Storage at the State Level: Promotion and Obstruction

Abstract

Although the primary statutory framework remains unchanged, a series of court decisions is altering the balance between federal and state jurisdiction over the electric power system. The “Platonic ideal” of a bright line between systems subject to FERC jurisdiction and systems subject to state jurisdiction is “smudging,” as entities located within the traditional zone of state control are increasingly capable of providing services in the FERC-regulated wholesale markets. FERC’s recent assertion of jurisdiction over energy storage resources located on the distribution system or behind the meter (“BTM”) is indicative of the changing landscape. The introduction of federal authority carries with it the possibility of preemption and defines the extent to which states can take action. Several states, most notably California, are already promoting BTM storage. This paper uses the California experience as evidence for a broader theory: the emerging “collaborative federalism” creates a much broader space for promoting energy storage resources than it does for limiting their proliferation. In Part I, the paper briefs the cases that define federal/state authority in electricity law under the emerging, functionalist or “collaborative federalism” approach. Part II explains why FERC’s Order 841, which asserts jurisdiction over storage resources on the distribution system and BTM, is probably lawful under the new approach. The section also explores Order 841’s potential opening for obstructive state policies. Part III examines California’s ongoing energy storage process to show how the “collaborative federalism” approach drives increasing cooperation between the states and the federal government. The section also identifies areas where jurisdictional details are being contested. The paper concludes by arguing states have significant room to promote energy storage but limited ability to restrain its growth. As storage proliferates, states should be proactive in collaborating with federal authorities to ensure the system delivers cheap power and remains reliable. If the states are not proactive, they risk losing authority over local reliability.