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Federal Register / Vol. 86, No. 59 / Tuesday, March 30, 2021 / Rules and Regulations
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energy resource aggregations, we conclude that the goal of resource neutrality supports requiring RTOs/ISOs to allow demand response resources to participate in such aggregations on a level playing field as other distributed energy resources.83
28. In summary, we conclude that if a distributed energy resource aggregator aggregates only demand response resources, it is materially indistinct from the aggregations of retail customers subject to the Order No. 719 opt-out.
The Commission has not proposed to overturn the Order No. 719 opt-out in this rulemaking and, to the extent parties ask that we do so on rehearing, we find that such requests are out of scope. However, we also conclude that heterogeneous distributed energy resource aggregations that include demand response do not fall squarely within the Order No. 719 opt-out. For the reasons discussed above, we find that allowing a RERRA to preclude demand response from participating in heterogeneous distributed energy resource aggregations would sufficiently undermine the goals of Order No. 2222.
As a result, on rehearing, we conclude that demand response resources may participate in heterogeneous aggregations, even when located in states that have exercised the Order No.
719 opt-out. We also clarify that the small utility opt-in adopted in Order No. 2222 still applies to all distributed energy resource aggregations, including those containing demand response resources.84
29. Finally, AEE/AEMA request that the Commission clarify that the opt-out and opt-in requirements of Order No.
719 will apply only to the non-injection portion of an individual distributed energy resource and not to the injection portion of an individual distributed energy resource. We clarify that, if an individual distributed energy resource can be configured to engage in either demand response or injection of energy onto the grid to make wholesale sales e.g., a behind-the-meter generator, it may choose to participate in the wholesale markets by reducing a customers metered load on the grid from the customers expected consumption i.e., as a demand response resource subject to Order No. 719 or it 83 We note that the Order No. 719 opt-out is arguably inconsistent with that goal. The Commission has not proposed to modify the relevant regulations in this proceeding and it would be inappropriate to do so on rehearing.
Nevertheless, we note that the Commission is contemporaneously issuing a notice of inquiry to examine the Order No. 719 opt-out and whether it remains just and reasonable. cross-referenced at 174 FERC 61,198.
84 Order No. 2222, 172 FERC 61,247 at P 64.

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may choose to participate by injecting energy onto the grid to make wholesale sales i.e., as a different type of distributed energy resource. If a distributed energy resource aggregation is composed solely of resources that participate as demand response resources, then the Order No. 719 optout would apply to that aggregation. If a distributed energy resource aggregation contains any resources that participate as another type of distributed energy resource, then the Order No. 719 opt-out would not apply to that aggregation.85
3. Small Utility Opt-In 30. In Order No. 2222, the Commission acknowledged that, notwithstanding its finding that the benefits of the final rule outweigh the policy considerations in favor of a broad opt-out, the final rule may place a potentially greater burden on smaller utility systems.86 The Commission stated that, recognizing this potentially greater burden on small utility systems, the Commission would exercise its discretion to include in the final rule an opt-in mechanism for small utilities similar to that provided in Order No.
719A.87 Specifically, the Commission determined that an RTO/ISO must not accept bids from a distributed energy resource aggregator if its aggregation includes distributed energy resources that are customers of utilities that distributed 4 million MWh or less in the previous fiscal year, unless the RERRA
affirmatively allows such customers to participate in distributed energy resource aggregations. The Commission found that this opt-in mechanism appropriately balances the benefits that distributed energy resource aggregation can provide to RTO/ISO markets with a recognition of the burdens that such aggregation may create for small utilities in particular.88
85 See, e.g., Order No. 841A, 167 FERC 61,154
at P 53 Therefore, when an electric storage device chooses to participate in the RTO/ISO markets as demand response, it is not participating as an electric storage resource or injecting electricity onto the grid and should not be subject to the market rules applicable to electric storage resources.
Accordingly, because demand response and electric storage resources have differing ways of interacting with RTO/ISO markets and are subject to different market rules, it is not arbitrary or inconsistent for the Commission to take different policy approaches when integrating those resources into the RTO/ISO
markets..
86 Order No. 2222, 172 FERC 61,247 at P 64
citing APPA Comments 2018 RM189 at 7, 910;
APPA/NRECA Comments RM1623 at 39; NRECA
Comments 2018 RM189 at 14, 2628; TAPS
Comments RM1623 at 1516.
87 Id. P 64.
88 Id. P 65.

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a. Requests for Clarification or Rehearing 31. Public Interest Organizations argue that the Commission erred by providing RERRAs the power to prevent distributed energy resource aggregations for utilities that provide 4 million MWh or less annually from participating in wholesale markets.89 First, Public Interest Organizations assert that, pursuant to the FPA, state authorities lack jurisdiction to directly determine whether resources are permitted to participate in RTO/ISO markets because such state actions directly aim at wholesale transactions and are therefore field preempted.90
32. Second, Public Interest Organizations assert that the 4 million MWh threshold for the opt-in is not supported by substantial evidence and should be removed, clarified, or otherwise revisited.91 According to Public Interest Organizations, the Commission acknowledged that the Small Business Size Standards system no longer uses a numerical MWh metric to determine the appropriate classification for utilities, and therefore it is not reasonable for the Commission to presume that this threshold reflects a meaningful point at which the substantial benefits of Order No. 2222
are outweighed by its burdens.92 They argue that the Commission did not identify record evidence to demonstrate that this scale of utility operation has meaningful relation to any harm such entities may face due to the implementation of Order No. 2222.
They assert that the Commissions justification that it has used this standard in prior orders is arbitrary because those orders involved different industries unrelated to the burdens faced by utilities with respect to distributed energy resources.93 Public Interest Organizations further contend that Order No. 719A is inapposite, positing that the Commission failed to show in what way the technical or costbased challenges faced by utilities 11
years ago with respect to demand response resources relate to the challenges faced by utilities now with respect to distributed energy resources.94 They assert that the Commission must provide a rational connection between the numerical threshold chosen and the purported 89 Public Interest Organizations Request for Rehearing at 5.
90 Id. at 26 quoting Hughes, 136 S.Ct. at 1298.
91 Id. at 27, 32.
92 Id. at 28 citing Order No. 2222, 172 FERC
61,247 at PP 67, 63 n.152.
93 Id. at 2829.
94 Id. at 29.

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