PJM will join in calls asking the D.C. Circuit Court of Appeals to reconsider its May 23 ruling sharply limiting federal jurisdiction over demand response.
PJM General Counsel Vince Duane told the Markets and Reliability Committee last week that the RTO will join the Federal Energy Regulatory Commission in seeking to reinstate FERC Order 745, which required PJM and other RTOs to pay demand response resources market-clearing prices.
The court ruled 2-1 that FERC’s order violates state ratemaking authority. (See Court Throws Out Demand Response Rule.)
Duane said PJM’s filing, which he said will be akin to an amicus brief, will express the RTO’s support for maintaining federal jurisdiction of DR under the Federal Power Act. Duane said the RTO was acting out of practical concerns — the need for DR this summer — despite the fact that it opposes Order 745’s equal-compensation mandate.
Duane acknowledged that the court grants less than 1% of the rehearing requests it receives. But given the implications of the ruling, he said, “There’s a sense that this has got a much better chance than average.”
“It allows us to preserve our options,” he said. With an appeal pending, “we can continue to rely this summer on demand resources. We don’t have any practical alternative to replacing these resources in short order.”
Order 745 required PJM and other RTOs to pay DR participating in the day-ahead and real-time energy markets locational marginal prices identical to those for generation. The order only applied when DR was capable of balancing supply and demand and lowered the market-clearing price.
FERC said it had authority for the order under sections 205 and 206 of the Federal Power Act because reducing retail consumption through DR can aid reliability and lower wholesale prices. The commission made a distinction between “price-responsive” DR, which it acknowledged was a retail product subject to state regulation, and DR response to incentive payments, which it called “wholesale demand response.”
The court’s majority disagreed, saying “a reduction in consumption cannot be a ‘wholesale sale,’” and thus does not come under federal jurisdiction. The commission “went far beyond removing barriers to demand response resources,” as Congress had ordered in the Energy Policy Act of 2005, the judges ruled.
“This is a big, sweeping decision with national implications,” Duane said.
The ruling was a subject of discussion at the Mid-Atlantic Conference of Regulatory Utilities Commissioners’ (MACRUC) annual education conference.
New York Public Service Commission Chair Audrey Zibelman, PJM’s former chief operating officer, said the court “got it wrong.”
“The states have the ability to delegate to the federal government through the RTOs if we want to,” Zibelman said. “I think that’s what [Order] 745 said. If we wanted to do demand response through the RTOs we can do it. If we want to do it ourselves we can do it.”
