NYISO Sues FERC Over Participation of Aggregated Dispatched Energy Resources in New York Wholesale Markets | Foley Hoag LLP – Energy and Climate Consulting

The long saga of how small-scale, “distributed” energy resources such as energy storage, solar power, energy efficiency assets and even electric vehicle charging equipment can compete in New York State’s energy big, if they “aggregate” their resources and bid together, has now landed in federal court. On October 4, 2022, the New York Independent System Operator, Inc. (“NYISO”) filed a petition before the DC Circuit Court of Appeals seeking review by a Federal Energy Regulatory Commission (“FERC”) order regarding NYISO’s compliance with FERC Order 2222. Order 2222, issued in September 2020, directed Regional Transmission Organizations (“RTOs”) and Independent System Operators (“ISOs”) to remove market barriers for Distributed Energy Resource (“DER”) aggregations participate in wholesale markets, potentially opening new markets for resources that are policy priorities for New York State.

Background

NYISO, along with other RTOs and ISOs, has made a series of compliance filings in response to Order 2222 since its enactment. More recently, in July 2021, the NYISO made a compliance deposit which FERC found only partially compliant with Order 2222 (See file numbers. ER21-2460-000 and ER21-2460-001). In relevant part, FERC determined that NYISO’s proposed market design to prohibit an aggregation from participating in markets as a reliability resource when one of its DERs was less than one hour unfairly limited the ability of the aggregation to participate in the markets. FERC ordered NYISO to revise its tariff to reflect that as long as some of the DERs in the aggregation meet the requirements to provide ancillary services, then any DER in that aggregation is free to do so.

NYISO then filed a request for clarification and rehearing with FERC. In its request for clarification, NYISO asked FERC to clarify whether it requires NYISO to grant individual DERs in an aggregation of real-time engagement and real-time dispatch opportunities. NYISO argued that if this were the case, NYISO would need to invest significant resources in developing such features, but it was “unclear whether the investment. . . would provide equivalent benefits or market efficiency. The NYISO also pointed out that this would require significantly more data collection from individual DERs, which would increase costs for DERs and aggregators. Importantly, NYISO also argued that this requirement could result in violations of reliability standards in the event that NYISO assigns unavailable DERs in an aggregation an operating reserve schedule.

NYISO’s rehearing request sought an alternative solution in the form of asking FERC to reconsider its directive to NYISO on the grounds that it is “too prescriptive, fundamentally inconsistent with NYISO’s market design, virtually impossible to enforce. will be implemented in the near future, and could threaten reliability. NYISO argued that FERC acted arbitrarily and capriciously when it failed to explain why such a market change was necessary, and accused FERC of “ignoring recorded evidence” of NYISO’s limitations. .

FERC refuse the rehearing and provided no clarification regarding NYISO’s request, and therefore NYISO sought judicial review under the Federal Power Act.

Potential impact

The Court has the power under the Federal Power Act to affirm, vary or set aside FERC’s order in whole or in part. If the Court upholds FERC’s order, it could significantly delay the ability of DER aggregations to participate in NYISO markets while NYISO works to modify its software and market rules to reflect the directive. An assertion could also impact the market designs of other RTOs and ISOs, which have already struggled to appease FERC in their Order 2222 compliance filings. If FERC sets a precedent for allowing DERs individuals from an aggregation to be able to participate in markets, this could have an unintended chilling effect on markets if DERs are unwilling to bear the additional costs associated with increased data collection efforts, and also if RTOs and ISOs must significantly delay the implementation of their market designs to meet such a requirement.