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The word from SCOTUS: FERC has the DR authority

The demand response (DR) courtroom drama is over. The Supreme Court of the United States (SCOTUS) has finally ruled on Federal Energy Regulatory Commission (FERC) vs. Electric Power Supply Association, the case to see if FERC had the power to push Order 745, which basically required the market to treat DR and generation as equal entities with a few provisos and caveats. (The DC Court of Appeals vacated the rule earlier on the idea that FERC simply didn’t have the authority.)

SCOTUS says, simply, that FERC does have the authority in a whopping 6-2 vote. This was not a nailbitter. There were a lot of underlying details involving scrutiny of wholesale rates, retail sales, potential rule violations and regulatory power subversion. The opinion is quite a reading on political drama and regulatory details. (You can find the whole kit and caboodle right here.)

In fact, the recently released decision states that FERC's push to pay demand response providers at the same rate as generators is "not arbitrary and capricious," as EPSA had maintained, and that FERC's active response to questions on this subject allowed for a "serious and careful discussion."

Despite the office being officially closed due to winter storm Jonas on the East Coast, FERC's chairman Norman C. Bay issued this statement: "I am pleased with today's Supreme Court decision on demand response. This decision means that consumers will continue to see the significant benefits of demand response, which enhances competition in the markets, reduces wholesale prices and helps make the grid more reliable."

It’s the ruling everyone’s talking about. Some are sad. Some are glad. But everyone has been waiting for it, and now it’s all the chatter.

Over at the Natural Resources Defense Council (NRDC), blogger Allison Clements writes “while others waited much of 2015 for the release of the new Star Wars movie, clean energy advocates were on pins and needles in anticipation of the outcome that finally arrived today in FERC v. Electric Power Suppliers Association.” Her takeaway: Hooray!

She also does a great job of summing up how we got here. To read her stuff, just click here.

EnerNOC, who had another arugment tied into this particular filing, released this statement by chairman and CEO Tim Healy about the ruling, “We are extremely proud of our involvement in this seminal case that ensures an important role for demand-side resources in our nation’s wholesale electricity markets. Today’s decision is a tremendous win for all energy consumers, for the economy, and for the environment. We commend the Court and look forward to continuing to help customers actively participate in our nation’s wholesale markets.”

The Advanced Energy Management Alliance (AEMA) were also happy campers. 

“We are delighted that the U.S. Supreme Court has determined that FERC has jurisdiction to allow participation in the wholesale energy markets by consumers who choose to use demand response to reduce their energy costs,” stated Katherine Hamilton, Executive Director of AEMA. “This decision will allow consumers to reap the full benefits of demand response—cost reductions that accrue to those who directly participate in those programs, as well as to the entire customer base.” 

It was not all sunshine and roses, however. The libertarian-leaning Competitive Enterprise Institute’s Myron Ebell released a sternly worded statement on behalf of the Institute. “The Supreme Court sends a clear message by ruling in favor of FERC's power demand rule: Energy politics are a game that ignores both the rule of law and states' constitutional authority. The effects of this decision trickle down to each individual consumer.” (Most opponents to Order 745 are states' rights advocates. The divide is a reading about authority, really, not about demand response.)

Professor Joel Eisen, who teaches and writes in the areas of energy law and policy, environmental law and policy, climate change, and the smart grid at the University of Richmond School of Law, has a few thoughts on the ruling as well. 

He writes in a note: “This decision reaches exactly the right result. The Court’s reasoning supporting FERC’s jurisdiction over demand response tracks closely the central argument in the amicus brief that I and three co-authors filed with the Court on behalf of 25 energy law scholars. I am delighted that a significant majority of the Justices (including the Chief Justice) appear to have been influenced by this brief.”

He added: “The significance of this decision cannot be underestimated. The Court has found that FERC has ample authority over the electric grid, allowing for even more valuable innovation and experimentation at the wholesale level, so long as its initiatives may be construed as ‘practices’ that ‘directly affect’ wholesale rates for electricity.”

Give us your take in the comments below or on Twitter @IntelUtil. 

Read more on Order 745 and this battle in our archives:
Why FERC Order 745 no longer matters
Counterpoint: Why FERC Order 745 does still matter
Supreme Court announcement on 745 “encouraging”
Rehearing FERC Order 745 to save DR

Kathleen Wolf Davis's picture

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