UNITED STATES OF AMERICA
BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

Standards for Business Practices and)Docket No. RM05-5-020

Communication Protocols for Public Utilities)

COMMENTS OF THE ISO/RTO COUNCIL

I.INTRODUCTION

The ISO/RTO Council (the “IRC”)1 respectfully submits these joint comments in
response to the Notice of Proposed Rulemaking (“NOPR”) issued by the Federal Energy
Regulatory Commission (the “Commission”) in the above-captioned docket on April 19,
2012.2 In the NOPR, the Commission proposes to amend its regulations to incorporate by
reference the business practice standards adopted by the Wholesale Electric Quadrant of the
North American Energy Standards Board (“NAESB”) that pertain to the measurement and
verification (“M&V”) of demand response and energy efficiency resources participating in
organized wholesale electricity markets (the “NAESB DR/EE Standards”). The NAESB

1 The IRC is comprised of the Independent System Operators operating as the Alberta Electric System

Operator (“AESO”), the California Independent System Operator (“CAISO”), Electric Reliability Council of
Texas (“ERCOT”), the Independent Electricity System Operator of Ontario, Inc., (“IESO”), ISO New
England, Inc. (“ISONE”), Midwest Independent Transmission System Operator, Inc., (“MISO”), New York
Independent System Operator, Inc. (“NYISO”), PJM Interconnection, L.L.C. (“PJM”), Southwest Power
Pool, Inc. (“SPP”), and New Brunswick System Operator (“NBSO”). The IESO, AESO and NBSO are not
subject to the Commission’s jurisdiction and these comments do not constitute agreement or
acknowledgement that these entities can be subject to the Commission’s jurisdiction. ERCOT is not subject to
the Commission’s jurisdiction for the purposes of the NAESB standards, but is joining in support of these
comments. AESO, IESO and NBSO are not parties to this filing. The IRC’s mission is to work
collaboratively to develop effective processes, tools and standard methods for improving the competitive
electricity markets across North America. In fulfilling this mission, it is the IRC’s goal to provide a
perspective that balances reliability standards with market practices so that each complements the other,
thereby resulting in efficient, robust markets that provide competitive and reliable service to customers.

2 See Standards for Business Practices and Communications Protocols for Public Utilities, Docket No. RM05-5-020, 77 Fed. Reg. 24427 (April 24, 2012) (the “NOPR”).

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DR/EE Standards categorize wholesale electricity products and services in which demand
response and energy efficiency resources can participate and provide M&V criteria for
these resources in ISO/RTO wholesale electric markets. Specifically, the NAESB DR/EE
Standards consist of the “Phase II” demand response standards (the “Phase II Demand
Response M&V Standards”) and business practice standards for the M&V of energy
efficiency resources in organized wholesale electricity markets (the “Wholesale Energy
Efficiency M&V Standards”). The latter standards create standardized methods for
quantifying energy reductions from energy efficiency measures, including six new
definitions and 63 business practices.

The IRC supports the incorporation in the Commission’s regulations of the NAESB DR/EE Standards. IRC members provided significant resources to NAESB to facilitate the development of these standards, and the IRC believes they provide an appropriate level of detail for purposes of national standards. In addition, the standards provide transparency to market participants, reduce barriers to participation, improve market efficiency, and
enhance operation of the bulk power system.

The NOPR poses the question as to whether further efforts at developing M&V

standards should be pursued and, if so, whether NAESB or another entity should be

assigned this task. Having now applied considerable effort to assist NAESB’s development
of Phase I and Phase II M&V standards, the IRC believes that the industry may have
reached a point of diminishing returns, at least at this stage, in undertaking further work on
uniform national M&V standards through the NAESB process or other national forums.
The NAESB process, although helpful, required a considerable commitment of time and
resources from personnel of the ISOs and RTOs. Given the different stages of development
and unique differences among the organized markets in their capacity markets - and to a

