FERC, utilities, greens urge court to revisit demand response decision

Source: Jeremy P. Jacobs, E&E reporter • Posted: Thursday, July 10, 2014

The Federal Energy Regulatory Commission, environmentalists and some grid operators are pressing a federal appeals court to revisit its decision tossing out a policy that provided incentives to electricity users to consume less power.

In a series of filings to the U.S. Court of Appeals for the District of Columbia Circuit this week, FERC and various parties are seeking a rehearing en banc, meaning before all of the court’s judges, on the case focusing on the power-saving practice known as demand response.

The D.C. Circuit, in a 2-1 May ruling, vacated a 2011 FERC order that required grid operators to pay customers and demand response providers the market value of unused electricity.

FERC’s goal was to provide parity between demand response providers, which pool reduced energy usage by hospitals, apartment buildings and universities, and retail providers (Greenwire, March 16, 2011).

The rule granted demand response companies access to the wholesale energy market. But several grid operators and power providers contended FERC overstepped its authority under the Federal Power Act by wading into the retail market (Greenwire, May 23).

FERC announced shortly after the ruling that it would seek a rehearing. And, in a court filing, the commission said the court vacated a “vital rule of national importance.”

Further, FERC noted that in 18 years it has only asked the court for an en banc rehearing once before.

“But en banc review is warranted here,” FERC wrote. “[T]he Opinion severely departs from precedent of this Court and the Supreme Court providing guidance to the Commission on the line, set forth in the Federal Power Act, between federal and state authority over electricity regulation. … The Commission’s Rule adheres to that line.”

FERC further notes the order is “narrowly tailored” to address “only demand response resources in wholesale markets that directly affect wholesale rates.”

It takes the votes of a majority of the D.C. Circuit’s 11 active judges to grant an en banc rehearing, and the circuit rarely does so.

However, FERC’s chances are bolstered by a strongly worded dissent in the ruling by Senior Judge Harry Edwards and a host of other parties also asking the court to reconsider the case.

In addition, groups that intervened in the case on FERC’s behalf — including demand response providers; grid operator PJM Interconnection LLC, which also runs a wholesale market; and the Maryland Public Service Commission — have also asked the court to reconsider the case.

Additionally, the California Independent System Operator, or CAISO, petitioned for a rehearing, even though it nominally won when the rule was struck down. Nevertheless, the operator said the ruling could have “serious negative impacts” on the country’s electricity markets.

The Environmental Defense Fund, Natural Resources Defense Council and Citizens Utility Board have also weighed in.

“Our nation’s strong interest in clean, reliable, and customer-friendly power took a big step backwards with the unfortunate court decision,” Jim Marston of the Environmental Defense Fund said in a statement. “Demand response, an invaluable component of a modernized energy system, is cleaner and more cost-effective than building new power generation.”

Click here¬†for FERC’s rehearing petition.