meter

    6. Since EPSA, the Commission and the U.S. Court of Appeals for the 
D.C. Circuit (D.C. Circuit) have addressed the Commission's 
jurisdiction over the participation in RTO/ISO markets of other types 
of demand-side resources and resources located on the distribution 
system or behind a retail customer meter. In those proceedings, the 
Commission has declined requests for states or RERRAs to determine the 
eligibility of these resources to participate in RTO/ISO markets.
1. Energy Efficiency Resources
    7. In Advanced Energy Economy, the Commission determined that it 
has exclusive jurisdiction to regulate the participation of energy 
efficiency resources in RTO/ISO markets as a practice directly 
affecting wholesale markets, rates, and prices.\15\ Consequently, the 
Commission found that a RERRA may not bar, restrict, or otherwise 
condition the participation of energy efficiency resources in RTO/ISO 
markets unless the Commission expressly gives RERRAs such 
authority.\16\ The Commission further found that any incidental effects 
on the retail markets from energy efficiency resource participation in 
wholesale markets are not substantial, including the effects on a load-
serving entity's day-to-day operations.\17\ The Commission also found 
that the potential for increasing competition faced by retail utility 
programs or concerns with double counting are not sufficient 
justifications for barring certain types of resources from the 
market.\18\
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    \15\ 161 FERC ] 61,245, at PP 60-61 (2017) (AEE Declaratory 
Order), order on reh'g, 163 FERC ] 61,030 (2018) (AEE Rehearing 
Order).
    \16\ Id. P 61.
    \17\ Id. P 63.
    \18\ Id. P 64.
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    8. On rehearing, the Commission found that a provision directly 
restricting retail customers' participation in organized wholesale 
markets, even if contained in the terms of retail service, nonetheless 
intrudes on the Commission's jurisdiction over those markets and 
prevents the Commission from carrying out its statutory authority to 
ensure that wholesale electricity markets produce just and reasonable 
rates.\19\ The Commission also disagreed that RERRAs have the authority 
to prevent energy efficiency resources from participating in RTO/ISO 
markets because of RERRAs' concerns about such participation, such as 
the potential impacts on retail load forecasting.\20\ The Commission 
reasoned that, even if a RERRA seeks legitimate ends, it still may not 
seek to achieve such ends through regulatory means that intrude upon 
the Commission's authority over wholesale rates.\21\
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    \19\ AEE Rehearing Order, 163 FERC ] 61,030 at P 37 (citing 
Oneok, Inc. v. Learjet, Inc., 135 S. Ct. 1591, 1600 (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'') 
(Oneok) (quoting N. Natural Gas Co. v. State Corp. Comm'n of Kan., 
372 U.S. 84, 94 (1963)); Nantahala Power & Light Co. v. Thornburg, 
476 U.S. 953, 970 (1986) (finding that ``a State may not exercise 
its undoubted jurisdiction over retail sales to prevent the 
wholesaler-as-seller from recovering the costs of paying the FERC-
approved rate'')).
    \20\ Id. P 38.
    \21\ Id. (citing Hughes v. Talen Energy Mktg., LLC, 136 S. Ct. 
1288, 1298 (2016)).
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2. Electric Storage Resources
    9. In Order No. 841,\22\ the Commission adopted regulations to 
remove barriers to the participation of electric storage resources in 
RTO/ISO markets. The Commission denied a request that the Commission 
allow states to decide whether electric storage resources in their 
state that are located behind a retail meter or on the distribution 
system are permitted to participate in RTO/ISO markets.\23\
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    \22\ Electric Storage Participation in Markets Operated by 
Regional Transmission Organizations and Independent System 
Operators, Order No. 841, 162 FERC ] 61,127 (2018), order on reh'g, 
Order No. 841-A, 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) (NARUC).
    \23\ Id. P 35.
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    10. In Order No. 841-A, the Commission found that the FPA and 
relevant precedent did not legally compel the Commission to adopt an 
opt-out with respect to participation in RTO/ISO markets by electric 
storage resources interconnected on a distribution system or located 
behind a retail meter.\24\ The Commission also maintained that the 
Court's jurisdictional conclusion in EPSA did not rest upon the fact 
that states were granted the Demand Response Opt-Out.\25\ The 
Commission disagreed that states could dictate whether resources are 
allowed to participate in RTO/ISO markets through conditions on the 
receipt of retail service. While acknowledging that states can include 
conditions in their own retail programs that prohibit any participating 
resources from also selling into RTO/ISO markets, the Commission found 
that a condition broadly prohibiting all retail customers from 
participating in RTO/ISO markets, even if contained in the terms of 
retail service, is aimed directly at RTO/ISO markets and would intrude 
on the Commission's jurisdiction over those markets.\26\
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    \24\ Order No. 841-A, 167 FERC ] 61,154 at P 32.
    \25\ Id. P 40.
    \26\ Id. P 41 (emphasis in original).
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    11. The Commission declined to exercise its discretion to grant an 
opt-out, finding that the benefits of allowing electric storage 
resources broader access to wholesale markets outweighed any policy 
considerations in favor of an opt-out.\27\ The Commission explained 
that it considered effects on the distribution system in reaching this 
decision.\28\
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    \27\ Id. P 56.
    \28\ Id.
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    The Commission disagreed that its decision not to exercise its 
discretion and adopt an opt-out in Order No. 841 was an unexplained 
departure from the Demand Response Opt-Out adopted in Order No. 719. 
The Commission stated that Order No. 719 expressly provided that the 
Demand Response Opt-Out only applies to demand response resources; that 
the resources at issue in Order No. 841 differed significantly from the 
demand response resources at issue in Order No. 719, i.e., that unlike 
demand response resources, electric storage resources are capable of 
engaging in sales for resale of electricity; and that, unlike in the 
case of demand response resources, RERRAs and distribution utilities do 
not have a longstanding history of managing and regulating programs for 
electric storage resources within their boundaries.\29\
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    \29\ Id. PP 50-52.
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    12. In NARUC, the D.C. Circuit upheld the Commission's decision in 
Order Nos. 841 and 841-A not to provide a RERRA opt-out with respect to 
the RTO/ISO market participation of electric storage resources located 
behind a retail meter or on the distribution system.\30\ The D.C. 
Circuit concluded that the Commission's prohibition of state-imposed 
participation bans directly affected wholesale rates because Order No. 
841 solely targeted the manner in which an electric storage resource 
may participate in RTO/ISO markets.\31\ The court then found that Order 
No. 841 did not directly regulate states' distribution systems and did 
not `` `usurp[ ] state power.' '' \32\ Furthermore, the D.C. Circuit 
explained, the Commission's statement in Order No. 841-A that states 
may not block RTO/ISO market participation `` `through conditions on 
the receipt of

