Should customers be allowed to bypass electric utilities to sell energy from storage—both distributed and behind-the-meter resources— into regional wholesale electricity markets?

That’s the question before a federal court, and its decision could have major repercussions for electric cooperatives.

A suit filed by NRECA, the American Public Power Association, the Edison Electric Institute and American Municipal Power Inc. says a recent landmark ruling by the Federal Energy Regulatory Commission effectively strips local governing bodies of the right to control storage use on local distribution systems.

“FERC has acted beyond its authority,” said Randolph Elliott, NRECA regulatory counsel. “The commissioners didn’t justify or reasonably explain why they did not allow state and local regulators to determine whether storage resources may participate in wholesale markets.”

Elliott said the rule will have far-reaching negative impacts on co-ops’ safety, costs and reliability.

The commission rejected an earlier request by NRECA and the other petitioners that wholesale market participation of distributed and behind-the-meter storage come only with consent from the “relevant electric retail regulatory authority,” which would include co-op boards.

The U.S. Court of Appeals for the D.C. Circuit is expected to rule on the case in 2020.

Meanwhile, even broader changes regarding how markets integrate distributed energy resources may be on the way.

FERC is proposing to allow third parties to aggregate DER of every kind and size into a single participant in wholesale markets. This would cover everything from generation facilities to storage to electric vehicles.

Together, Elliot said, the two rules would uproot policies set by states, local governments and utilities to address DER and energy storage, including procedures for net metering, community solar, EV charging and distribution charges.

“This is the camel’s nose under the tent to allow FERC to regulate a lot of local distribution resources and determine the relationship between the local co-op and its member,” said Elliott.

“FERC would give retail member-consumers of a distribution co-op a federal right to exit the co-op’s DER programs in favor of the wholesale market. FERC would be the decisionmaker, not the co-op board, on whether it would be fair or whether they could do it at all.”

The commission regulates six regional transmission organizations and independent system operators that run much of the country’s wholesale electricity markets. At least 300 distribution co-ops and 33 generation and transmission co-ops exist within these RTOs and ISOs.

Allowing RTOs and ISOs to control the charging or discharging of aggregated energy resources would require co-ops to quickly accommodate unplanned power flows, which can challenge equipment and lead to voltage fluctuations and system disruptions.

Such circumstances would threaten reliability and safety for co-op staff responding to outages in addition to boosting operational costs, co-op officials said in statements to FERC. System studies and upgrades would be necessary, yet there would be no requirement for the third-party aggregator to help pay.

“We have the responsibility to maintain voltage and power quality requirements, and we need to be able to directly assign the costs to identify and rectify nonconforming DERs,” said Gerry Schmitz, senior electrical engineer at Adams-Columbia Electric Cooperative in Friendship, Wisconsin.

“Allowing third-party aggregators to assume control of the demand management loads or the member-owned generation systems and to offer services independently to the transmission grid would, simply put, destroy Dakota Electric’s ability to control our system peak,” said Craig C. Turner, director of engineering services at the Farmington, Minnesota-based co-op.

“Dakota Electric would no longer be able to plan for or rely on these non-wired solutions to reduce distribution costs for our members. This would result in the need to construct millions of dollars of additional substation and distribution system capacity. This would also result in higher peak loads, which, in turn, would cost our members millions of dollars annually in higher electrical bills.”