New Berkeley Lab report on considerations for reversing the third party aggregator opt out in MISO and SPP regions

Several states in MISO and SPP previously opted out of allowing third-party aggregators of retail customers to directly participate in the demand response programs of organized wholesale markets following FERC Order 719. Some have begun to explore the possibility of allowing direct third-party participation in organized wholesale markets in light of FERC Order 2222 which requires states to allow ARCs to directly enroll distributed energy resources into organized wholesale market opportunities. Berkeley Lab is pleased to announce the release of a report titled Third-Party Aggregation Rulemaking in MISO and SPP Footprints, in which we performed a document review and several interviews with 27 regulators, aggregators, and other industry professionals across 12 states to better understand how states have treated and/or integrated aggregators into wholesale markets along with considerations and policy issues related to that integration process. While the report is focused on vertically integrated states in the MISO and SPP footprints, 17 of these 20 states opted out of allowing third party aggregations following Order 719 and none have fully reversed that decision. As such, we supplement findings from these states with a handful of others to highlight examples across states of how retail regulators have weighed different tradeoffs and taken different actions related to legal jurisdiction, participation requirements, and rule enforcement.

We summarize findings into a set of general and specific policy findings.

Five high level, general findings include:

• The vast majority of MISO and SPP states opted out of third-party ARCs after FERC Order 719
• Third-party ARCs in vertically-integrated MISO and SPP states exist despite largely-absent state-administered rules
• Restructured states outside of MISO and SPP exhibit heterogeneity in how they approach aggregations, but may still offer helpful considerations
• Many retail regulators have similar questions surrounding topics such as jurisdiction, participation rules, and dual participation, regardless of market footprint and structure

The findings offer a deeper dive into specific examples from states on issues surrounding regulator jurisdiction, aggregator participation requirements, and the enforcement of these rules. Each section organizes state actions into Tiers I-III, which roughly correspond to the possible level of involvement or possible change necessary by state regulators and/or legislators to implement these actions. 

The tier level does not indicate any value judgement, as each state has respective regulatory limitations and each decision comes with various tradeoffs. One main tradeoff is between simplicity and quick implementation versus comprehensive and prolonged implementation. In many cases, actions in Tier I could be implemented without significant changes by relying on the use of existing processes for an aggregator context. On the other hand, many actions in Tier III are more narrowly designed to address aggregators specifically, but often require more significant changes including the involvement of additional parties through stakeholder engagement or legislative action. In some cases, these tiers are discrete. However, state regulators may also choose to progress through these various tiers sequentially as they phase in aggregators while learning from their experience.

With the ability to stack bulk system level services, distributed energy resource aggregations in MISO and SPP could provide various private benefits (e.g., increased value streams to the DER’s owner) as well as societally beneficial grid services (e.g., peaking capacity, ancillary services, and other services that increase the grid’s overall operational efficiency). If states begin to loosen restrictions on third-party aggregators and learn from experiences, they should be able to capture these benefits and a resulting series of ‘best practices’ may emerge with time.

For questions on the report, please contact Sydney Forrester (510-486-4123, [email protected]) or Pete Cappers (315-637-0513, [email protected]).

We appreciate the funding support of the U.S. Department of Energy’s Office of Electricity and Office of Energy Efficiency and Renewable Energy as well as DOE’s Grid Modernization Initiative for making this work possible.