Battery Energy Storage Facilities May Be Subject to Wholesale Distribution Charges

June 25, 2015

FERC found that a storage device using a utility’s distribution system in charging mode should share in the costs of the distribution system.

On June 18, the Federal Energy Regulatory Commission (FERC) upheld an earlier order allowing Commonwealth Edison Company (ComEd) to assess a wholesale distribution charge on Energy Vault, LLC (Energy Vault), which owns a battery energy storage facility directly interconnected to ComEd’s distribution system.[1] Because Energy Vault will use ComEd’s distribution system to charge its batteries, FERC concluded that that it would be appropriate for Energy Vault to be assessed the distribution charge.

ComEd assesses a wholesale distribution charge on non-generator customers connected to its distribution system that take distribution service. This wholesale distribution charge is a weighted average carrying charge that is calculated based on the distribution facilities that will be used in providing wholesale distribution service. Generator customers connected to the distribution system are not subject to this wholesale distribution charge because ComEd had previously concluded that reverse flows from generators may benefit its system by reducing congestion and line loading in some conditions.

In the June 18th Order, FERC emphasized that it has previously recognized that storage devices may be classified as generation, transmission, or distribution assets, and that the actual classification is a case-specific inquiry depending upon the intended use of the storage device. FERC explained that treating the use of a distribution system by a storage device differently from that of a generator is reasonable because storage devices and generation have significantly different impacts on the distribution system. Since Energy Vault’s device spends “a substantial share of its operating life being charged by withdrawing energy from the distribution system” and “will add to the flow and load on the distribution system just like any other load and, crucially, unlike a generator,”[2] imposing the wholesale distribution charge would ensure that the facility contributes to the cost of the distribution system that it needs to withdraw energy to charge its batteries.

In reaching this conclusion, FERC rejected arguments that Energy Vault was being “double-charged” or should be exempt from the wholesale distribution charge because it did not serve retail load and qualified as a “Market Seller” and “Energy Storage Resource” under PJM’s Open Access Transmission Tariff. FERC explained that “benefits provided by energy storage resources do not prevent a transmission owner from seeking to recover a just and reasonable charge for an energy storage device’s use of its distribution system when in charging mode.”[3]

Electricity storage assets constitute a small part of the overall electricity supply, transmission, and distribution portfolio, but many industry observers expect increasing distribution-level deployment of storage assets based on new technologies (e.g., batteries or convertible mechanical power, such as flywheels). The June 18th Order creates a precedent that may affect these and other new electric storage assets. 


If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Washington, DC
Pamela C. Tsang

Kenneth M. Kulak

[1] PJM Interconnection, L.L.C., et al., 151 FERC ¶ 61,231 (2015) (“June 18th Order”).

[2] Id. at P 18.

[3] Id. at P 24.