Dive Brief:

• Grid operator PJM Interconnection has filed a plan to allow demand response to participate in the May 2015 Base Residual Auction (BRA), in the event the U.S. Supreme Court declines to hear an appeal of FERC Order 745's dismissal, SNL Energy reports.
• If the court declines the case, PJM will adjust the amounts of capacity it procures to conform to qualifying commitments by wholesale entities to reduce their wholesale loads in the capacity market.
• PJM said the changes would more accurately reflect the amount of capacity the operator should procure in Reliability Pricing Model (RPM) auctions, as it will reflect the actual (reduced) load that wholesale customers want to be served, based on the RPM clearing price for capacity. 

Dive Insight:

Last week the Obama Administration asked the Supreme Court to dismiss a decision from the D.C. Circuit Court that invalidated FERC Order 745. If the high court takes the case, a stay the circuit court's decision will remain in place. But should it decline, FERC's authority to regulate demand response would remain nullified, and PJM has filed a proposal attempting to address the uncertainty in advance of its BRA.

Under PJM's proposal, the grid operator will adjust the amounts of capacity it procures in RPM auctions by modifying the demand curve for such auctions, known as the Variable Resource Requirement (VRR), to conform to qualifying commitments by wholesale entities to reduce their wholesale loads in the capacity market.

In that case, if the Supreme Court declines to hear the case "RPM Auctions will operate with accurate representations of demand, and thus will continue to provide just and reasonable prices for the capacity needed to maintain resource adequacy."

PJM added it is not arguing the new "stop-gap” rules are superior to the current RPM rules, and the operator said it cannot predict how much demand response may participate in the capacity market under these proposed rules, "though it could be substantially lower under this proposal than it has been historically."

"Curtailment Service Providers have historically accounted for a majority of the demand response registered in PJM, but would not be permitted to offer demand response directly into the PJM market under this proposal," the grid operator said. "However, if the current rules under which demand response participates in the PJM market must be revised, PJM believes the rules it proposes here would preserve the reliability and economic benefits of some demand response, and would be superior to rules that do not recognize any demand response."