[[Page 15936]]

retail service,' '' or impose any `` `condition[ ] aimed directly at 
the RTO/ISO markets, even if contained in the terms of retail service,' 
'' was simply a restatement of the well-established principles of 
federal preemption.\33\
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    \30\ 964 F.3d at 1186-89.
    \31\ Id. at 1186.
    \32\ Id. at 1187; id. at 1188 (quoting EPSA, 136 S. Ct. at 777).
    \33\ Id. at 1187 (quoting Order No. 841-A, 167 FERC ] 61,154 at 
P 41) (emphasis in original).
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    13. The D.C. Circuit next concluded that the Commission's decision 
not to adopt a state opt-out was adequately explained.\34\ The D.C. 
Circuit explained that the Commission addressed concerns that states 
may bear additional administrative burdens associated with enabling the 
participation of energy storage resources in RTO/ISO markets, but the 
Commission decided that such negative effects were outweighed by the 
benefits of the final rule.\35\ The D.C. Circuit further noted that, in 
not adopting the opt-out, the Commission was ``acutely aware'' of the 
Demand Response Opt-Out in Order No. 719.\36\ The court stated that the 
Supreme Court described the Demand Response Opt-Out in EPSA as 
``cooperative federalism,'' demonstrating the Commission's 
``recognition of the linkage between wholesale and retail markets and 
the [s]tates' role in overseeing retail sales.'' \37\ The D.C. Circuit 
also agreed with the Commission that EPSA did not condition its 
holdings on the existence of the Demand Response Opt-Out.\38\
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    \34\ Id. at 1189.
    \35\ Id. at 1190.
    \36\ Id.
    \37\ Id. at 1189-90 (quoting EPSA, 136 S. Ct. at 779-80) 
(internal quotation marks omitted).
    \38\ Id.
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3. Distributed Energy Resource Aggregations
    14. Subsequently, in Order No. 2222,\39\ the Commission adopted 
regulations to remove barriers to the participation of distributed 
energy resource aggregations in RTO/ISO markets. The Commission 
declined to include a mechanism for all RERRAs to prohibit all 
distributed energy resources from participating in RTO/ISO markets 
through distributed energy resource aggregations (i.e., an opt-
out).\40\ The Commission stated that the final rule `` `addresses--and 
addresses only--transactions occurring on the wholesale market.'' \41\ 
The Commission thus found that the FPA and relevant precedent does not 
legally compel the Commission to adopt an opt-out with respect to 
participation in RTO/ISO markets by all resources interconnected on a 
distribution system or located behind a retail meter.\42\ The 
Commission found that the benefits of allowing distributed energy 
resource aggregators broader access to the RTO/ISO market outweigh the 
policy considerations in favor of an opt-out.\43\ The Commission 
explained that it was not persuaded that concerns about potential 
effects on the distribution system justify adopting an opt-out that 
could substantially limit that participation.\44\
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    \39\ Participation of Distributed Energy Resource Aggregations 
in Markets Operated by Regional Transmission Organizations and 
Independent System Operators, Order No. 2222, 85 FR 67094 (Oct. 21, 
2020), 172 FERC ] 61,247 (2020), corrected, 85 FR 68450 (Oct. 29, 
2020), order on reh'g, Order No. 2222-A, 174 FERC ] 61,197 (2021).
    \40\ Id. P 56.
    \41\ Id. P 58 (quoting EPSA, 136 S. Ct. at 776).
    \42\ Id.
    \43\ Id. P 60.
    \44\ Id. In Order No. 2222, the Commission recognized the 
potentially greater burden on small utility systems, and exercised 
its discretion to include an opt-in mechanism for small utilities 
similar to that provided in Order No. 719-A. See id. P 64.
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    15. The Commission also explained that because demand response 
falls under the definition of distributed energy resource, an 
aggregator of demand response could participate as a distributed energy 
resource aggregator in RTO/ISO markets.\45\ However, the Commission 
clarified that the final rule did not affect existing demand response 
rules.\46\ The Commission explained that the final rule did not affect 
the ability of RERRAs to prohibit retail customers' demand response 
from being bid into RTO/ISO markets by aggregators, consistent with the 
Demand Response Opt-Out established in Order No. 719.\47\
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    \45\ Id. P 118.
    \46\ Id.
    \47\ Id. P 59 (citing Order No. 719, 125 FERC ] 61,071 at PP 
154-55).
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    16. In Order No. 2222-A, issued concurrently with this NOI, the 
Commission sets aside in part the conclusion that the participation of 
demand response in distributed energy resource aggregations is subject 
to the opt-out requirements of Order Nos. 719 and 719-A.\48\ The 
Commission declines to extend this opt-out to demand response resources 
that participate in heterogeneous distributed energy resource 
aggregations--i.e., those that are made up of different types of 
resources including demand response as opposed to those made up 
entirely of demand response. The Commission finds that the Demand 
Response Opt-Out will continue to apply to aggregations made up solely 
of resources that participate as demand response resources, consistent 
with the Commission's regulations.\49\ The Commission finds that 
heterogeneous distributed energy resource aggregations that include 
demand response resources do not fall squarely within the Demand 
Response Opt-Out, as set forth in the Commission's regulations, because 
they are not solely aggregations of retail customers.\50\ The 
Commission finds that extending the opt-out to demand response 
resources in heterogeneous distributed energy resource aggregations 
would undermine the potential of Order No. 2222 to break down barriers 
to competition, interfering with the Commission's responsibility to 
ensure that wholesale rates are just and reasonable.\51\ The Commission 
also states that applying the Demand Response Opt-Out to aggregations 
that contain a combination of demand response and other types of 
distributed energy resources could prevent distributed energy resource 
aggregators from incorporating the complementary capabilities of 
existing and future demand response technologies.\52\
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    \48\ Order No. 2222-A, 174 FERC ] 61,197 at P 22.
    \49\ Id.
    \50\ Id. P 23 n.70 (citing 18 CFR 35.28(g)(1)(iii) (expressly 
limiting the application of the Order No. 719 opt-out to ``an 
aggregator of retail customers that aggregates the demand response 
of the customers of utilities''); 18 CFR 35.28(b)(10), (g)(12) 
(requiring RTOs/ISOs to establish market rules applicable to 
entities that aggregate one or more resources located on the 
distribution system, any subsystem thereof or behind a customer 
meter); Order No. 2222, 172 FERC ] 61,247 at P 114 (finding that 
distributed energy resources may include, but are not limited to, 
resources that are in front of and behind the customer meter, 
electric storage resources, intermittent generation, distributed 
generation, demand response, energy efficiency, thermal storage, and 
electric vehicles and their supply equipment)).
    \51\ Id. P 23; see also id. (concluding that extending the Order 
No. 719 opt-out to demand response resources that seek to 
participate in heterogeneous distributed energy resource 
aggregations would undermine the ability of such aggregations to 
take advantage of different resources' operational attributes and 
complementary capabilities).
    \52\ Id. P 26.
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C. Voltus v. MISO Complaint

