Questions multiplied faster than answers last week following an appellate court ruling that threw out the Federal Energy Regulatory Commission’s jurisdiction over demand response compensation.
Market leader EnerNOC issued a statement May 27 saying that the energy payments that are the subject of Order 745 were responsible for only 2% of the company’s $1 billion of revenue over the last three years.
“EnerNOC’s preliminary estimate of the impact of Friday’s decision suggests that EnerNOC and its customers could be required to refund in a future period as little as $0 and as much as $20 million if Friday’s decision on Order 745 survives any continued appeals process. Order 745 does not pertain to capacity payments which the Company is contractually due or has previously earned.”
FirstEnergy sees it differently. It reacted to the court ruling by filing a complaint (EL14-55) seeking to bar DR from the capacity market.
FirstEnergy’s complaint asked FERC to order the removal of “all portions of the PJM Tariff allowing or requiring PJM to include demand response as suppliers to PJM’s capacity markets.”
The company also asked FERC to bar PJM from releasing the results of the May capacity auction, saying it “must be considered void and legally invalid because the inclusion of demand response in the auction parameters was unlawful.”
EnerNOC said Tuesday that it cleared about 4,000 MW of DR worth more than $185 million. The company’s shares jumped more than 10% on the news but gave back most of that by the end of the week.
EnerNOC said it “would expect state regulators to take a much more active role in facilitating demand response activity. If the decision is broadened to include capacity and ancillary services markets, the Company would expect state programs to expand significantly to preserve the nearly $12 billion of consumer savings that demand response delivered last year in the PJM market.”
Exelon CEO Christopher Crane told an investment conference last week that the ruling could mean DR looks “less like a supply and more like a demand element.”
States taking over DR regulations could result in disparate rules, UBS Securities said. “We see the potential for more generous compensation in jurisdictions encouraging participation, while those that have been opposed, implementing tighter rules. Additionally, under state regulation, it would appear that utilities might ultimately be the entities controlling the bidding-in of DR products.”
At last week’s Markets and Reliability Committee meeting, PJM officials said they were awaiting guidance from FERC.
“For now, it’s business as usual for PJM, for PJM markets,” Assistant General Counsel Jackie Hugee said. “As of today, we still have a Tariff and an Operating Agreement in full force.”
The court’s order won’t take effect until at least mid-July to allow time for motions for rehearing, she said.
Hugee also said the ruling is likely to stand because there are no conflicting rulings in other jurisdictions that might prompt the circuit or Supreme Court to reconsider it. “It’s rare that a circuit court will grant rehearing of one of its orders,” she said.
“Our primary hope is [that] it will not be disruptive this summer,” when PJM typically calls on DR to reduce peak load, Executive Vice President for Operations Mike Kormos said.
Marji Philips of Direct Energy asked whether states might delegate management of DR to PJM, similar to the arrangement that governs the Generation Attribute Tracking System (GATS), which states use in awarding renewable energy credits (RECs).
Kormos said PJM will “reach out to the states” to determine their response to the ruling.