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lesser degree, in their energy markets - the IRC believes that further efforts at uniformity
would collide with the differences in market design which the Commission has approved,
most recently in the Commission’s order on the design of MISO capacity requirements.3
The IRC participants have observed throughout the NAESB Phase I and II process that
some industry participants have attempted to use the standards development process as a
market design mechanism, rather than establishing minimum criteria in Business Practice
Standards. The IRC believes that market design should remain within the ISO/RTOs’

regional stakeholder forums. Moreover, time is needed for the markets to further catch up
and address M&V experience gained in recent periods. Indeed, in certain areas,
Commission action may be needed to address market-specific issues.
For all of these reasons, the IRC requests that the Commission not press for
additional standardization at this time. Should the Commission nevertheless require
additional processes, the IRC believes that the inclusiveness and flexibility of the NAESB
process is preferable to creating a new institutional process and respectfully requests
detailed guidance from the Commission on the nature of further efforts.

II.BACKGROUND

On April 15, 2010, the Commission issued Order No. 676-F,4 incorporating by

reference an initial set of NAESB-developed business practice standards to categorize

various demand response products and services and to support the M&V of these products
and services in organized wholesale electricity markets (the “Phase I Demand Response
M&V Standards”). The Commission stated in that order that additional substantive

3 See Midwest Independent Transmission System Operator, Inc., 139 FERC ¶ 61,199 (issued June 11, 2012).

4 See Standards for Business Practices and Communication Protocols for Public Utilities, Order No. 676-F, FERC Stats. & Regs. ¶ 31,309 (2010) (“Order No. 676-F”).

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standards would appear to be beneficial in creating transparent and consistent M&V of
demand response products and services in wholesale electric markets.5 The Commission
anticipated that NAESB efforts to develop “Phase II” M&V standards would accomplish
this goal.6

III.COMMENTS

The IRC provides the following comments for the Commission’s consideration.

A. The Phase I Demand Response M&V Standards Have Proven Useful,

and the Phase II Demand Response M&V Standards Build Effectively on the Phase I Standards

The Commission seeks comment on its proposal to incorporate by reference into its regulations the Phase II Demand Response M&V Standards and associated terms used in the WEQ-015 glossary. IRC members actively participated in the development of the
Phase II Demand Response M&V Standards. Over 10 formal NAESB meetings were held on these standards. The IRC members estimate that they collectively provided over 1000 hours of staff time providing support for the NAESB process.

Since the ratification by NAESB, and the Commission’s incorporation in its

regulations, of the Phase I Demand Response M&V Standards, ISOs and RTOs, through
their stakeholder processes, have continued to incorporate the substance of the standards
into their respective market rules and tariffs. The wholesale standards developed through
the NAESB process have also provided the basis for the development of retail demand
response M&V standards which have enjoyed the strong support of the NAESB
membership.

5 Order No. 676-F at P 32.
6 Id.

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In addition, the North American Electric Reliability Corporation (“NERC”) has

relied regularly on the Phase I Demand Response M&V Standards and terminology in the development of the Demand Response Availability Data System (“DADS”), which is now a mandatory submission process for NERC-registered entities in several wholesale and
retail electric service categories. Finally, the Smart Grid standards development initiative of the National Institute of Standards and Technology (“NIST”) - actively supported by the ISOs and RTOs - has also adopted numerous terms and communications standards from the Phase I Demand Response M&V Standards.

The IRC believes that the Phase II Demand Response M&V Standards and

associated terms build effectively upon the Phase I Demand Response M&V Standards, and will further enhance participation in wholesale market demand response products and
services. Accordingly, the IRC supports the Commission’s proposal to incorporate by
reference into its regulations the NAESB Phase II M&V Standards and associated terms
used in the WEQ-015 glossary.

