2016 Will See an FERC Demand Response Decision

Jan 14, 2016 10:02:00 AM by NuEnergen

FERC2015 came to an end with some disappointment for those who were hoping to hear the Supreme Court's decision on Order 745. With the court since in recess until January 11th, we've been holding our breath, waiting to hear whether or not it will rule that the Federal Energy Regulatory Commission (FERC) has overstepped its authority when it issued the Order to direct ISOs and RTOs to compensate cost effective demand response (DR) resources at market price as a means of offering incentive for energy demand reduction. So far, the ruling has not come, but we can expect a decision to be made early this year.

The Supreme Court listened to arguments back in October that were centered around whether or not the FERC had overstepped the directing of payments for DR within the wholesale sector. As the most high-profile energy case of 2015, the stakes have been high for those most interested in the decision. Whatever ruling is made will have significant and wide-reaching ramifications for DR, distributed energy resources, and the role that the federal government has in the power industry and markets. 

December 14th marked the last day that the Supreme Court was in session for 2015, and as of that day, no decision had been formally posted. Although it was originally anticipated that a quick decision would be made, lengthy deliberations of the matter have proved otherwise. This, however, could be a good sign for those who are backing FERC. The prolonged timeframe also downplays any notion of a 4-4 split decision -- a split which would allow a DC Circuit ruling to stand. While such a division is possible (with the evidence being that Justice Samuel Alito Jr. has recused himself), the fact that split decisions are typically announced shortly after arguments leads us to believe otherwise.

It was only after the DC Circuit Court vacated Order 745 (in a 2014 decision) that the Supreme Court agreed to hear the case. The Order had been dropped by the DC circuit on the grounds that the FERC's attempt to regulate the retail electricity market was not within its authority and was thus deemed "improper." Now the debated has been focused upon whether the FERC has authority over DR markets. It was the Electric Power Supply Association that challenged this rule. 

According to the EPSA, "FERC has no more jurisdiction to regulate retail-level 'demand response' through payments to retail customers than it does to raise retail prices directly." It believes that regulating payments to retail customers as a means of consuming less electricity is essentially the same thing as regulating retail sales and rates.

The FERC, on the other hand, believes that, "Demand response -- simply put -- is part of the retail market. It involves retail customers, their decision whether to purchase at retail, and the levels of retail electricity consumption."

Now the question is, will the Supreme Court agree? It did seem, at times, that the court was somewhat skeptical of the FERC's claims, but the ruling could still go either way. Please contact NuEnergen for further information.