    17. On October 20, 2020, Voltus, Inc. (Voltus) filed a complaint 
arguing that the Demand Response Opt-Out provisions in Midcontinent 
Independent System Operator, Inc.'s (MISO) tariff are inconsistent with 
the jurisdictional provisions of the FPA and are not just and 
reasonable.\53\ Voltus also requested that the Commission issue a 
notice of proposed rulemaking to repeal the Demand Response Opt-
Out.\54\
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    \53\ Voltus, Complaint, Docket No. EL21-12-000, at 1 (filed Oct. 
20, 2020); see MISO, FERC Electric Tariff, Module C, 38.6.A.iii.1(a) 
(34.0.0).
    \54\ Complaint at 2. The Complaint is pending.
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II. Discussion

    18. In this proceeding, we seek to examine whether changing 
circumstances warrant revising the Commission's regulations providing 
for the Demand Response Opt-Out

[[Page 15937]]

established in Order Nos. 719 and 719-A, and more specifically, whether 
RTO/ISO markets would significantly benefit from the increased 
participation of aggregated demand response resources that are 
currently barred by RERRAs exercising the Demand Response Opt-Out.
    19. Over a decade ago, the Commission required RTOs/ISOs to amend 
their market rules as necessary to permit ARCs to bid demand response 
on behalf of retail customers directly into RTO/ISO markets, subject to 
the Demand Response Opt-Out. The Commission found that permitting ARC 
participation in RTO/ISO markets would increase competition, help 
reduce prices to consumers, and enhance reliability.\55\ In support of 
its decision, the Commission stated that its intent was not to 
interfere with the operation of successful retail demand response 
programs, place an undue burden on state and local retail regulatory 
entities, or raise new jurisdictional concerns.\56\ The Commission 
found that its decision properly balanced the interests and concerns of 
state and local regulatory authorities with the Commission's goal of 
removing barriers to the development of demand response resources in 
RTO/ISO markets.\57\
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    \55\ Order No. 719, 125 FERC ] 61,071 at P 154; Order No. 719-A, 
128 FERC ] 61,059 at P 65.
    \56\ Order No. 719, 125 FERC ] 61,071 at P 155; Order No. 719-A, 
128 FERC ] 61,059 at PP 49, 54, 56-57, 67.
    \57\ Order No. 719, 125 FERC ] 61,071 at P 156.
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    20. Since the issuance of Order No. 719, there have been 
significant legal, policy, and technological developments that may 
warrant reconsideration of the Demand Response Opt-Out. The Commission 
has subsequently issued rules relating to other types of demand-side 
resources and resources located on the distribution system or behind a 
retail customer meter. In those proceedings, the Commission has 
consistently declined to adopt a mechanism similar to the Demand 
Response Opt-Out.\58\ In so doing, the Commission has explained that 
the benefits of allowing electric storage resources and distributed 
energy resource aggregations broader access to RTO/ISO markets 
outweighed any policy considerations in favor of an opt-out.\59\ 
Further, there have been significant improvements in the technology 
that ARCs offer to retail customers, including instant communication of 
dispatches, real-time visibility and control of load curtailment, 
immediate settlement of dispatch performance, and automated financial 
transactions between markets and customers, in part due to the 
proliferation of broadband, high-speed wireless communication.\60\ More 
broadly, the adoption of emerging consumer technologies, such as smart 
thermostats, electric water heaters and smart meters, now allows for 
load to be managed through geographically-targeted demand reductions, 
load building and system balancing.\61\ Through the use of state-of-
the-art sensors and controls, grid-interactive efficient buildings \62\ 
can reduce 10-20% of commercial building peak load.\63\
