FERC approves demand response integration in New England wholesale market

FERC set aside the New England Power Generators Association’s request that FERC determine that price-responsive demand resources are ineligible to participate as supply-side resources per the finding in Electric Power Supply Association v. FERC

FERC on Jan. 9 issued an order approving ISO New England’s (ISO-NE) tariff changes that will allow demand response resources to provide operating reserves and participate in New England’s forward reserve market, according to TransmissionHub.

The rules will become active in June 2017 with the full integration of ISO-NE’s transitional program for demand response to participate in the region’s day-ahead and real-time energy markets, according to the order. The ISO-NE’s effort to fully integrate demand response into energy markets complies with FERC Order 745 requiring competitive markets to pay the full wholesale clearing price to demand response resources that participate in the energy markets of ISOs and RTOs, FERC said.

On Oct. 31, 2014, ISO-NE and the New England Power Pool (NEPOOL) jointly submitted the tariff changes that permit price-responsive demand to provide operating reserves and participate in the forward reserve market on an equal footing with generators and other supply-side resources (Docket No. ER15-257). The new provisions also modify metering requirements for non-controllable, behind-the-meter generation and for market participants that install their own revenue quality meters.

In its order, FERC said that under a common market structure proposed by the applicants, resources will have comparable obligations and be paid the comparable price for delivery. FERC added that, under this market structure, dispatching resources for energy and operating reserves can be co-optimized to produce the most efficient market outcome. In addition, FERC said that expanding the pool of resources available to supply energy and operating reserves in real-time and on a forward basis will enhance competition and reliability.

FERC disagreed with concerns expressed in a Nov. 21, 2014, protest by the New England Power Generators Association (NEPGA), in which NEPGA claimed that ISO-NE’s provisions for compensating demand response resources that provide operating reserves for avoided line losses creates unduly discriminatory compensation.

“We agree with [ISO-NE and NEPOOL] that the provisions proposed [in the filing] provide for compensation consistent with that provided to demand resources in the capacity and energy markets for avoided losses, and also consistent with ISO-NE’s proposal to credit load reductions for average avoided peak distribution losses, which [FERC] previously approved,” FERC said.

FERC set aside the request in NEPGA’s protest that FERC determine that price-responsive demand resources are ineligible to participate as supply-side resources per the finding last May of the U.S. Court of Appeals for the District of Columbia in Electric Power Supply Association v. FERC (EPSA).

“While we acknowledge that the EPSA decision creates uncertainty for demand response resources in FERC-jurisdictional wholesale markets, we find it appropriate at this time to proceed with these market enhancements until further action is taken,” FERC said.

U.S. Supreme Court Chief Justice John Roberts on Dec. 8, 2014, granted a request by U.S. Department of Justice Solicitor General Donald Verrilli for an extension from Dec. 16, 2014, to Jan. 15 to file a petition for Supreme Court review of the Court of Appeals’ EPSA ruling.

Verrilli said in a Dec. 5, 2014, filing to the Supreme Court that he has authorized the petition seeking the review, and that the extension of time was needed to prepare the petition.

NEPGA last November filed a separate complaint asking FERC to disqualify demand response resources from participating as supply in ISO-NE’s Feb. 2 forward capacity auction for 2018/2019 (Docket No. EL15-21). In its complaint, NEPGA asked for an expedited decision in advance of the auction to avoid the distorted clearing prices that NEPGA claimed would result from “the unlawful participation” of demand response resources.

FERC said in its Jan. 9 order that the issues NEPGA raised in the Nov. 21, 2014, protest with respect to the EPSA decision are already before FERC in the separate NEPGA complaint filed in November and that proceeding is the appropriate venue for resolving those issues.

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