By Suzanne Herel

PJM on Thursday announced a fallback plan to incorporate demand response into the capacity market in the event a D.C. Circuit Court of Appeals ruling limiting the jurisdiction of the Federal Energy Regulatory Commission is allowed to stand.

PJM General Counsel Vince Duane presented the contingency measure to the Markets and Reliability Committee, saying it would go into effect only if the U.S. Supreme Court rejects a request by Solicitor General Donald B. Verrilli to hear the case. Verrilli is expected to file a petition of certiorari on FERC’s behalf by Jan. 15.

Duane said that while the Supreme Court grants only about 1% of all cert petitions, some claim the success rate may be as high as 70% for those filed by the solicitor general. “I haven’t been able to validate that statistic,” Duane said. “But there’s no question that the odds increase significantly when the solicitor general makes a request.”

The plan, which will be submitted to FERC in a Section 205 filing in coming weeks, would allow any “wholesale entity” to submit “curtailment commitment bids” that would reduce the capacity procured in May’s Base Residual Auction. Duane said the term “wholesale entity” is “deliberately vague” and intended to include both load-serving entities and electric distribution companies.

The contingency plan is based largely on a white paper PJM released Oct. 7. That proposal came under criticism for limiting demand-side DR participation to load-serving entities. It is the electric distribution companies that oversee DR programs in several PJM states.

“This is a modest planning exercise to mitigate risk — but it does not avoid risk,” Duane said.

Duane said PJM can expect a decision on whether the Supreme Court will take up the case in March or April.

That won’t be in time, however, for the February incremental capacity auction, which will be conducted under current rules. (See EPSA Stay Complicates PJM’s 2015 Capacity Auction Plans.)

“If that’s ultimately found to be unlawful, it could undo that auction,” Duane said. “We face the prospect of an unsettled market outcome if the D.C. Circuit decision becomes the law of the land.”

The contingency plan is a “stop-gap” measure to allow time to develop a long-term solution, Duane said.

“We haven’t had an inclusive, broad stakeholder discussion … of what demand response should look like in the future,” Duane said. “We’re not suggesting in this filing we’re charting the future of demand response.”

PJM will request the commission act on the filing by April 1.

The contingency plan is a response to the D.C. Circuit’s May 23 ruling (Electric Power Supply Association v. Federal Energy Regulatory Commission) that overturned FERC Order 745. The court issued a stay on the ruling in October in response to a request from FERC. (See Awaiting FERC action, PJM Floats ‘Trial Balloon’ on DR Post-EPSA.)

The court ruled that FERC’s order, which required PJM and other RTOs to pay DR resources market-clearing prices, violates state ratemaking authority. While the ruling addressed FERC’s jurisdiction over DR in energy markets, PJM wanted to be prepared for it to be applied to FERC-regulated capacity markets.