B. The Phase II Demand Response M&V Standards Meet the

Commission’s Objectives in Requesting More Detailed Technical Standards, and the Commission Should Not Press For Additional Standardization At This Time

The NOPR invites comments as to whether the Phase II Demand Response M&V
Standards “are sufficiently detailed to provide transparent measurement and verification
among regions, and whether greater detail or prescriptiveness would be appropriate,” and
seeks comment “on the degree to which encouraging greater consistency among markets

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and regions would reduce costs for customers and market participants or otherwise facilitate participation by end users in multiple markets.”7

As the Commission notes in the NOPR, the Phase II standards make numerous substantive improvements to the original Phase I standards:

In the Phase II Demand Response M&V Standards, NAESB consistently

replaced references to the “System Operator” with the term “Governing

Documents” throughout most of the standards. Other changes include adding a meter data reporting deadline (103 days for the energy and capacity
product categories and 55 days for reserve and regulation product
categories); specifying an advanced notification of one day maximum to the demand response resource that its capacity product category will be
required; establishing a telemetry interval of six seconds for the provider of the regulation product category to submit data to the system operator;
tightening the requirement for meter accuracy for after-the-fact metering for all four product categories; and defining an adjustment window of four
hours for calculating baseline adjustments for the baseline type-I and
baseline type-II performance evaluation types.8

The Phase II Demand Response M&V Standards do not specify a standard

performance evaluation methodology for wholesale demand response M&V. As the

Commission recognizes in the NOPR, NAESB acknowledged that the standards as

submitted “set forth a generalized performance evaluation methodology that lacks specific
provisions or detailed requirements.”9 The IRC contends that further efforts at developing
a universal, standardized demand response M&V methodology - including a standard
performance evaluation methodology - will not be productive at this time, for the following
reasons:

 The Commission has approved a variety of market designs with

fundamentally different approaches, particularly for capacity markets. The
Phase II Demand Response M&V Standards, the development of which

7 NOPR at P 17.

8 NOPR at P 13.

9 NOPR at P 17.

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required considerable resources, represent the realistic level of uniformity that can be achieved given these differences in underlying market design, as well as the inherent differences in the needs of the particular regions given the different types of state regulation and other factors.

 Given these inherent differences, further efforts at standardization may lead

to “least common denominator” solutions that do not meet the particular

needs of the individual markets. In contrast, the individual ISO/RTO

stakeholder processes are able to build upon the base level of uniformity set forth in the Phase II Demand Response M&V Standards to meet the
identified needs of the particular ISO/RTO.

 In certain cases, Commission action has provided critical guidance that can

be more effective in providing direction than can be achieved by trying to reach “consensus” on admittedly difficult issues where there are inevitable winners and losers. Thus, future Commission issuances of guidance can avoid potentially unfruitful hours of debate among NAESB participants on forthcoming contentious M&V issues.

 While, as explained above, value has already been achieved in several

forums, more time is needed for the Commission and stakeholders to gain and analyze their experience in implementing the Phase I and Phase II Demand Response M&V Standards.

 Stakeholders have expressed only limited support for launching an

additional NAESB process, and it is not apparent that the benefit of such

standardization would outweigh the additional costs that would be imposed on all market participants, and the ISOs/RTOs, to implement such
standardization across all processes, rules, and systems.

A single standardized methodology may reduce future innovation that could

improve M&V business practices.

In particular, the IRC believes that the five performance evaluation methodology
types defined in both the Phase I and Phase II NAESB standards provide ISOs and RTOs
with the needed flexibility to enable accurate M&V for the wide variations in types of
demand response resources, products and services that are present across ISO/RTO
footprints and NERC Regions. Moreover, a flexible, regional approach to demand
response M&V is crucial to ensuring the growth of demand response resources in
wholesale electricity markets. The IRC believes that a detailed, standardized M&V

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performance evaluation methodology, as is favored by a small minority of stakeholders, could reduce the accuracy of demand response M&V and exclude participation by
resources with load shapes not conforming to the standard.10