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    \58\ E.g., AEE Declaratory Order, 161 FERC ] 61,245 at P 57 
(finding that RERRAs may not bar the participation of energy 
efficiency resources in wholesale markets unless the Commission 
gives RERRAs such authority, and declining to opine on the 
requirements the Commission would impose in the event that a RERRA 
requests such authority).
    \59\ Order No. 841-A, 167 FERC ] 61,154 at P 56; Order No. 2222, 
172 FERC ] 61,247 at P 60.
    \60\ See Voltus, Complaint, Exhibit B (Testimony of Gregg Dixon) 
at 4-7.
    \61\ The Brattle Group, The National Potential for Load 
Flexibility 1 (June 2019), https://brattlefiles.blob.core.windows.net/files/16639_national_potential_for_load_flexibility_-_final.pdf.
    \62\ Grid-interactive efficient buildings are energy efficient 
buildings with smart technologies characterized by the active use of 
distributed energy resources to optimize energy use for grid 
services, occupant needs and preferences, and cost reductions in a 
continuous and integrated way. U.S. Department of Energy, Grid-
interactive Efficient Buildings 20 (April 2019), https://www.energy.gov/sites/prod/files/2019/04/f61/bto-geb_overview-4.15.19.pdf.
    \63\ Id. at 10-11.
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    21. Accordingly, we are exploring whether to revise the 
Commission's regulations to remove the Demand Response Opt-Out, 
recognizing that the Commission, when it established the Demand 
Response Opt-Out, balanced the interests and concerns of state and 
local regulatory authorities with the Commission's goal of removing 
barriers to demand response resource participation in RTO/ISO markets. 
Circumstances may have changed in the years since the issuance of Order 
Nos. 719 and 719-A, such that the balance reflected in those orders 
adopting the Demand Response Opt-Out may have shifted and the RTO/ISO 
market rules reflecting the Demand Response Opt-Out may no longer be 
just and reasonable. For example, we note that, in its complaint, 
Voltus alleges that the Demand Response Opt-Out has become a barrier to 
competition. Specifically, Voltus argues that the Demand Response Opt-
Out: (1) Makes gatekeepers of utilities that lack the correct 
incentives to maximize the contribution of demand response to market 
value; (2) disconnects customers and market prices; (3) blocks 
innovation; and (4) results in a costly patchwork of program 
requirements and incentives.\64\ Voltus also alleges that the absence 
of demand response competition contributes to threats to reliability in 
MISO.\65\ Through the questions below, we seek information to help us 
examine the potential costs/burdens and benefits, both quantitative and 
qualitative, of removing the Demand Response Opt-Out, as well as other 
changes relating to demand response since the Commission issued Order 
Nos. 719 and 719-A. We are not seeking comment on the Small Utility 
Opt-In.
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    \64\ Voltus, Complaint at 58-59.
    \65\ Id. at 64. We also acknowledge that parties in that 
proceeding opposed these arguments. For example, Organization of 
MISO States argues that Order No. 719 and MISO's tariff provisions 
implementing it remain just and reasonable. Organization of MISO 
States, Inc., Motion to Dismiss Complaint and Protest, Docket No. 
EL21-12-000, at 14 (filed Nov. 19, 2020); see also Midwest TDUs, 
Motion to Intervene, Protest, and Motion to Dismiss, Docket No. 
EL21-12-000, at 13 (filed Nov. 19, 2020) (arguing that Voltus does 
not demonstrate that MISO has concluded that its reliability is at 
risk unless states rescind their Order No. 719 Demand Response Opt-
Out).
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    22. We invite interested persons to submit comments on the 
following questions, and we encourage commenters to provide specific 
examples and refer to recent, relevant studies or data, as necessary. 
Commenters need not answer every question below.

