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Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Rules and Regulations
No. 719 opt-out and built a legal framework for that regulatory scheme.39
NARUC argues that Order No. 2222A
allows a demand response resource to disregard the judgment of state regulators by joining a third-party aggregation with other types of resources.40 In addition, NARUC argues, the order allows third-party aggregators of demand response resources to add a solitary unit of a different type of distributed energy resource to its aggregations to circumvent state law.
15. NARUC disputes the Commissions position that because the terms of wholesale market participation are a matter under exclusive Commission jurisdiction, todays order does not infringe upon or otherwise diminish state authority. 41
NARUC argues that the Commissions action in Order No. 2222A is unlike the Commissions decisions in Order Nos. 841 and 2222 because there were no state regulations already in place.42
NARUC explains that there was no need prior to Order No. 841 for states to prohibit storage resources on the distribution system or behind the meter from participating in wholesale markets because that was not possible before the order.43 NARUC points out that the challenge to Order No. 841 in NARUC
was a facial challenge and argues that NARUC does not address as-applied challenges.44 NARUC explains that prior to Order No. 2222A, some states had regulations that applied to demand response aggregations on the distribution system or behind the meter because Order No. 719 permitted such participation in the wholesale markets.45 NARUC argues that Order No. 2222A takes away this authority over demand response resources.46
ii. Adequate Notice 16. Multiple petitioners argue that the Commission violated the Administrative Procedure Act APA by effectively eliminating the Order No. 719 opt-out without providing adequate notice and without soliciting comments and evidence from RERRAs that have adopted and relied upon that opt-out.47
The Southern Regulators and NARUC
argue that the procedurally proper 39 NARUC

Request for Rehearing at 3, 5.
at 6.
41 Id. quoting Order No. 2222A, 174 FERC
61,197 at P 12 n.36.
42 Id. at 5.
43 Id. at 6.
44 Id. citing NARUC, 964 F.3d at 118889.
45 Id. at 67 emphasis in original.
46 Id. at 7.
47 Southern Regulators Request for Rehearing at 10; EEI Request for Rehearing at 4; North Carolina Commission Request for Rehearing at 89.

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method to modify the opt-out is in the proceeding in Docket No. RM2114000
that was noticed for this purpose.48 The Southern Regulators argue that nothing in the Notice of Proposed Rulemaking in Docket No. RM1623000 49 indicated an effort or intent by the Commission to reconsider the Order No. 719 opt-out.50
17. The Southern Regulators argue that they were prejudiced by the Commissions failure to provide notice that the Order No. 719 opt-out was at risk in Docket No. RM189.51 The Southern Regulators and the North Carolina Commission explain that they have provisions restricting aggregators of retail customers in their respective jurisdictions.52 The Southern Regulators maintain that, because the NOPR offered no hint that the opt-out was in jeopardy, they had no reason to oppose elimination of the opt-out in the rulemaking docket or actively participate in the other portions of the rulemaking affecting demand response resources.
18. In addition, NARUC and the Southern Regulators argue that eliminating the Order No. 719 opt-out for demand response resources in heterogeneous aggregations is outside the scope of Order No. 2222.53
iii. Reasoned Decision-Making 19. Several petitioners argue that the Commission acted arbitrarily and capriciously by departing from its policy in Order Nos. 719 and 719A in Order. No. 2222A without acknowledgment, an adequate explanation, or an examination of the policy considerations in support of the opt-out.54 The MISO Transmission Owners further argue that the Commission did not adequately address how it will enforce the policy of avoiding unduly burdening states and retail regulators or why the policy considerations are no longer relevant.55
The Southern Regulators contend that the Commissions reasons for 48 Southern Regulators Request for Rehearing at 10; NARUC Request for Rehearing at 8.
49 Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators, 81 FR 86522
Nov. 30, 2016, 157 FERC 61,121 2016 NOPR.
50 Southern Regulators Request for Rehearing at 10.
51 Id. at 11.
52 Southern Regulators Request for Rehearing at 11; North Carolina Commission Request for Rehearing at 23.
53 NARUC Request for Rehearing at 8; Southern Regulators Request for Rehearing at 7.
54 See, e.g., MISO Transmission Owners Rehearing Request at 6; NARUC Rehearing Request at 8; North Carolina Commission Rehearing Request at 5; Southern Regulators Rehearing Request at 9.
55 MISO Transmission Owners Rehearing Request at 89, 11.

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eliminating the opt-out in Order No.
2222A were present at the time Order No. 719 was issued, and that the Commission has not explained why those reasons now require elimination of the opt-out.56
20. Next, several petitioners claim that the Commission failed to acknowledge the states role in overseeing demand response activities within their borders.57 The MISO
Transmission Owners assert that the Commission failed to consider the effect that limiting the opt-out will have on states ability to control consumer costs, and the Southern Regulators argue that the Commissions opt-out decision unreasonably restricts the ability of states to protect retail customers.58
21. Next, some petitioners argue that the Commission relies on a false distinction between heterogeneous and homogeneous distributed energy resource aggregations to justify eliminating state opt-out authority.59
22. NARUC challenges the Commissions finding that heterogeneous distributed energy resource aggregations that include demand response resources do not fall squarely within the Order No. 719 optout, as set forth in our regulations because they are not solely aggregations of retail customers, because the definition of aggregator of retail customers that the Commission relies upon does not say that the aggregations are exclusively retail loads, just mostly. 60 NARUC argues that the Commission acted capriciously by changing the treatment of demand response resources on the distribution system and behind the meter without further evidence of the types of load involved or inquiry into the experience of states that have employed the optout.61
23. Some petitioners also object to the Commissions characterization of demand response resources in declining to extend the opt-out to heterogeneous distributed energy resource aggregations. The Southern Regulators criticize the Commissions reliance on the ability of distributed energy resources to take advantage of operating attributes and complementary 56 Southern
Regulators Rehearing Request at 89.
e.g., MISO Transmission Owners Rehearing Request at 910 citing EPSA, 136 S. Ct.
at 779.
58 MISO Transmission Owners Rehearing Request at 910; Southern Regulators Rehearing Request at 15.
59 E.g., Southern Regulators Rehearing Request at 19.
60 NARUC Rehearing Request at 7 quoting Order No. 2222A, 174 FERC 61,197 at P 23.
61 Id. at 8.
57 See,
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