In response to a US Circuit Court decision to vacate Federal Energy Regulatory Commission (FERC) Order 745, state utility regulators, electric grid operators, demand response providers, industrial consumers and consumer advocates all filed a request for a rehearing en banc, expressing strong support for all types of demand response as a valuable resource to the nation’s electric grid.
The states of California, Pennsylvania and Maryland, as well as PJM Interconnection, joined the FERC in requesting that the Court reconsider its decision, the Advanced Energy Management Alliance (AEMA) said.
This court battle, with the original US Circuit Court decision on May 23, pitches incumbent generators against providers of services like demand response that allow consumers to choose to curtail their energy use during times of high demand—and cost—on the electric grid and be compensated for their flexibility. While states individually can and do offer demand response programs, the ability to use demand response in the wholesale markets has been a powerful economic driver for manufacturers and large commercial customers and has helped to keep costs down for residential consumers, AEMA noted.
In the ruling, the court acknowledged that demand response benefits consumers by lowering wholesale costs and increasing system reliability. Many consumers rely on the value of demand response at the wholesale level to reduce energy costs and retain the cost-effectiveness of their industries, businesses and home energy management systems.
Since the implementation of Order 745 in January 2012, economic demand response participants receive the full wholesale price when the wholesale price exceeds the monthly net benefits threshold ($25.60/MWh in March 2013). Prior to Order 745, participants were compensated based on the difference between the wholesale price and the retail price for generation and transmission services.
According to Latham’s Clean Energy Law Report, the US Circuit Court decided that the FERC did not have jurisdiction under the Federal Power Act to issue Order 745 because demand response is part of the retail market, which is exclusively within the states’ jurisdiction to regulate.