A. Questions Regarding Changed Circumstances Relevant to the Demand 
Response Opt-Out Since Issuance of Order Nos. 719 and 719-A

    23. First, we seek comment on whether and how circumstances have 
changed since the Commission established the Demand Response Opt-Out in 
Order Nos. 719 and 719-A.
    (Q1) To what extent have the type and capabilities of demand 
response technologies and aggregations available to parties seeking to 
participate in RTO/ISO markets changed since 2009? \66\
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    \66\ In 2009, the Commission issued Order No. 719-A.
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    (Q2) To what extent have advances in communications, controls, and 
information technology created new demand response capabilities 
available to parties seeking to participate in RTO/ISO markets since 
2009?
    (a) For example, what impact, if any, has broader deployment of 
advanced metering infrastructure (AMI) had on the availability and 
utilization of demand response for aggregators seeking to participate 
in RTO/ISO markets?
    (b) Has experience with RTO/ISO deployment of demand response 
resources demonstrated any system-

[[Page 15938]]

wide value or operational benefits that accrue, more efficiently and 
effectively, via RTO/ISO dispatch through aggregators than would be 
available otherwise?
    (Q3) To what extent have changes in the resource mix since 2009 
increased the need for aggregations of demand response in RTO/ISO 
markets, particularly demand response that can respond to operator 
instructions in real time? Have impacts of these trends been different 
in states that have adopted the Demand Response Opt-Out?
    (Q4) The North American Electric Reliability Corporation (NERC) has 
stated that demand response provides transmission system operators with 
additional system-balancing tools to maintain bulk-power system 
reliability.\67\ NERC has also stated that, as the resource mix 
changes, flexible resources that can be called upon on short notice, 
including demand response, are needed to ensure resource adequacy and 
meet ramping needs.\68\ To what extent can demand response aggregations 
provide real-time balancing and essential grid services, such as 
frequency response and ramping capability, to support bulk-power system 
operations? Are third-party demand response aggregators equally able to 
provide real-time balancing and essential grid services, or are 
utility-operated programs better suited to provide them? Are 
transmission system operators better able to leverage these 
capabilities given developments in technology and infrastructure since 
2009?
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    \67\ North American Electric Reliability Corporation, Essential 
Reliability Services Task Force Measures Framework Report 63 (Nov. 
2015), https://www.nerc.com/comm/Other/essntlrlbltysrvcstskfrcDL/ERSTF%20Framework%20Report%20-%20Final.pdf.
    \68\ North American Electric Reliability Corporation, 2020 State 
of Reliability 49 (July 2020), https://www.nerc.com/pa/RAPA/PA/Performance%20Analysis%20DL/NERC_SOR_2020.pdf.
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B. Questions Regarding Potential Benefits of Removing the Demand 
Response Opt-Out