C.The IRC Supports Incorporation in the Commission’s Regulations of

the Wholesale Energy Efficiency M&V Standards, With a Minor

Adjustment

In the NOPR, the Commission preliminarily finds that the Wholesale Energy

Efficiency M&V Standards provide substantive detail to assure more effective evaluation
of the performance of energy efficiency products and services, and that the standards: (i)
provide a means for consistent and reliable evidence of reductions in electricity usage, (ii)
provide for proper M&V of energy efficiency for compensation and persistence, and (iii)
should help to ensure that energy efficiency is treated comparably to other electricity
resources.11

The IRC agrees that the proposed standards have sufficient detail to achieve the

level of confidence required for use in resource adequacy and planning analysis. The IRC
also supports the level of detail and specificity included for M&V plan development,
reporting requirements and data validation. These M&V criteria have been used
successfully to measure and verify energy efficiency performance for qualification and
compensation of resources participating in capacity markets in ISO-NE and PJM markets,
thereby validating the current level of detail. The IRC believes that the methodological
approaches included in the standard allow for flexibility in the implementation of M&V,

10 The Commission also asked (see NOPR at P 19), if further processes are required, which entity would be best suited to undertake such processes. Although for the reasons stated, the IRC requests that the
Commission forbear from ordering additional processes at this time, should the Commission nevertheless require additional processes, the IRC believes that the inclusiveness and flexibility of the NAESB process is preferable to creating a new institutional process.

11 NOPR at P 23.

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thereby reducing overall costs for M&V and increasing participation in wholesale electricity markets.

Further, the IRC believes that the baseline conditions and criteria specified in the
standard are appropriate and consistent with the current industry standards. The use of
statistical sampling specified in the standard is appropriate for large utility-scale energy
efficiency programs, and should not limit participation of performance-based energy
services. Moreover, the level of precision and accuracy for statistically derived estimates
of demand reduction and the requirements for monitoring frequency and duration are also
appropriate for products used in wholesale electricity markets. Finally, the requirements
for measurement parameters and measurement equipment meter specifications in the
standard are sufficiently rigorous for verification of resource adequacy requirements,
system planning and participation in wholesale electricity markets. The IRC supports the
high level of rigor stipulated in these standards. Any lessening of that rigor would diminish
the confidence required to operate the bulk power system reliably and efficiently.
The IRC believes that one adjustment is needed to the approach proposed in the NOPR. Footnote 39 to the NOPR states:

We propose to incorporate by reference the following standards collectively
identified by NAESB as 2010 Wholesale Electric Quadrant Annual Plan
Item 4(d): Energy Efficiency Resource Use Criteria in Wholesale Markets -
Section 021-3.1; General Measurement and Verification Plan Requirements

- Section 021-3.2; Post Installation M&V Report Components - Section
021-3.3; Performance Reporting - Section 021-3.4; M&V Supporting
Documents - Section 021-3.5; M&V Methodologies - Section 021-3.6;
Energy Efficiency Baseline Conditions - Section 021-3.7; Statistical
Significance - Section 021-3.8; Nominated Energy Efficiency Value
Calculations/Demand Reduction Value Calculations - Section 021-3.9;
Measurement and Monitoring - Section 021-3.10; Measurement Equipment
Specifications - Section 021-3.11; and Data Validation - Section 021-3.12.

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The IRC believes that the Introduction and Principles and Applicability sections

identified in the Annual Plan item 4(d) as WEQ-021-1 and WEQ-021-2, respectively,

should also be incorporated in the Commission’s regulations. Specifically, the Introduction
and Principles (Section WEQ-021-1) frame the context of the standards and are important
to the user of the standards. Secondly, and more importantly, the Applicability section
(WEQ-021-2): (i) limits the applicability of the standard to ISO/RTOs, (ii) establishes that
governing documents take precedence over the standard where there is a conflict, (iii)
clarifies that the standard does not establish requirements related to the compensation,
design, operation, or use of energy efficiency products and services, and does not require
the System Operator to offer energy efficiency products and services, and (iv) states that
the standard includes the requirements on energy efficiency resource providers for the
M&V of energy efficiency products and services offered into wholesale electricity markets.
We believe it is critical to include these references to fulfill the intent of the stakeholders in
the standard development process.

