As RTO Insider reported, Chairman Norman Bay asserted at the National Association of Regulatory Utility Commissioners Winter Committee Meetings in DC, that the Federal Energy Regulatory Commission will not revisit the price structure of demand response following the Supreme Court decision on Order 745, but will instead focus on implementing the policy.
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FERC Won’t Revisit Demand Response Pricing
February 15, 2016
By Rich Heidorn Jr.
WASHINGTON — FERC won’t be revisiting the demand response compensation rules under Order 745, commissioners said Monday.
After the Supreme Court upheld Order 745 last month, Commissioner Tony Clark urged the commission to reconsider the order’s requirement that RTOs pay DR the same LMPs as generation, which he said “continues to be widely panned by market experts.”
But at the National Association of Regulatory Commissioners winter meetings, Chairman Norman Bay and the commission’s two other members, Cheryl LaFleur and Colette Honorable, said they had no intention of revisiting the issue.
“I think that the Supreme Court got it right,” Bay said in a brief interview after a question-and-answer session with NARUC President Travis Kavulla in front of hundreds of regulators and industry stakeholders.
Bay told Kavulla, “I don’t see [FERC undertaking] any major initiatives” as a result of the court’s ruling that the order did not intrude on state jurisdiction and that its compensation scheme was not arbitrary and capricious. “I think it’s really about implementing Order 745 at this point.”
Honorable said afterward that she agreed with Bay. “I believe the court spoke very clearly… I don’t see a need to revisit compensation because the courts have upheld” FERC’s order, she said.
LaFleur, the only member of the current commission who cast a vote on the 2011 order, said she had no reason to second guess her position regarding compensation. “It’s just starting to be actually used now as the cloud [of litigation] is lifted,” she said.
The commission’s majority, led by former Chairman Jon Wellinghoff, said full LMP was appropriate because rates should reflect the service provided rather than the provider’s cost. The commission also said it would be difficult to establish “G” in the formula because retail rates vary within states and over time.
Former Commissioner Philip Moeller dissented on the order, saying DR should be paid a price of LMP minus G, where “G” stands for the retail price of electricity.
Moeller, now an executive with the Edison Electric Institute, reiterated his position last week at a briefing of financial analysts in New York, saying he hoped the commission would re-evaluate the rule “sooner rather than later.”
Under the commission’s current composition, however, DR providers such as EnerNOC, Centrica’s Direct Energy and Johnson Controls’ EnergyConnect have no reason to fear a pay cut.
Clark, who joined the commission after Order 745, won’t be around to fight for a change, having announced that he won’t seek reappointment when his term ends in June.