    24. We seek comment on the potential benefits of revising our 
regulations to remove the Demand Response Opt-Out. We also seek comment 
on reasons why the balance between the Commission's goal of removing 
barriers to the development of demand response resources in RTO/ISO 
markets and the interests and concerns of state and local regulatory 
authorities may have shifted such that the market rules reflecting the 
Demand Response Opt-Out may no longer be just and reasonable.
    (Q5) What are the potential benefits of removing the Demand 
Response Opt-Out, including any benefits not considered by the 
Commission in Order Nos. 719 and 719-A, and considering any changed 
circumstances that may be relevant? Please note if such benefits were 
not previously highlighted in Order Nos. 719 and 719-A.\69\ Please 
provide quantitative estimates, if possible. In addition, please 
describe the types of entities to which any benefits would accrue.
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    \69\ See supra PP 4, 19.
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    (Q6) What are the potential benefits of creating more consistency 
between the participation models for ARCs and distributed energy 
resource aggregators by removing the Demand Response Opt-Out? In light 
of market participation opportunities for energy efficiency resources, 
electric storage resources, and distributed energy resource 
aggregations, would eliminating the Demand Response Opt-Out established 
in Order Nos. 719 and 719-A enhance clarity for market participants and 
prevent disputes regarding the eligibility of resource aggregations to 
participate in wholesale markets?
    (Q7) Is there any evidence to suggest that removing the Demand 
Response Opt-Out would result in additional demand response resources 
participating through aggregations in RTO/ISO markets? Similarly, is 
there any evidence to suggest that removing the Demand Response Opt-Out 
would result in additional demand response services or flexibility to 
address system needs? If so, are there ways to quantify these benefits 
to RTO/ISO markets? Do the benefits of permitting increased third-party 
demand response aggregations in RTO/ISO markets exceed those provided 
by utilities bidding demand response into such markets?
    (Q8) Is there any other evidence to suggest that RTO/ISO market 
rules reflecting the Demand Response Opt-Out are no longer just and 
reasonable?

C. Questions Regarding Potential Resulting Burdens From Removing the 
Demand Response Opt-Out

    25. We also seek comment on the potential resulting burdens from 
removing the Demand Response Opt-Out based on experience gained since 
2009. In Order No. 719, the Commission described the various concerns 
commenters expressed about the Commission's proposed Demand Response 
Opt-Out. Commenters alleged that the proposed Demand Response Opt-Out 
would place the burden on local authorities to take action to disallow 
participation of ARCs in RTO/ISO markets. Another commenter argued 
that, under the Commission's proposal, ARCs would effectively be 
allowed to cherry-pick the best load response resources out of existing 
load-serving entity demand response programs, depriving those load-
serving entities of important resources used to keep rates down for all 
consumers.\70\ The Commission explained its decision to establish the 
Demand Response Opt-Out in part by stating that it did not seek to 
interfere with the operation of successful retail demand response 
programs or place an undue burden on state and local retail regulatory 
authorities.\71\
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    \70\ Order No. 719, 125 FERC ] 61,071 at PP 139, 141.
    \71\ See supra P 19.
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    (Q9) To what extent has the Demand Response Opt-Out prevented 
interference with the operation of existing retail demand response 
programs, or avoided placing an undue burden on state and local retail 
regulatory entities, as noted in Order No. 719?
    (Q10) What potential costs and burdens might result from removing 
the Demand Response Opt-Out, considering any of the changed 
circumstances explored above? Please note any burdens that were not 
previously mentioned in Order Nos. 719 and 719-A. Please provide 
quantitative estimates, if possible.
    (Q11) Are there any downsides to increased participation of 
aggregators of demand response in RTO/ISO markets from states currently 
exercising the Demand Response Opt-Out that may warrant the 
Commission's consideration? If so, please describe the potential 
downsides and the types of entities that would bear these burdens.
    (Q12) Is there a significant difference between any costs and 
burdens from complying with Order No. 2222 and those that might result 
from removal of the Demand Response Opt-Out? If so, why would removal 
of the Demand Response Opt-Out create more costs and burdens?

