Dive Brief:
- The U.S. Supreme Court decided on Monday that it will hear the case over Federal Energy Regulatory Commission (FERC) Order 745.
- The court will review the DC Circuit Court's May 2014 decision to strike down Order 745, which gives FERC jurisdiction to regulate demand response in wholesale energy markets.
- In its Monday order, the court said it will consider two questions at the heart of the case: 1) whether FERC "reasonably concluded it has authority under the Federal Power Act ... to regulate the rules used by operators of wholesale electricity markets to pay for reductions in electricity consumption and to recoup those payments through adjustments to wholesale rates," and 2) "whether the Court of Appeals erred in holding that the rule issued by the Federal Energy Regulatory Commission is arbitrary and capricious.”
Dive Insight:
The decision by the Supreme Court sets up a showdown between traditional generators and demand response advocates. The DC Circuit Court's May 2014 ruling has left the demand response industry and wholesale energy markets in a world of uncertainty. Despite the Supreme Court's decision to take the case, the markets can expect little certainty until the court rules on the case itself.
The case centers around the issue of whether demand response is a wholesale or retail market issue. The case applies to demand response providers in wholesale energy markets, where major power users are compensated for reducing their energy usage under FERC Order 745. Traditional generators represented by the Electric Power Supply Association, the trade group for competitive generators, argue that demand response is solely an issue for retail markets because retail users are being asked to reduce their retail consumption. FERC, the Obama administration, and demand response advocates such as EnerNOC argue the regulation extends only to the wholesale energy market, which is directly within the scope of FERC's authority.
The court is expected to take up the case during the nine-month period starting in October 2015.
