The Midcontinent Independent System Operator (MISO), a Regional Transmission Organization (RTO), has proposed to the Federal Energy Regulatory Commission (FERC) tariff provisions that would treat electric storage facilities as transmission-only facilities if they provide the preferred solution to a transmission issue in MISO’s regional planning process.  This is the first such proposal by a wholesale electric market operator.  Up to now, storage facility requests to qualify as transmission facilities have been few and case-specific.  Treatment as a transmission resource provides additional deployment opportunities for storage resources and allows them cost recovery through cost-based transmission rates instead of relying on energy market revenues.  Standardized tariff-based terms and conditions for qualifying as a transmission resource should provide an easier path to such treatment.

FERC issued an order setting MISO’s proposal for investigation and will hold a technical conference on it.  This proceeding will likely set a precedent for other RTOs with respect to the terms and conditions under which storage resources may qualify as transmission resources.  MISO’s proposal and FERC’s proceeding should be of interest to a wide range of electricity market participants including utilities, generation companies, customers and investors in storage and other electricity resources.

Background

Storage resources generally operate as supply-side resources that earn revenue through energy market participation.  With their ability to inject and withdraw energy from the grid, however, storage resources can be installed and operated in a way that substitutes for potentially more costly transmission facilities.  For example, in 2010, FERC addressed a proposal from Western Grid Development LLC to install on the California ISO system sodium sulfur batteries.  According to Western Grid, the storage resources would facilitate reliability by (1) mitigating normal transmission overload; (2) addressing transmission line trips; (3) responding to transmission lines taken off line for maintenance; and/or (4) reacting to voltage dips on transmission line segments.

MISO proposal

MISO’s proposed tariff provisions will allow a storage facility to be approved as the preferred solution to issues identified in a regional transmission plan.  Such storage resources will treated as a transmission-only asset.  MISO proposes: (1) an evaluation process for a storage resource to be included in the regional plan as the preferred solution to a transmission issue; (2) the cost and performance factors that will be considered in that evaluation; (3) criteria for selecting a storage resources as the preferred solution; and (4) development of operating guides for storage resources serving a transmission function.  Real-time operation of a storage resource serving as transmission will be under MISO’s functional control but its owner must maintain the needed state of charge.

While transmission-only storage resources will recover certain costs through cost-based transmission rates, they will also incur costs and earn revenue through the energy markets as they purchase energy when charging and sell energy when discharging, as directed by the RTO.  This raises the issue of ensuring that storage resources do not collect more than their costs.  Under the  proposal, revenues collected from a storage resource’s market activities directed by MISO will be credited to transmission rates.  In addition, a storage resource serving a transmission function when charging and discharging will not be eligible to serve as a market resource and will not set the energy market price but instead will be a price taker.

According to FERC’s order, comments on MISO’s proposed tariff provisions were  mixed.  Transmission owners support the proposal as providing another tool for them to maintain the “reliability and resilience” of the transmission system.  However, protesters raised a host of issues that will be addressed in a staff-led technical conference, including the following:

  • Evaluation and selection criteria for storage resources to serve as transmission resources,
  • Such storage resource’s market activities and any potential wholesale market impacts of those activities,
  • How MISO’s current formula rate structure accommodates cost recovery for storage resources to serve as transmission resources,
  • Such resource’s potential impact on the generator interconnection queue, and
  • Operating guides that will apply to a such storage resources.

Additional details of the technical conference will be provided in a subsequent FERC notice.  Post conference comments by parties will be accepted.

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Photo of Bud Earley Bud Earley

Bud Earley, a non-lawyer senior advisor, provides analysis and advice on a wide range of federal and state energy regulatory issues, including transaction and rate issues, regional transmission organization (RTO) tariffs and rules, interconnection, retail choice and demand response for electricity customers…

Bud Earley, a non-lawyer senior advisor, provides analysis and advice on a wide range of federal and state energy regulatory issues, including transaction and rate issues, regional transmission organization (RTO) tariffs and rules, interconnection, retail choice and demand response for electricity customers, a natural gas pipelines and hydroelectric facility licenses, and LNG export authorizations.

Working with Covington teams, Mr. Earley has provided expert advice and analysis to investment firms, utilities, independent power producers, project developers, customers, marketers and U.S. and international energy companies,

Prior to joining Covington, Mr. Earley served for over 30 years in various staff positions at the Federal Energy Regulatory Commission (FERC). While at the FERC, Mr. Earley was instrumental in developing and applying policies regarding the transition of the electric utility industry to competition, including policies regarding independent power producers, transmission access, standard generator interconnection procedures, organized electricity markets, mergers and market-based rates.