On March 18, 2021, FERC issued Order No. 2222-A, setting aside its finding in Order No. 2222 that demand response resource participation in heterogeneous distributed energy resource (“DER”) aggregations are subject to the opt-out and opt-in requirements of Order Nos. 719 and 719-A, as well as clarifying other requirements in Order No. 2222 concerning Qualifying Facility (“QF”) interconnection policies, restrictions to avoid double-counting services, and information sharing and criteria for the distribution utility review process. Concurrent with Order No. 2222-A, FERC also issued a Notice of Inquiry (“NOI”) seeking comment on whether to revise its more than a decade-old regulations requiring Regional Transmission Organizations and Independent System Operators (“RTO/ISO”) not to accept bids from an aggregator of retail customers (“ARC”) where the relevant electric retail regulatory authority (“RERRA”) prohibits such customers’ demand response resources from being bid into organized markets (“Demand Response Opt-Out”). Specifically, the NOI applies only to regulations where an ARC aggregates the demand response of the customers of utilities that distributed more than four million megawatt-hours in the previous fiscal year and is intended to examine whether changing circumstances warrant revision of the Demand Response Opt-Out and whether the RTO/ISO market would benefit from including currently barred Demand Response Opt-Out resources.

On September 17, 2020, the Commission issued Order No. 2222 (see September 22, 2020 edition of the WER), which requires RTO/ISOs to revise market rules that FERC determined were unjust and unreasonable barriers to DER aggregator participation in RTO/ISO markets. Specifically, FERC ordered each RTO/ISO to revise its tariffs to include DER aggregators as a type of market participant in addition to other requirements intended to facilitate DER aggregator market participation. However, Order No. 2222 did not affect the ability of RERRAs to prohibit retail customer aggregators from including demand response resources in bidding into the RTO/ISO markets. A number of public interest organizations filed requests for rehearing and clarification, which FERC addressed in detail in Order No. 2222-A.

Most notably, FERC determined that while the Demand Response Opt-Out under Order Nos. 719 and 719-A will continue to apply to DER aggregations that consist solely of demand response resources, it will not apply to DER aggregations that also consist of other types of resources in addition to demand response resources, which the Commission defines as heterogeneous DER aggregations. The Commission found that heterogeneous DER aggregations, including demand resource resources, do not fall within the purview of the Demand Response Opt-Out because they are not solely aggregations of retail customers; would undermine the Commission’s goal to remove barriers to DER participation in wholesale markets and enhance competition while ensuring just and reasonable rates; and would undermine Order No. 2222’s potential to take advantage of the diversity of different resources’ operational attributes and capabilities.

Commissioner Danly dissented to Order No. 2222-A for the same reasons he dissented to Order No. 2222; namely, that it “oversteps the reasonable exercise of the Commission’s authority at the expense of the states.” Commissioner Danly said he would decline to exercise FERC jurisdiction over DER aggregations and both the sale and interconnection of QFs participating in DER aggregations. Commissioner Christie also dissented, primarily because he believes that Order No. 2222-A sides with private commercial interests seeking entry into the RSO/ISO at the expense of the states and other authorities responsible for defending the public interest, and will likely result in consumers paying billions of dollars for grid expenditures claimed as necessary to comply with Order No. 2222.

In regard to the NOI, Commissioner Danly concurred with its issuance as an exercise of the Commission’s discretion to issue an NOI on topics within its purview, but opposes eliminating the Demand Response Opt-Out for the “significant violence” it would do to the “statutory and regulatory regimes” of the 18 states that have exercised the Demand Response Opt-Out. Commissioner Christie dissented to the NOI for similar reasons and for the same concerns he expressed in his dissent to Order No. 2222-A.

Order No. 2222-A will go into effect sixty (60) days from its publication in the Federal Register. Initial Comments to the NOI are due June 23, 2021, and Reply Comments are due July 23, 2021.

A copy of Order No. 2222-A is available here and a copy of the NOI is available here.