EPSA v. FERC - the End of Wholesale Demand Response?

Abstract

Flipping on a light switch calls upon the electric grid for power, and the grid responds by supplying it—a supply response. A demand response reverses this relationship: the end user changes her electricity usage in response to a price change or in return for compensation. One form of demand-side participation, economic demand response, involves specifying a baseline for a particular end user‟s electricity consumption at a particular time, then compensating reductions in consumption below that baseline. If such reductions‟ volume and timing are precise enough for dispatch, operators of the bulk power system can use them in much the same way as additional generation or transmission resources—meaning that demand response can substitute for power plants and transmission lines, often more cheaply. The Federal Energy Regulatory Commission, pushed demand response forward in 2011 with Order 745, which set compensation levels for wholesale demand response. The D.C. Circuit pushed back with the 2014 decision, Electric Power Supply Association v. Federal Energy Regulatory Commission, which ruled that, with Order 745, the Commission had impermissibly crossed the jurisdictional dividing line laid down by the Federal Power Act of 1935 between the Commission and state electricity sector regulators. The Supreme Court then granted certiorari and has heard argument over—but not yet decided—whether the Commission has jurisdiction to issue Order 745. This Article describes demand response before addressing what the Commission can do to promote demand response in the aftermath of an adverse Court decision. It proposes an ambitious answer: the Commission should insist that wholesale market participants support demand response, and it should