Court rejects FERC request for rehearing of high-profile demand-response ruling

Source: Hannah Northey, E&E reporter • Posted: Friday, September 19, 2014

A federal appeals court yesterday rejected the Federal Energy Regulatory Commission’s request to reconsider its May decision that scrapped a high-profile policy providing incentives to electricity users to consume less power.

In a win for utilities, the U.S. Court of Appeals for the District of Columbia Circuit¬†rejected¬†FERC’s request for the court to rehear its 2-1 ruling that vacated Order 745, which required grid operators to pay customers and demand-response providers the market value of unused electricity.

FERC had sought a rehearing en banc in the case, meaning it would be heard before all of the court’s judges.

The court rarely takes such a step, and yesterday a majority of the D.C. Circuit’s 11 active judges did not vote in favor of the petition.

The court in May ruled that FERC had overstepped its authority under the Federal Power Act in its Order 745, ruling that demand response is a function of retail electricity markets, which are governed by the states (EnergyWire, May 27).

Order 745 essentially grants demand-response companies access to the wholesale energy market. FERC’s goal was to provide parity between demand-response providers, which coordinate the reduction of energy usage among hospitals, apartment buildings and universities, and retail providers.

Several grid operators and power providers that called for the court to reject FERC’s request applauded the court’s decision not to revisit the matter.

John Shelk, president of the Electric Power Supply Association, said his group and a coalition of partners from the American Public Power Association, the Edison Electric Institute and other power groups still believe FERC lacked jurisdiction over retail markets and the order was not justified.

“As EPSA has said since the panel opinion was issued last May, the decision helps to preserve the financial integrity and operational reliability of wholesale power markets,” Shelk said in an email. “EPSA’s focus going forward is on ensuring a smooth transition while underscoring the broader wholesale price formation issues that FERC has wisely begun working on.”

FERC Chairwoman Cheryl LaFleur said in a statement she was disappointed with the court’s decision.

Environmental groups that fought to maintain FERC’s policies also said the decision was a letdown.

The Natural Resources Defense Council has warned that demand response will now be directly tied to a “patchwork” of state programs that are “uneven,” making it more difficult for businesses like Wal-Mart Stores Inc. and other industrial companies — new and established — to sell their demand-response services into the grid.

“We’re disappointed that the court preserved the broad sweep of its initial Order 745 decision because it will increase consumer costs and could frustrate some state compliance efforts with the EPA’s proposal to curb power plant emissions,” said John Moore, senior attorney at the NRDC’s Sustainable FERC Project coalition.