By Suzanne Herel and Rich Heidorn Jr.

The Federal Energy Regulatory Commission yesterday asked the Supreme Court to overturn an appellate court ruling voiding its authority to regulate the rules used by RTOs to pay for demand response, a day after PJM filed a contingency plan for including DR in its upcoming capacity auction.

The 59-page petition for a writ of certiorari, filed by attorneys for FERC and the U.S. Department of Justice, said the D.C. Circuit Court of Appeals erred in its May 23 ruling (Electric Power Supply Association v. Federal Energy Regulatory Commission) that FERC lacked authority under the Federal Power Act to issue Order 745. The order requires RTOs to pay DR providers the same way they pay generators in energy markets — through LMPs.

“FERC’s conclusion that it has the authority [and the responsibility] to regulate the compensation paid by wholesale-market operators for demand-response commitments — and recouped in the wholesale rate set in the auction markets run by those operators — is the best and indeed only sensible reading of the statutory text,” FERC said.

The petition said the Supreme Court should take the case because of the growing importance of demand response.

“Even read most narrowly — as invalidating only FERC’s authority to regulate the level of compensation paid by wholesale-market operators to demand-response providers in energy markets — the decision … threatens significant damage to the nation’s wholesale-electricity markets,” FERC said.

FERC said its regulation of DR participation in wholesale markets “is essential to the commission fulfilling its statutory responsibility to ensure that [wholesale] rates are just and reasonable” and that the EPSA ruling also threatens the participation of DR in wholesale capacity markets.

“Because the court concluded categorically that ‘[d]emand response is part of the retail market,’ and determined that the FPA ‘unambiguously restricts FERC from regulating the retail market,’ its holding throws into serious question whether FERC may review any of the rules established by wholesale-market operators to govern demand-response participation — or perhaps even whether it has authority to permit the participation of demand-response providers in wholesale-electricity markets at all,” FERC said.

PJM Filing

On Wednesday, PJM submitted to FERC its contingency plan to incorporate DR in May’s Base Residual Auction if the Supreme Court rejects the petition and allows the ruling to stand (ER15-852).

General Counsel Vince Duane outlined the plan Dec. 18 to the Markets and Reliability Committee. (See PJM to File Post-EPSA Demand Response Contingency Plan with FERC.) It would allow a load-serving entity “or other wholesale entity” to submit demand-side bids — “wholesale load reductions” — causing PJM to procure less capacity in the BRA.

PJM requested a response from FERC by April 1. If the court agrees to hear the case, PJM would withdraw the filing.

Duane said last month that PJM can expect a decision on whether the court will take the case in March or April.