FERC Issues Policy Statement on Cost Recovery for Electric Storage Resources, But the Devil Will Be in the “Implementation Details”
By Molly K. Suda, William H. Holmes, and Buck B. Endemann
Last week, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) issued a Policy Statement to provide guidance for electric storage resource owners and operators that may seek to receive cost-based rate recovery for certain services, as well as market-based revenues for other services.[1] The Policy Statement explains that an electric storage resource may provide transmission or grid support services at a cost-based rate, while also participating in the wholesale energy markets administered by a regional transmission organization (“RTO”) or independent system operator (“ISO”) and earning market-based revenues. As described below, the Policy Statement eliminates some uncertainty created by prior FERC precedent, which limited electric storage resources’ ability simultaneously to provide transmission or grid support services at cost-based rates and also participate in the wholesale markets.
However, the path forward for electric storage resources to “stack” payment streams and recover costs through both cost-based and market-based rates will not be without obstacles. The Policy Statement acknowledges that “implementation details” will need to be addressed. Additionally, FERC Commissioner Cheryl LaFleur dissented, disagreeing with the Policy Statement’s broad statements that electric storage resources’ ability to recovery costs through both cost-based and market-based rates will not adversely impact other market competitors. Commissioner LaFleur also disagreed with the decision to address the issue of electric storage resources’ ability to recover costs through both cost-based and market-based rates in a proceeding separate from the pending Notice of Proposed Rulemaking on electric storage’s participation in RTO/ISO markets (“Electric Storage NOPR”).[2] Thus, while the Policy Statement removes some uncertainty, electric storage resources will likely still have to grapple with cost recovery, competition, and other issues on a case-by-case basis.
This alert provides background on the Commission’s prior precedent related to electric storage resources and cost-based recovery, as well as the Commission’s recent efforts in several open proceedings to address potential barriers to the further development of electric storage resources. Provided below is a summary of the Commission’s Policy Statement, as well as an overview of open questions and unresolved issues that are intertwined with issues presented in the Commission’s Electric Storage NOPR and other recent orders.