Dive Brief:

• Federal regulators have approved PJM Interconnection's process to implement any local restrictions on an energy efficiency resource participating in the wholesale market, while simultaneously rejecting challenges to a December order that exerted its authority over the market.
• The grid operator will implement a "verification process" to ensure all efficiency resources are complying with any restrictions implemented by local regulators.
• The Federal Energy Regulatory Commission also denied a rehearing of its December order, which barred states from blocking energy efficiency from competing in regional electricity markets.

Dive Insight:

FERC has final say over wholesale markets, but must balance that against local authority over retail sales of electricity. So in instances where a relevant electric retail regulatory authority (RERRA) is authorized by the
commission to restrict the sale of energy efficiency resources, regulators have now signed off on PJM's proposal for how to implement those restrictions.

The commission also approved PJM’s proposal to deal with EERs that cleared in a prior capacity market auction but are later restricted from participation in PJM’s market. In that instance, the seller can either obtain replacement capacity for the ineligible efficiency or "be relieved of capacity commitments."

In December, FERC  barred states from blocking energy efficiency from regional markets, despite approving a carveout for East Kentucky Power Cooperative. The utility had asked the Kentucky Public Service Commission to restrict energy efficiency resources from the wholesale market because the utility was trying to reduce spending on demand-side management, as electricity consumption declined.

PJM's rules mean there is now a process to ensure that EERs in the market comply with an RERRA restrictions, by posting a commission-authorized list of restrictions. But regulators also rejected calls to reconsider the December order.

"The Commission’s exclusive jurisdiction over the participation of demand response resources and EERs in the wholesale market does not preclude the Commission from taking into consideration states’ preferences and implementing or deferring to those preferences when the circumstances merit," regulators wrote.