III. Comment Procedures

    26. The Commission invites interested persons to submit comments on 
the matters and issues proposed in this notice, including any related 
matters or alternative proposals that commenters may wish to discuss. 
Comments are due June 23, 2021 and Reply Comments are due July 23, 
2021. Comments must refer to Docket No. RM21-14-000 and must include 
the commenter's name, the

[[Page 15939]]

organization they represent, if applicable, and their address.
    27. The Commission encourages comments to be filed electronically 
via the eFiling link on the Commission's website at http://www.ferc.gov. The Commission accepts most standard word-processing 
formats. Documents created electronically using word-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.
    28. Those unable to file electronically may mail comments via the 
U.S. Postal Service to: Federal Energy Regulatory Commission, Secretary 
of the Commission, 888 First Street NE, Washington, DC 20426. Hand-
delivered comments or comments sent via any other carrier should be 
delivered to: Federal Energy Regulatory Commission, 12225 Wilkins 
Avenue, Rockville, MD 20852.
    29. All comments will be placed in the Commission's public files 
and may be viewed, printed, or downloaded remotely as described in the 
Document Availability section below. Commenters on this proposal are 
not required to serve copies of their comments on other commenters.

IV. Document Availability

    30. 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 the Commission's Home Page (http://www.ferc.gov). At 
this time, the Commission has suspended access to the Commission's 
Public Reference Room due to the President's March 13, 2020 
proclamation declaring a National Emergency concerning the Novel 
Coronavirus Disease (COVID-19).
    31. From the Commission'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 this document in 
the docket number field.
    32. User assistance is available for eLibrary and the Commission's 
website during normal business hours from the Commission's Online 
Support at 202-502-6652 (toll free at 1-866-208-3676) or email at 
ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at 
public.referenceroom@ferc.gov.
    By direction of the Commission.
    Commissioner Danly is concurring a separate statement attached.
    Commissioner Christie is dissenting with a separate statement 
attached.

    Issued: March 18, 2021.
Nathaniel J. Davis, Sr.,
Deputy Secretary.

United States of America

Federal Energy Regulatory Commission

Participation of Aggregators of Retail Demand Response Customers in 
Markets Operated by Regional Transmission Organizations and Independent 
System Operators--Docket No. RM21-14-000

    DANLY, Commissioner, concurring:
    1. I disagree that we should eliminate the Commission's rule 
establishing states' rights to opt out of wholesale demand response 
aggregation programs.\1\ The Commission, however, always has the 
discretion to issue a Notice of Inquiry (NOI) on any topic within its 
purview. I therefore concur in the issuance of the NOI but oppose the 
measures it anticipates.
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    \1\ See 18 CFR 35.28(g)(1)(iii) (2020).
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    2. It is my understanding that eighteen states have opted out \2\ 
of the Commission's demand response aggregation mandate in Order No. 
719.\3\ Any Commission action to now revoke the states' authority to 
opt-out would thus do significant violence to the statutory and 
regulatory regimes these eighteen states have enacted, in addition to 
the harm it would cause to the long-established division between 
federal and state regulation of electricity.\4\
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    \2\ The states are Arkansas, Iowa, Indiana, Kansas, Kentucky, 
Louisiana, Michigan, Minnesota, Missouri, Mississippi, Montana, 
North Carolina, North Dakota, Nebraska, New Mexico, Oklahoma, South 
Dakota, and Wisconsin.
    \3\ Wholesale Competition in Regions with Organized Electric 
Markets, Order No. 719, 125 FERC ] 61,071 (2008), order on reh'g, 
Order No. 719-A, 128 FERC ] 61,059, reh'g denied, Order No. 719-B, 
129 FERC ] 61,252 (2009).
    \4\ I discuss these jurisdictional issues in my dissent today to 
Order No. 2222-A. See Participation of Distributed Energy Res. 
Aggregations in Mkts. Operated by Reg'l Transmission Orgs. and 
Indep. Sys. Operators, Order No. 2222-A, 174 FERC ] 61,197 (2021) 
(Danly, Comm'r, dissenting).
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    3. I invite these states and any other parties interested in 
preserving the traditional and current role of the states in exercising 
jurisdiction over retail electricity and distribution systems, 
including oversight over demand response programs, to respond to the 
NOI and provide appropriate record evidence.
    4. Some of the most important evidence I would like to see 
submitted concerns whether wholesale demand response aggregation 
programs are providing reliability benefits commensurate with their 
costs. Before we force everyone to join them, we ought to see if they 
work. We often see statistics of the quantity of resources that 
participate or join wholesale demand response programs. We rarely see 
statistics that quantify the actual performance of these demand 
response resources during critical events.
    5. Anecdotal evidence suggests their performance during times of 
strain may be poor, and perhaps terrible. Commission staff reviewed 
preliminary analyses in response to the 2020 California reliability 
crisis and observed that dispatched ``Proxy Demand Response'' in CAISO 
had 50% availability over the six days of the 2020 California 
reliability crisis, while dispatched ``Reliability Demand Response 
Resources'' had 71% availability.\5\ The Commission staff further 
observed that ``while [Proxy Demand Response] has been regularly 
dispatched, its performance varies dramatically,'' and that for 
Reliability Demand Response Resources, ``[t]here are neither 
established performance metrics nor comparable historical data to 
evaluate'' its performance.\6\ It would be an unacceptable failure of 
regulatory oversight if we do not have basic performance metrics for 
demand response given that these wholesale programs have been 
authorized for over a decade--and that customers have been paying for 
them all the while.
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    \5\ See Preliminary Observations on the August 2020 California 
Heat Storm (AD21-3-000), FERC, 15-16 (Dec. 17, 2020), https://cms.ferc.gov/sites/default/files/2020-12/California%20Heat%20Storm%20Inquiry%20Presentation%2C%20December%2017%2C%202020%20--%20Script.pdf.
    \6\ Id.
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    6. I welcome, indeed, encourage a searching inquiry into how much 
demand response actually contributes to reliability during critical 
reliability events. Ideally, comments would rest upon detailed analyses 
of whether demand response is worth both the costs a resource saves 
when it does not purchase energy (when demand responds to requests to 
reduce consumption) and the marginal price it receives in payment. 
Again, these seem like threshold questions before we upend eighteen 
separate states' regulatory regimes enacted to accommodate the opt-out 
we currently require but now may eliminate.
    For these reasons, I respectfully concur.

