Dive Brief:

• The Federal Energy Regulatory Commission (FERC) has upheld PJM Interconnection's treatment of demand response resources, rejecting five requests last week that the resource be subject to the same requirements as generation.
• The Independent Market Monitor for PJM had argued that demand response resources should be subject to energy offer caps and must-offer requirements, but regulators said operational differences between the two make that infeasible.
• FERC found offer caps are designed to allow demand response resources "to submit offers that reflect the cost of providing demand response," while generation resources are able to submit bids that reflect short-run marginal cost up to $2,000/MWh. 

Dive Insight:

Federal regulators last week rejected calls by PJM's market monitor, demand response providers and others to alter the way it handles DR resources in its markets, RTO Insider reports.

"Comparability does not require that generation resources and demand response resources be subject to the same operational parameters in every circumstance," FERC said in its decision. Treating “similarly situated resources on a comparable basis does not necessarily mean that the resources are treated the same."

"Comparability," the commission said, "does not require identical application to demand response resources and generation resources of PJM’s offer cap and the must-offer requirement, as alleged by the Market Monitor."

FERC explained that PJM’s offer cap limits generation offers to the higher of $1,000/MWh or a resource’s short-run marginal cost, with a hard cap of $2,000/MWh.

"The cost of providing a load reduction for a demand response resource is the opportunity cost of foregoing production, as based on that entity’s operations and economic circumstances," FERC said. "As the commission has found, moreover, an offer cap is designed to allow demand response resources to submit offers that reflect the cost of providing demand response."

Both DR and generation can now submit offers that reflect either the short-run marginal cost of providing energy or the cost of providing demand response, FERC said, "even though the mechanics of having these offers validated differ."