The National Electrical Manufacturers Association (NEMA) announced today that it supports the decision of the Federal Energy Regulatory Commission (FERC) to request a rehearing by the full U.S. Court of Appeals for the D.C. Circuit in Electric Power Supply Association v. Federal Energy Regulatory Commission.
On May 23, the court vacated FERC Order 745, which established a uniform compensation method for demand response resources in wholesale energy markets. In a 2-1 ruling, the court held that FERC lacked jurisdiction to enter Order 745 because, in the court’s view, demand response compensation was akin to a credit against retail electricity rates and retail rates were within the exclusive jurisdiction of states.
“This is an issue of exceptional importance for the reliability of the nation’s electric grid,” said NEMA President and CEO Evan R. Gaddis. NEMA believes demand response compensation is a practice that has a place in both retail and wholesale electricity markets, and there is a coordinated role for both state and federal regulation in order for demand response to be optimally effective, Gaddis explained.
“We believe FERC went out of its way to narrowly craft its wholesale market demand response rules to accommodate the respective federal and state jurisdictions,” Gaddis said.
NEMA agrees with FERC’s decision to seek rehearing and to make demand response resources available in wholesale energy markets so that parties regulated by FERC, such as independent systems operators (ISOs) and regional transmission organizations (RTOs), can better manage supply and demand and relieve grid congestion. Demand response can also reduce electricity costs in a relatively efficient manner. FERC has also established demand response rules for forward capacity markets and ancillary services in wholesale electricity markets.
“Prior precedent is clear that FERC has jurisdiction over rules and practices that directly affect the wholesale rate or are closely related to the wholesale rate for electricity,” said NEMA General Counsel Clark Silcox. “FERC made the undisputed finding of this direct affect in its order. This was not a remote practice beyond the rate structure that only indirectly affects wholesale electricity rates, so the court’s jurisdictional ruling is somewhat surprising and we think the court of appeals should rehear this,” Silcox added. The court’s opinion acknowledged that “demand response compensation affects the wholesale market” and that it “will also increase system reliability.”
Other parties who intervened in the case, including PJM Interconnection and the State of Maryland, have said they will ask the court for rehearing as well.
NEMA is the association of electrical equipment and medical imaging manufacturers, founded in 1926 and headquartered in Rosslyn, Virginia. Nearly 400 members strong, its companies manufacture a diverse set of products including power transmission and distribution equipment, lighting systems, factory automation and control systems, and medical diagnostic imaging systems. Total U.S. shipments for electroindustry products exceed $100 billion annually.