Finally, the IRC supports the ongoing NAESB effort to correct the ratified standards
by removing references to the International Performance Measurement and Verification
Protocols (“IPMVP”) from some measurement and verification standard practices. Based
on comments and concerns offered in the process of developing the NAESB Retail Electric
Quadrant Business Practice Standards for Measurement and Verification of Energy
Efficiency,12 the reference to IPMVP inappropriately attributes the performance
methodologies to IPMVP, when in fact the methodological approaches are not exactly the
same. Removing the reference to IPMVP in the business practice standard does not

12 See comments of Alliance to Save Energy, U.S. Department of Energy, Efficiency Valuation Organization,
and Northeast Energy Efficiency Partnerships at http://www.naesb.org/pdf4/dsmee_retail_ee_041912w3.docx

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materially change any of the content of the measurement methodologies allowed in the

standard, and avoids confusion that may result from attributing a business practice standard requirement to another guidance document that may be materially different from the
NAESB standards.

In sum, the IRC supports the Commission’s proposed incorporation by reference of the Wholesale Energy Efficiency M&V Standards, but with the inclusion of WEQ-021-1 and WEQ-021-2, as well as WEQ-021-3.

IV.CONCLUSION

The IRC supports (subject to the adjustments requested in Section III.C, above) the
incorporation by reference in the Commission’s regulations of the NAESB DR/EE
Standards, and believes the level of detail in both standards is adequate to support the use
of products in the ISO/RTO markets. The NAESB DR/EE Standards should provide
transparency to market participants, reduce barriers to participation, improve market
efficiency, and enhance operation of the bulk power system. For all of these reasons, the
IRC requests that the Commission not press for additional standardization at this time.
Should the Commission nevertheless require additional processes, the IRC believes that the
inclusiveness and flexibility of the NAESB process is preferable to creating a new
institutional process and respectfully requests detailed guidance from the Commission on

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the nature of further efforts.

Respectfully submitted,

/s/ Nancy Saracino/s/ Carl F. Patka

Nancy SaracinoCarl F. Patka*

General CounselAssistant General Counsel

Roger CollantonRaymond A. Stalter

Assistant General Counsel-Litigation andDirector of Regulatory Affairs

Mandatory StandardsNew York Independent System Operator,

Anna McKenna*Inc.

Senior Counsel10 Krey Blvd

California Independent System OperatorRensselaer, New York 12144

Corporationcpatka@nyiso.com

151 Blue Ravine Road

Folsom, California 95630

amckenna@caiso.com

/s/ Matthew Morais/s/ Craig Glazer

Matthew Morais*Craig Glazer*

Assistant General CounselVice President-Federal Government Policy

Electric Reliability Council of Texas, Inc.PJM Interconnection, L.L.C.

2705 West Lake DriveSuite 600

Taylor, Texas 765741200 G Street, N.W.

mmorais@ercot.comWashington, D.C. 20005

202-423-4743

glazec@pjm.com

/s/ Theodore J. Paradise/s/ Paul Suskie

Raymond W. HepperPaul Suskie*

Vice President, General Counsel, andSenior Vice President, Regulatory Policy

Secretaryand General Counsel

Theodore J. Paradise*Southwest Power Pool, Inc.

Assistant General Counsel, Operations and415 North McKinley, Suite 140

PlanningLittle Rock, Arkansas 72205

ISO New England Inc.psuskie@spp.org

One Sullivan Road

Holyoke, Massachusetts 01040

tparadise@iso-ne.com

/s/ Stephen G. Kozey

Stephen G. Kozey*

Vice President, General Counsel, and Secretary

Midwest Independent Transmission System Operator, Inc.

P.O. Box 4202

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Carmel, Indiana 46082-4202

skozey@midwestiso.org

* = persons designated to receive service

Dated: July 30, 2012

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