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James P. Danly,

Commissioner.

[[Page 15940]]

United States of America

Federal Energy Regulatory Commission

Participation of Aggregators of Retail Demand Response Customers in 
Markets Operated by Regional Transmission Organizations and Independent 
System Operators--Docket No. RM21-14-000

    CHRISTIE, Commissioner, dissenting:
    1. As Bob Dylan said, you don't need a weatherman to know which way 
the wind blows, and while styled as a Notice of Inquiry (NOI), it is 
apparent that this order's end game is to repeal or severely restrict 
the ``opt-out'' provisions of Order Nos. 719 and 719-A.\1\
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    \1\ See, e.g, NOI at PP 2, 18, 20, 21, 24.
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    2. Since those orders were issued, eighteen states have chosen to 
use the opt-out provision.\2\ Presumably those states made those 
decisions for reasons that were consistent with their own public policy 
needs and preferences. FERC should respect those state policy 
decisions; however, because those states (and potentially others in the 
future) have exercised their own policy choices, the majority now seeks 
to block states from making such choices.
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    \2\ See Participation of Distributed Energy Resource 
Aggregations in Markets Operated by Regional Transmission 
Organizations and Independent System Operators, Order No. 2222, 85 
FR 67094, 172 FERC ] 61,247, on reh'g, Order No. 2222-A, 174 FERC ] 
61,197 (2021) (Danly, Comm'r, dissenting at n. 2).
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    3. I therefore dissent for the same fundamental reasons expressed 
in my dissent today to Order No. 2222-A: \3\ At a time when we hear 
many voices--including some on this Commission--demanding that FERC 
`respect' state public policies in RTO/ISO capacity markets when it 
comes to the MOPR cases, this order goes in the exact opposite 
direction. We see in this NOI another example that for some, 
`respecting' state public policies only applies when the states are 
doing what they want.
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    \3\ See Order No. 2222-A (Christie, Comm'r, dissenting).
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    4. I further note, as I discussed today in my dissent to Order No. 
2222-A, that combined with that order this one substantially raises the 
costs to states of participating in RTOs/ISOs.\4\ Some states not in 
RTOs/ISOs may well choose to continue to stay out; those in RTOs/ISOs 
may well choose to reconsider their participation, if the cost of 
participation is to be blocked by FERC from exercising significant 
portions of their historic powers over the retail side of regulation.
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    \4\ Id. at P 7. Technically speaking, states approve 
participation by state-regulated utilities in RTOs/ISOs.
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    For these reasons, I respectfully dissent.

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Mark C. Christie,

Commissioner.
[FR Doc. 2021-06106 Filed 3-24-21; 8:45 am]
BILLING CODE 6717-01-P