FERC weighs Supreme Court petition on demand-response ruling

Source: Hannah Northey, E&E reporter • Posted: Wednesday, September 24, 2014

The Federal Energy Regulatory Commission is urging a federal appeals court to not invalidate a high-profile rule for electricity-saving programs until the agency decides whether to ask the Supreme Court to intervene.

David Morenoff, FERC’s general counsel, asked the U.S. Court of Appeals for the District of Columbia Circuit yesterday to not finalize its 2-1 ruling that vacates Order 745, which requires grid operators to pay customers and demand-response providers the market value of unused electricity.

The split three-judge panel found FERC exceeded its authority in directing that demand-response providers such as factories or commercial buildings receive full market prices when they curtail electricity use. Demand-response programs are retail market actions, and those are the province of state regulators, not FERC, the judges ruled.

The court’s mandate is scheduled to take effect tomorrow, but FERC wants until Dec. 16 to decide on taking the case to the Supreme Court.

FERC argued that the appeals court’s May decision should not immediately become effective because it “presents a substantial legal question and raises significant implications for wholesale electricity market stability and grid reliability.”

The Supreme Court receives thousands of petitions to review lower court rulings every year and takes up fewer than a hundred. So the odds of the high court granting review of this case, should FERC or another group request it, are low.

The same federal appeals court last week rejected FERC’s request to rehear the case en banc, meaning it would be heard before all of the court’s judges. The court rarely grants such requests (EnergyWire, Sept. 18). That decision was applauded by the Electric Power Supply Association, American Public Power Association, Edison Electric Institute and other power groups that believe FERC lacked jurisdiction over retail markets and the order was not justified.

Even so, the justices have historically given petitions from federal agencies closer scrutiny. It takes the votes of four justices to grant review of a case.

FERC isn’t the only concerned party considering an appeal to the Supreme Court.

The demand-response decision has for months triggered widespread speculation about the expectations of electricity market prices and profits, the potential for lengthy legal battles, and concerns that the industry could have a harder time complying with U.S. EPA’s greenhouse gas rules (EnergyWire, June 26).

Yesterday, lawyers representing demand-response companies such as EnerNOC Inc., Viridity Energy Inc., Wal-Mart Stores Inc., steel producers and the American Forest & Paper Association also asked the court for more time — 90 days — to consider whether to seek the Supreme Court’s review.

The court’s decision to kill the rule, they warned, raises legitimate legal questions and could tie grid operators’ hands during emergencies and possibly trigger “devastating” reliability problems for the U.S. electric grid. They pointed to grid operators’ use of tens of thousands of megawatts of demand response to avoid blackouts during this winter’s subarctic freeze in January and the prior summer’s excessive heat.

“Were the mandate to issue prior to the Supreme Court’s decision on the Intervenors Supporting Respondent’s petition for a writ of certiorari, events such as the Polar Vortex and heat wave of the summer of 2013 could have adverse impacts on grid reliability because there would not be sufficient resources to meet system demand,” they wrote.

John Moore, a senior attorney for the Natural Resources Defense Council’s Sustainable FERC Project, said his group strongly supports the petitions, adding that the court’s ruling has major potentially negative implications for wholesale electricity market stability, resource adequacy and grid reliability.

“Demand response is vital to balancing supply and demand, reducing prices, and reducing the need for more expensive, often-dirtier power,” Moore wrote in an email.

Power groups opposed to FERC’s request disagreed.

John Shelk, the Electric Power Supply Association’s president and CEO, said a stay is not warranted, adding that FERC’s request would only add to market uncertainty. “A stay delays focusing on the practical next steps to shape that orderly transition,” Shelk wrote in an email.