Senator introduces bill to give FERC demand response authority

U.S. Sen. Martin Heinrich (D-N.M.) recently introduced a bill that would clarify FERC’s authority under the Federal Powers Act to require regional transmission organizations to compensate demand response.

Heinrich on Nov. 20 introduced the bill in response to a May 23 finding by the U.S. Court of Appeals for the District of Columbia that FERC does not have the authority to promote demand response in wholesale energy markets, potentially vacating FERC Order 745 on demand response.

The Court of Appeals on Oct. 20 approved a request by FERC to delay finalizing that ruling. FERC has until Dec. 16 to seek U.S. Supreme Court review of the ruling, according to TransmissionHub.

“Modernizing our electrical grid is central to becoming a nation that’s more energy efficient and provides cost savings for everyone,” Heinrich said in a Nov. 20 statement. “There is no kilowatt-hour more valuable than the one you don’t use in the first place. This bill is a small fix but with big implications for growing the economy, and is central to slowing the effects of climate change and creating a healthier environment for future generations.”

The bill, S. 2947, expands Section 206(a) of the Federal Power Act to include a subsection regarding the treatment of wholesale demand response resources. It defines the terms demand response and demand response resource and establishes FERC’s authority to “prescribe just, reasonable, and not unduly discriminatory or preferential terms, conditions, and compensation applicable to wholesale demand response resource participation in organized wholesale energy, capacity, and ancillary service markets.”

The bill defines demand response as a reduction in the consumption of electric energy by customers from their expected consumption in response to an increase in the price of electric energy or to incentive payments designed to induce lower consumption of electric energy, and it defines demand response resource as a resource capable of providing demand response.

The Senate on Nov. 20 sent the bill to the Energy and Natural Resources Committee, of which Heinrich is a member.

FERC has received two complaints since May that cite the Court of Appeals’ ruling as justification for removing demand response provisions in regional transmission organization tariffs.

FirstEnergy on May 23 filed a complaint against PJM Interconnection asking FERC to direct PJM to remove from its tariff the provisions that allow for the compensation of demand response providers as a form of supply in the PJM capacity market (Docket No. EL14-55). In addition, the New England Power Generators Association (NEPGA) on Nov. 14 asked FERC to disqualify demand response resources from participating as supply in ISO New England’s (ISO-NE) 2018/2019 forward capacity auction scheduled for Feb. 2, 2015 (Docket No. EL15-21).

FirstEnergy also asked FERC to declare PJM’s May base residual auction for 2017/2018 void, claiming that demand response resources participated in the auction “under questionable authority.”

In its Oct. 22 response to FirstEnergy’s complaint, PJM said that the demand response resources that cleared capacity market auctions prior to the Court of Appeals’ ruling have made commitments under market rules approved by FERC and are obligated to perform under that commitment.

Responding to NEPGA’s complaint, ISO-NE on Dec. 4 argued that FERC should reject the NEPGA complaint as a premature demand for FERC response to a judicial mandate “that has not, and may never, be issued.”

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