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Clark Calls for New Look at Order 745

ISO-NE to Resume DR Expansion; Status Quo for PJM, MISO

FERC Commissioner Tony Clark said last week that the Supreme Court’s ruling upholding FERC’s jurisdiction over wholesale demand response frees the commission to take another look at Order 745’s requirement that RTOs pay DR providers LMPs equal to generation.

“With the disposition of these matters, I would encourage the commission to turn its attention towards a thorough assessment of the underpinnings of a compensation regime that continues to be widely panned by market experts,” he said in a statement.

“That this case has garnered so much attention says much about how financially lucrative the current mechanism is to one particular type of market participant. Yet the commission’s job is not to support a particular technology, resource class or business model based on its subjective preferences; it is to dispassionately create mechanisms that find economically proper prices.”

The Supreme Court rejected the D.C. Circuit Court of Appeals’ ruling that FERC overstepped its jurisdiction and that the pricing regime required by Order 745 was “arbitrary and capricious.” (See related story, Legal Challenge Behind it, DR Seeks to Overcome Behavioral Resistance, Varying State Rules.)

Critics, including former Commissioner Philip Moeller, who dissented on the 2011 order, contend DR should be paid a price of LMP minus G, where “G” stands for the retail price of electricity.

The majority said full LMPs was appropriate because rates should reflect the service provided rather than the provider’s cost. It said its reasoning was consistent with the single-price clearing method used by RTOs: nuclear, coal, gas and wind generators are all paid LMPs regardless of their fuel costs or tax advantages.

The commission also said it would be difficult to establish “G” in the formula because retail rates vary within states and change over time.

It’s unclear whether the commission will take up the matter. In any event, Clark — who joined the commission after Order 745 — likely won’t be around to see it relitigated, having announced last month that he won’t seek reappointment when his term ends in June. (See Clark Won’t Seek New FERC Term.)

ISO-NE Resumes Work to Integrate DR into Energy Market
Two other cases dropped off FERC’s to-do list last week as a result of the Supreme Court ruling. On Friday, FirstEnergy (EL14-55) and the New England Power Generators Association (EL15-21) withdrew complaints they had filed seeking to bar DR from participating in the PJM and ISO-NE capacity markets, respectively.

ISO-NE spokeswoman Marcia Blomberg said Monday the ruling will allow the RTO to resume its work to “fully integrate” DR into all of the RTO’s markets, including the day-ahead and real-time energy and operating reserves. The RTO had suspended work on the project because of the legal challenge.

“We will work to accomplish this by June 1, 2018, on the schedule we worked out with our stakeholders to ensure a reliable transition through implementation of well-designed market rules and thoroughly tested modifications of energy management software.”

Once integration is complete, DR will offer into the day-ahead market alongside generators and be subject to the same Pay-for-Performance incentives.

Currently, small levels of DR participate in the RTO’s energy markets, but their offers are cleared administratively and not in the market, Blomberg said. DR and energy efficiency resources have been participating in the RTO’s capacity market since it began in 2010.

PJM, MISO: Business as Usual
For PJM and MISO, meanwhile, the ruling meant mostly business as usual.

PJM General Counsel Vince Duane started off last Thursday’s Markets and Reliability Committee meeting with some comments about what the ruling will change for PJM. In a word: “Nothing.”

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