High Court Rules FERC Can Issue Demand Response Rule

High Court Rules FERC Can Issue Demand Response Rule

The U.S. Supreme Court overturned a lower court ruling against the Federal Energy Regulatory Commission (FERC) Order 745, which pays consumers for using less power during high-demand periods.

In Electric Power Supply Association v. FERC, the high court voted 6-2 that FERC had authority under the Federal Power Act to issue the so-called demand response rule. The justices said FERC is not directly regulating retail electricity sales with the rule. Justice Samuel Alito recused himself from the case because of a stock holding.

“The Supreme Court’s decision is great news for consumers and the environment. It gives consumers more opportunity to save, and even make, money through smarter electricity use,” said Allison Clements, director of the Sustainable FERC Coalition housed at the Natural Resources Defense Council. “Also, because demand response is flexible and fast-acting, it enables the affordable integration of more wind and solar power into the electricity transmission grid.”

The demand response rule was adopted in March 2011 and was intended to compensate large, individual consumers such as utilities, large groups of electricity consumers and factories for using less electricity during peak demand periods. A U.S. Court of Appeals for the D.C. Circuit panel ruled in May 2014 that the states have jurisdiction over demand response because it affects retail customers and how much electricity they buy, even though it affects the wholesale markets.

“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,” said Tim Healy, Chairman and CEO of EnerNOC.

Opponents of Order 745 said the rule overcompensated demand response providers for resources that should not be on par with electricity generation.  The Electric Power Supply Association has not yet commented on the ruling.